In August, China’s foreign exchange reserves fell for the second consecutive month to the lowest since October 2018.
Specifically, China’s foreign exchange reserves at the end of August were $3.055 trillion, down $49.18 billion from the previous month.
Wang Chunying, a spokesman for China’s State Administration of Foreign Exchange, said that the drop in China’s foreign exchange reserves was due to the strengthening of the U.S. dollar.
According to Bloomberg, China’s primary source of foreign exchange reserves comes from its trade surplus.
China’s trade surplus fell by $21.9 billion from July. The drop was mainly due to weaker export growth as consumers worldwide cut spending as inflation soars.
The Chinese regime increased liquidity, boosted the economy, and reduced the yuan’s value by lowering interest rates. However, this tactic of the Chinese rulers could accelerate capital outflows from China.
According to Da Ji Yuan, the yuan has depreciated against the U.S. dollar since April. A weaker currency, the Fed’s rate hikes, the Zero-Covid policy, and the Russia-Ukraine war have contributed to a sell-off in Chinese equities and bonds this year.
An analysis by Bloomberg on September 7th indicates that the yuan’s depreciation this time is too large for China’s regime to control the situation. As a result, the economic outlook for the regime’s markets is much more negative than in previous times when China depreciated the yuan to boost China’s economy.