Date
30 May 2017
David Li Daokui says China's forex reserves could face more losses if the renminbi downtrend continues. Photo: Xinhua
David Li Daokui says China's forex reserves could face more losses if the renminbi downtrend continues. Photo: Xinhua

China needs US$3 tln in reserves to counter yuan speculation

China should maintain at least US$3 trillion in its foreign exchange reserves to buffer the economy from expectations of continued renminbi weakness.

The country’s forex reserves shrank by more than US$500 billion in 2015, the Hong Kong Economic Journal reports, citing David Li Daokui (李稻葵), director of the Center for China in the World Economy at the Tsinghua University School of Economics and Management.

More losses could ensue if the renminbi downtrend continues, he said.

The reserves lost US$110 billion, or 3.2 percent, in December alone, the biggest drop since records began, according to central bank data.

For the full year, the reserves gave up US$512.66 billion to US$3.33 trillion, mainly on short-term investment and renminbi speculation. 

Li said the People’s Bank of China should clarify that its foreign exchange policy is aligned to a basket of currencies.

It should show more resolve in stopping Chinese companies from speculating in the renminbi.

[Chinese version中文版]

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