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Falling renminbi and reserves: what next for China?

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Report summary

The Chinese policymakers did not see it coming. Market turbulence has ensued since the People's Bank of China announced its exchange rate reform on 11 August 2015. To date the renminbi has fallen by nearly 5% against the US dollar. China's foreign exchange reserves once thought to be a formidable war chest shrank by US$420 billion in just six months to US$3.2 trillion by end January. Accelerating capital outflow sparked concerns about a looming financial crisis. China now faces the classic trilemma it cannot control its exchange rate have an independent monetary policy and allow free capital movements all at the same time. The path to reform was never going to be easy. What can we expect from China's policymakers next and will the renminbi devalue sharply again?

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    Falling renminbi and reserves: what next for China?

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Table of contents

Tables and charts

This report includes 21 images and tables including:

Images

  • Renminbi Spot Exchange Rate (RMB/USD)
  • China's reserves are falling...
  • ...but current account surplus can help rebuild them
  • Renminbi outlook to 2018
  • Renminbi exchange rate index: CFETS currency basket
  • USA Purchasing Managers' Indices
  • Eurozone Purchasing Managers' Indices
  • Japan Purchasing Managers' Indices
  • China Purchasing Managers' Indices
  • Industrial production
  • Industrial production
  • Consumer Sentiment Index (3-month moving avg.)
  • Consumer Sentiment Index (3-month moving avg.)
  • 10-year government bond yields (%)
  • 10-year government bond yields (%)
  • Consumer Price Index (annual % change)
  • Consumer Price Index (annual % change)
  • Exchange Rate Indices vs US$ (Jan 2012 = 100)
  • Exchange Rate Indices vs US$ (Jan 2012 = 100)
  • Oil and gas prices
  • Copper and freight prices

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