China: Few months from running out of ‘spare’ FX reserves – SocGen

By FXStreet Albert Edwards, Research Analyst at Societe Generale, notes that China has burned through almost $800bn of its FX reserves mountain since it peaked at almost $4 trillion in mid-2014.

Key Quotes

“January’s FX data to be released this weekend is set to register another sharp drop of $120bn (consensus estimate). But at $3.2 trillion, the market remains content that massive firepower remains to support the renminbi. It does not.

Our economists estimate that when FX reserves reach $2.8 trillion – which should only take a few more months at this rate – FX reserves will fall below the IMF’s recommended lower bound.

If that occurs in the next few months, expect to see a tidal wave of speculative selling, forcing the PBoC to throw in the towel and let the market decide the level of the renminbi exchange rate.”
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Source:: FX Street