China | It’s not time to relieve yet: updating projections of China’s foreign reserves

Summary

By use of a new method we find portfolio outflows are still the dominant driver behind the fast depletion of foreign reserves last year. Local factors, including foreign debt repayment, RMB cross-border flows, and increase in domestic FX deposit holding, also contribute. Policymakers need to strengthen capital account restrictions and enact macro-prudential measures.

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