China’s Central Bank Spent $100B to Prop Yuan

Chinese stock markets tumbled again on Monday as it emerged that the Beijing authorities spent nearly $100bn last month propping up the yuan.

The $94bn (£61bn) fall in central bank reserves was the biggest on record, although in percentage terms it was the biggest for three years.

Investors in China returning to their trading desks after a long weekend reacted to falls in stocks in the US and Europe on Friday. The sell-off pushed the Shanghai and Shenzhen CSI 300 index down by 3.4%, leaving the wider Shanghai composite index down by 2.5%.

It came despite the country’s central bank governor, Zhou Xiaochuan, trying to calm nerves, arguing that the “correction in the stock market is almost done”. He predicted markets would be more stable after weeks of turbulence.

His message was reinforced by China’s top economic planning agency, which declared that the economy’s growth prospects were improving. The NDRC said: “The power usage, rail freight, as well as real estate prices and turnover have all improved into August, indicating the economy is stabilising amid fluctuations.”

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza