China’s FX Reserves Slip in July Signaling Little Intervention

(Bloomberg) -- China's foreign-currency holdings slipped in July as dollar assets strengthened, signaling minimal intervention to manage the yuan level.

• Reserves declined to $3.104 trillion in the month from $3.119 trillion in June, the People's Bank of China said Wednesday

Key Insights

• The reading is lower than the median estimate of $3.105 trillion in Bloomberg's survey of economists. Dollar index and U.S. long-term Treasury yields edged up in July compared to the previous month, exerting downward pressure on the reserves
• The modest decline in the reserves stockpile signals the People's China of China has refrained from selling foreign exchange directly to intervene in the yuan. China was labelled as currency manipulator by the U.S. this week after the yuan fell beyond 7 per dollar
• There's been “little need for the central bank to buy or sell foreign currencies” since China's capital inflows and outflows are roughly balanced, which helps keep the reserves relatively stable, David Qu, an economist at Bloomberg Economics in Hong Kong, wrote in a note

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• China's economy and financial markets are resilient enough to weather external shocks, and will help the country stabilize forex reserves, State Administration of Foreign Exchange spokeswoman Wang Chunying says in a statement.

To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Enda Curran

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With assistance from Bloomberg