China Finds More Discreet Ways to Support the Yuan
- After August shock devaluation, central bank shifts tactics
- Strategy shifts optics on drop in world's largest reserves
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Just because China is burning through its reported foreign-exchange reserves more slowly doesn’t mean it’s losing its commitment to support the yuan.
The People’s Bank of China and local lenders increased their holdings in onshore forwards to $67.9 billion in August, positions that would boost China’s currency against the dollar. The amount is five times more than the average in the first seven months, PBOC data show. The positions are part of a three-stage process to support the currency without immediately draining reserves, according to China Merchants Bank Co. and Goldman Sachs Group Inc.