Well-known Chinese news site Sina recently reported that official third quarter government reports showed an unexpected US$100 billion decline in China’s foreign exchange reserves. This was the first decline after nine consecutive quarters. There is no clear indication of where the money went. Some experts suggested this could have been caused by China’s central bank making international investments. Some expressed the belief that more and more Chinese companies and individuals are holding on to more foreign currencies because they worry about a potential devaluation of the Chinese currency. Another possible cause of the decline could be the recent appreciation of the U.S. dollar, which caused a decline of the valuation of all assets not priced in U.S. dollars. Chinese Premier Li Keqiang has said twice this year that the high level of China’s foreign exchange reserves is becoming a very heavy burden for China.
Source: Sina, October 17, 2014