Reuters BEIJING (Reuters) — China’s foreign exchange reserves fell for a sixth straight month in December but by less than expected to the lowest since February 2011, as authorities stepped in to support the yuan ahead of U.S. President-elect Donald Trump’s inauguration. Reserves fell by $41 billion last month to $3.011 trillion, central bank data showed on Saturday, following a drop of $69.06 billion in November.
Economists polled by Reuters had expected reserves to drop $51 billion to $3.001 trillion, from $3.052 trillion at the end of November.
The yuan depreciated 6.6 percent against the surging dollar in 2016, its biggest one-year loss since 1994, and is expected to weaken further this year despite authorities’ latest attempts to slow its descent. Trump has vowed to label China a currency manipulator on his first day in office on Jan. 20 and has threatened to impose huge tariffs on imports of Chinese goods.
While the world’s second-largest economy still has the largest stash of forex reserves by far, it has burned through half a trillion dollars since August 2015, when it stunned global investors by devaluing the yuan.
If forex reserves continue to be depleted at a rapid pace and capital flight continues, some strategists believe China’s leaders may have little choice but to sanction another big “one-off” devaluation which would roil global financial markets.