China Falls On Its Foreign Reserves

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In its attempt to improve the currency rates, China is now burning its foreign exchange reserves. The country has seen a major decline in its currency value. Despite a huge monthly decrease of nearly $100 billion, China managed to have one of the biggest caches when it comes to foreign reserves. The current valuation stands at $3.56 trillion and this data was allocated at the end of last month.

The decrease in economic growth led to a lot of investors moving out of China so that they could get better returns somewhere else. This is why the total amount has slowed down a great deal. It was almost $4 trillion in June 2015.

This is why the Chinese central banks decided to sell a great deal of foreign reserves so that they could somehow maintain the value of the Chinese currency. It was on August 11th that the Chinese government took the decision to devalue the renminbi which took everyone by surprise. The devaluation was the highest we had seen in the last 2 decades.

Owing to the drastic change in the exchange rate policy, the investors have been under a lot of pressure. In these recent weeks, it has been seen that sell-off in the shares especially in Shanghai has been extremely steep. This has led to a huge change in the market and the confusion and pandemonium is at its peak.

The customers’ administration recently reported that the exports had declined by nearly 5.5%. The imports too fell by nearly 13.8% and the trade surplus swelled to $60.2 billion. Hence, there have been too many changes in recent times and the fall in Chinese currency is a reflection of how tough times the government is facing. The upcoming days will see a lot of changes too..

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