Monday, April 12, 2010

China's FX reserve accumulation slowed substantially in Q1

If needed this could be additional ammunition for the Chinese leadership's defence of the "USD peg." However, some of the slower reserve accumulation is due to the valuation impact from the stronger USD and we expect reserve accumulation to increase again in Q2.Despite the slower growth in reserves for Q1 as a whole, "hot money" inflows appear to have accelerated sharply in late Q1. This underlines that the expected gradual appreciation of CNY could prove extremely difficult to manage without tighter capital controls.

FlashComment ChinaFXreserves 120410 -

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