Will China Run out of Reserve? What's Your DXY Target?

CFR: China Isn’t Going to Run Out of Reserves Anytime Soon

At the same time, I think the evidence continues to mount that the scale of outflows is significantly a function of expectations—so the best way to limit outflows is simply to hold the exchange rate stable for an extended period of time (technical note: China has an ongoing current account surplus, so stable reserves imply ongoing outflows at a modest pace).

China merely provides the fundamental backdrop. This is entirely a story about the U.S. dollar. If the U.S. dollar declines, then China dodges a bullet. Global credit growth will revive, global economic growth will follow, the U.S. dollar will decline. If instead credit growth remains tight, global economic growth will disappoint, and the U.S. dollar will rally.