How much has China spent defending the RMB since Aug. 11? Deutsche reckons $100-150bn (out of $3.6tn of reserves) pic.twitter.com/8QYJyqSLSq
— Tracy Alloway (@tracyalloway) September 4, 2015
Deutsche Bank's estimate works out to a $150 to $225 billion monthly rate. On top of that, there's the average $26 billion in reserve outflows since the peak of reserves in June 2014. At the low end of DB estimates, the "extreme" forecast of $3 trillion in reserves by year end 2015 is easily hit. At the high end, reserves would fall below $3 trillion in October.Now imagine there is a panic and China has to really spend to defend the yuan. In the post China May Only Have Enough Cash for 6 to 18 Month Defense of the Yuan, I looked at an estimate of China's liquid reserves. Charlene Chu thinks they have far less liquid capital available than believed, less than $1 trillion by her estimate. Based on current DB estimates, China might exhaust those liquid assets by October.
Official reserve numbers will be out soon enough, so I don't want to over speculate on DB estimates. That said, if the high end estimates are plausible, a bad month for China could easily see outflows on the order of $300 billion, a 10% draw down in reserves. Those are the types of numbers that I think most people would view as impossible. Yet only a month ago, they would have told you a depreciation in the yuan was impossible.
Gordon Chang: 2015: The Year China Goes Broke?
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