Is China’s Economy Back on Track?

April 8, 2016

Written by Myn
Edited by HV

The PBOC announced China’s foreign exchange reserves increased by $10.3 billion in March, the first in 5 months. The reserves are now at at $3.32 trillion.

It is the result of several measures, such as prohibiting the capital outflow, the Chinese government applied to stabilize the economy and avoid yuan devaluation. The weakening U.S dollar also affected the world’s largest currency hoard.

Along with the increasing PMI in March, the improving foreign reserves suggested a recovery in the world’s second-largest economy. However, the impact remained temporary as the hedge-fund managers still expected the yuan to weaken over the long term.

Kyle Bass, Dallas-based Hayman Capital Management, said “the monthly numbers don’t mean anything.”  According to Bass, with such rapid increase in money supply, the PBOC would soon have to lower the interest rate, which in turn puts more pressure on the currency and drag the yuan down.

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