Ever since the Chinese economy started slowing and the country surprised markets with a currency devaluation in August, analysts have been scrambling to lower their estimates for pretty much anything concerning China.
Since June this year, some estimates put the total number of outflows as high as $300 billion. In order to service the outflows and stabilize the exchange rate, China had to sell about $400 billion in foreign exchange reserves since August 2014. This number could reach $1.2 Trillion in a “downside scenario” according to Barclays.
“In such a downside scenario there could be pressure on the central bank to provide about 10-12 percent of GDP [up to $1.2 trillion per year] in reserves to the market to offset outflows as well as hedging demand,” the bank writes in a note.
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