China’s foreign exchange reserve, declined to $3.191 trillion, after rising marginally to 3.219 trillion in April.  Gold reserves are down to $70.48 billion, largely due to change in value of Gold. PBoC has 58.14 million troy ounces of gold as reserves. This the weakest reserve reading, since December, 2011. Median expectations were for $3.2 trillion. Recent weakness in Dollar and crack down by People’s Bank of China (PBoC) over capital flows has somewhat stabilized reserve this year and prevented heavy bleeding.

However, China has high current account surplus with the world, along with inflows of FDI, which means, outflows are still persisting this year, if FX reserves are either stable or declining.

Since last May, FX reserve has declined $520 billion.

Recent economic data indicates that March bounce in economic activity is fading. So the stimulus from the government is now less effective than it used to be years back. With economic activity showing little or no signs of improvements, China’s currency remains vulnerable to decline against Dollar.

After early year turmoil, it has remained somewhat stable against Dollar, which means it has been declining against other major currencies such as Euro, Pound, Yen and Franc.