Chinese FX reserves decline while Swiss reserves rise in August

The latest data from People’s Bank of China (PBoC) shows that FX reserve in China is continuing their decline and in August the total reserve has declined to $3.185 trillion, down half a percent from July. The reserve is still decline but compared to last year, the decline has slowed down a lot. In June 2014, China’s foreign exchange reserve has touched the highest on record top $3.99 trillion. The reserve is down more than 20 percent from the peak. However since January, this year it has stabilized.  Since January, it is down just 0.04 trillion. Last year, reserve declined just short of $600 billion. Some of the other indicators from China, such as house prices and PMI reports also pointing to stabilization, if not recovery.          

While China’s story has been about the bleeding of the reserve, it has been just opposite e for Switzerland, which is suffering from a chronic problem of increase in foreign exchange reserves due to the intervention of Swiss National Bank in order to keep the exchange rate steady, and inflows of foreign funds. In August FX reserve increased by $12 billion, and it has increased from $227 billion in 2012. The Swiss National Bank (SNB) abandoned its euro-franc peg in January last year but Fx reserve has increased by $130 billion since, which is equivalent to almost 20 percent of GDP.