China burned through $108 billion in December, according to China's
central bank, as the country tried to stabilize the yuan as it
depreciated against the dollar.
That works out at to about $3.5 billion per day.
That effort didn't stop the yuan
from ending the year down 4.5% against the dollar. And it hasn't
stopped the currency from continuing to decline in the first days of
2016.
That said, it has allowed the
currency to glide down more gently than it would if the government
weren't propping it up by buying it.
The Chinese want the yuan to
depreciate. Their economy is slowing and a weaker yuan means more
competitive goods and jobs for Chinese workers.
On the other hand, because
China's economy is slowing the government needs cash. That means it has
to avoid capital flight as yuan-holders trade it in for a more stable
currency.
It's an incredibly expensive
task, one that analysts have said could leave China in a position where
it's forced to bleed money until the yuan finds some sort of stable
level against the dollar, or against a basket of alternative currencies.
But we don't know when China's
slow down will stop, so we don't know how long it will take the yuan to
find a fair value. We don't know how long China will have to bleed
money.
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