Data released on Tuesday showed a slowdown in credit issuance last month. But the same seasonal factors that weighed on exports last month probably account for the slowdown. Capital Economics expects a rebound in April. The People’s Bank also on Tuesday confirmed a sizeable fall in the value of its foreign exchange reserves during Q1. This has been widely interpreted as evidence of reserve asset sales. In fact, it was entirely due, dollar strength undermined the dollar value of the portion of reserves invested in other currencies. “Our estimates suggest that the PBOC was a net purchaser of foreign exchange in Q1. The bigger picture though is that PBOC interventions have diminished dramatically in scale. That supports the view that the renminbi is now trading close to its true market value.” notes Capital Economics
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