China’s Foreign Currency Reserves Fell by $94 Billion in August 2015 ( Source: New York Times)

China gave the clearest signal yet on Monday of its broad intervention to defend the value of its currency, disclosing after the close of trading in Shanghai that its foreign exchange reserves had dropped by nearly $100 billion in August.

China still has the world’s biggest cache of foreign reserves, standing at $3.56 trillion at the end of last month, government data showed. But the total has declined steadily from a peak of nearly $4 trillion in June of last year, as slowing economic growth has caused investors to move money out of the country in search of better returns elsewhere.

 

Those outflows accelerated last month after China made the surprise decision on Aug. 11 to devalue the nation’s currency, the renminbi, by the most in over two decades. China’s foreign reserves fell $94 billion in the month, according to Monday’s report.

 

Downward pressure on the currency reflects the bleaker prospects for China’s economy as growth appears to be slowing faster than previously reported. Also on Monday, China’s statistics agency revised down its estimate for gross domestic product in 2014, saying the economy had grown by 7.3 percent last year compared with the 7.4 percent previously reported.

 

The manufacturing sector grew faster last year than previously estimated, the agency said, but the service sector — specifically financial services like securities companies and banks, which benefited from a booming stock market — grew slower last year than originally reported.

 

Pockets of weakness can be seen across China’s economy.

 

“Business this year has been tough, and getting more tough as each month goes by,” Du Shengdu, a manager in the sales department of Hebei Hongchi Bicycles, a bicycle manufacturer in central China. “Fewer customers are asking for quotes, and even for those who ask for quotes, a lot of times, no order ultimately materialized.”

 

But at least some exporters report seeing a recent uptick in businesses on expectations of a weaker renminbi. A weaker currency makes China’s products relatively cheaper for overseas buyers.

 

Economists have said the initial drop in the currency’s value of around 3 percent against the dollar would have only a very limited impact, but the effect could be exacerbated if the currency yields to market pressure for further depreciation.

 

Kellen Chan, a sales manager in the export department at Guangzhou Xinxiu Fashion Bags, a handbag maker in the southern city of Guangzhou, said that business was slow earlier in the summer, but that it had started picking up more recently.

 

“We are getting a lot more inquiries starting from last month,” Ms. Chan said. “It is probably due to the devaluation of the renminbi.”

 

Since the devaluation, China’s central bank has kept the currency more or less steady at roughly 6.4 renminbi to the dollar. But the move raised expectations that the renminbi would weaken further, and as a result, the central bank has had to sell huge amounts from its foreign reserves to maintain the strength of the Chinese currency.

 

Some analysts interpreted the drop of nearly $100 billion as relatively good news, compared with estimates that the decrease could have been double that amount.

 

China’s central bank “is not burning through its reserves as quickly as many had believed,” Julian Evans-Pritchard, a China economist at Capital Economics, wrote in a report Monday evening after the data was released.

 

Mr. Evans-Pritchard calculated that the net amount of money leaving China probably rose to a record $130 billion last month, up from about $75 billion in July. “It seems that the depreciation of the renminbi has not sparked as rapid an acceleration of outflows as many had feared,” he wrote.