Our analysis suggests that the PBoC stepped up its FX intervention to USD122bn in August, from ~USD50bn in July, which underscores the significant pressure from capital outflows. Nonetheless, this suggests that the recent relative stability of spot USDCNY could be misleading. Based on the available data for FX intervention in July and our estimates for August, the PBoC has spent around USD172bn on intervention in both July and August. While the PBoC has huge FX reserves (USD3.65trn as of July 2015), if the current level of capital outflow pressures is sustained, we believe this currency defence could become costly.If the pace of FX intervention remains at USD86bn per month, we estimate that the PBoC could lose up to USD510bn of its reserves between June and December 2015, which would represent a nonnegligible decline of 14%.
