It's not GDP, exports, inflation...BUT state of China's forex reserves.
How is China burning its forex reserves to defend Yuan?
When things were good - China had a problem of plenty and it was accumulating reserves (Buying Dollar, Selling Yuan) to slow down appreciation of Yuan. As a result, China accumulated forex reserves of $3.8 trillion. Remember, China's foreign exchange reserves surged almost 200-fold from US$21.2 billion in 1993 to a peak of almost US$4 trillion in 2014.
But in 2015 - this trend got disrupted. China is now fighting capital outflows and faster Yuan depreciation. I did cover this trend on Jan 09 2015 in article titled: The Big Headline that went unnoticed: China is losing Forex reserves at alarming pace
China FX reserves declined $512.66 bln in 2015, biggest annual drop on record, and the first decline since 1992. This is not the end. The Chinese central bank is set to declare what happened to reserves in January 2016 on Sunday. There are estimates that the reserves fell by another US$118 billion in January.
Why is China worried? - The pace of Yuan depreciation is very disruptive. This is USDCNY chart
One can sense panic in Chinese policy makers response. Capital outflow is a main challenge and Govt there is taking steps to attract flows. In recent policy measure: China has increased its quota in its foreign investor program five-fold, upping to a $5 billion limit from the previous $1 billion. China has also eased rules for Qualified FIIs from moving funds in and out of China. Under the new rules, the capital lock-up period for QFII redemptions was cut to three months, down from one year formerly. That's not all - in January, Chinese authorities injected nearly 2 trillion yuan ($305 billion) into the commercial banking system through open market operations to stem the panic.
China is fighting a tough battle. Keep an eye on how China is burning reserves to fight capital flows and can it win this war?
Updated on Feb 07 2016
— moneycontrol (@moneycontrolcom) February 7, 2016
The article is purely for educational purpose.