China’s giant threat to global financial stability

It would only take three months of burning through reserves before China’s once mighty arsenal looks less than adequate for such a large economy

For stock markets, it’s been a grim start to the year, and it may be that things will get grimmer still before getting better. Everything rests on China, which is engaged in a herculean battle to defend its currency, the renminbi, against a veritable flood of capital outflows.

For those of us who spent the best part of a decade railing against the iniquities of Chinese reserve accumulation – designed to keep the currency from appreciating and by that means bolster the competitiveness of Chinese goods – this is a somewhat ironic turn of events.

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