Chinese authorities’ efforts to prop up the renminbi amid a flow of funds overseas cost the country. US$99.5bn in January according to data published by the People’s Bank of China.

China’s currency – also known as the yuan – has been under pressure since authorities unexpectedly devalued it versus the US dollar as part of a response to slowing economic growth in the world’s second largest economy. Both overseas and domestic investors are moving money abroad over concerns that there are more devaluations to come.

“Investors want to preserve the purchasing power of their capital so they’re selling renminbi and buying other currencies like the Japanese yen and the US dollar,” explained Jim Brechin, Chief Asian markets strategist at Japan-based broker-dealer, Resona Corporate Partners.

“The remaining $3.23 trillion in reserves is vast and still the largest in the world but the authorities can’t maintain this kind of expenditure indefinitely. They’re going to have to do something more substantial,” he remarked.

China has been trying to engineer an orderly devaluation of its currency as it tries to allow the market more of a say in what its value should be against freely-traded counterparts like the US dollar, the yen and the euro but this has proven difficult to manage.

Resona Corporate Partners says that investors are selling yuan-denominated investments in stocks and other securities while currency speculators are actively betting on further falls in the renminbi. “We think the PBoC is deliberately showing speculators the size of the war chest at their disposal hoping they back off their short bets,” said Brechin.

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