China’s foreign reserves could drop again in September

China's foreign reserve data (to be released on 7 October) will be quite eye-catching, as the market will be able to estimate how much China's central (PBoC) has spent in safeguarding its currency. 

The drop of the foreign reserves of China will likely exceed USD100bn in September, compared with USD94bn in August, as the PBoC also intervened into offshore CNH market in the past month, foresees Commerzbank. While the intervention is widely seen as a "market manipulation", Chinese authorities argue that the financial stability is crucial amid market turbulence. 

It is worth noting that China's capital outflows have taken place since Q3 2014, as illustrated by balance of payment data.

Continuous strong capital outflows could point to a diminishing return of domestic investment, as some people see that the overseas investment is more attractive. More importantly, central bank's intervention might be able to change the market price, but will unlikely turn around market expectations.