China’s foreign exchange reserves plunged by US107.9 billion in December to close the year at US$3.33 trillion, down from US$3.84 trillion at the end of 2014, South China Morning Post reported. The sudden end of a soft peg against the US dollar in August resulted in sharp depreciation for the yuan, forcing the People’s Bank of China to sell off reserves to maintain the currency’s level and stave off capital flight. The yuan has fallen 2% against the dollar in the first four trading days of 2016. Liu Dongliang, an economist at China Merchants Bank, said December’s fall might explain why China’s central bank had suspended cross-border currency business for some foreign banks.
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