According to Nomura’s Chief China economist Ting Lu, the People’s Bank of China (PBOC) needs to stimulate the economy to counter a slowdown by swapping the yuan for foreign exchange.

Key quotes

“First, it could prevent the yuan from appreciating further.”

“Second, it could raise the PBOC’s FX reserves in a time of rising market fear of Chinese corporates’ offshore dollar bonds defaults.”

“Third, it could add liquidity to the economy, which is slowing to a worrisome pace.”

“We expect the net purchases of FX by the PBOC could increase significantly in the coming months.”