The People’s Bank is back

The People’s Bank of China (PBC) sat on the sidelines of foreign exchange markets in 2012 with net purchases close to zero for much of the year. But it has burst back into the game, buying $56bn of foreign exchange in January and, according to our estimates, around $35bn last month. These interventions have helped keep the renminbi steady against the dollar against a backdrop of a rising trade surplus and strengthening capital inflows. The State Council yesterday pledged to push ahead with exchange rate liberalisation this year. But the PBC’s recent moves signal that limiting currency appreciation is still a central concern.