IMF Says It Is Undervalued by 21.3%, but the Market Says It Should Fall to 7.4! 83% of the Trade Surplus Not Converted, Nasdaq ETF at a 15% Premium, a 1% Rise Shrinks the Dollar Account by 278 Billion, and Once the Leash Is Loosened Outflows Would Exceed Foreign Reserves! Depositors Lose Up to 2.9 Trillion a Year, Export Factories Give Up 3.6 Trillion

This article explores the massive divergence between the IMF and the market regarding the valuation of the RMB exchange rate, analyzes the capital control policies and their heavy costs behind the central bank's efforts to maintain the RMB exchange rate and low interest rates, points out that the cost of exchange rate stability is mainly borne by depositors and export enterprises, and predicts the key observation indicators for future exchange rate trends.

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Observe things as they are, reject fragmented understanding. Just last week, the People's Bank of China released a document titled "Policy Stance on the RMB Exchange Rate," consisting of seven parts in total. First, why did this document come out at this specific time? The first thing it has to deal with is actually not a problem of the RMB itself, but a political issue. The corresponding date is October 12, because the annual meetings of the International Monetary Fund (IMF) and the World Bank are both being held in Bangkok today. Everyone has probably heard the most crucial sentence in the document: that China has no necessity nor intention to gain trade advantages through currency depreciation. This sentence was actually already stated back in January of this year by Deputy Governor Zou Lan at a press conference of the State Council, and then repeated in March by Pan Gongsheng at the National People's Congress press conference. By October 8, it became the written policy stance of the central bank, with an extra half-sentence appended: never engaging in competitive depreciation. Just this one sentence has been mentioned at least six times by my count over the past ten months, and finally, it has simply been written into a document. What does this indicate? It indicates that someone has been pushed to this corner.

Let's first talk about this exchange rate control thing. Has everyone ever thought about a question? How is a country's exchange rate held back by capital controls, how much money does it cost every year to keep this price pinned down, and who actually pays for this money in the end? Has anyone thought about this question? This has to start with capital controls. So what exactly are capital controls? Under the context of the CCP, to put it bluntly, money moving in and out of the borders requires approval and quotas. Hereafter, I will refer to this whole setup as the wall. Let's put the conclusion right here: from the outside perspective, the RMB is undervalued and should appreciate, which is a political accounting. If calculated based on interest rates, debt, and where capital flows, the RMB should be heading downward. And what does the CCP want now? What it wants right now is actually the same thing as its interest rates. Through observations over this period, it has become clear. What the CCP wants now is for it not to move upward, and preferably not to move downward either. Therefore, fixing the RMB exchange rate right here while keeping the policy interest rate at this position requires spending money, and the cost of doing so is enormous. Furthermore, the one who pays the most money is not the central bank. Who is it? It is the people with fixed deposits in banks and the factories engaged in exports. Below, I will walk everyone through every single number with mental math.

Let's first talk about who has been backed into a corner. Every year, the IMF conducts an evaluation of various countries' exchange rates using a trade model. It is precisely under this model that they arrived at the conclusion that the RMB is undervalued. All the numbers I am about to mention are median values. The assessment released by the IMF in July last year indicated that the RMB was undervalued by more than 8.5%. In February this year, they reported an undervaluation of 16.4%, and their latest release on July 30 this year showed 21.3%. Furthermore, in its exchange rate report in January this year, the US Department of the Treasury also stated that the RMB was significantly undervalued, pressuring the CCP to allow the RMB to appreciate. What we should look at first is not their conclusions, but rather the model they are using and why they choose to use it. Let's first look at the IMF's basis for claiming undervaluation. Here, we must separate the quoted exchange rate from the real price. The quoted rate refers to the RMB's exchange rate against a basket of currencies, which is called the nominal effective exchange rate. When you factor out the price level differences between countries to determine whether the RMB is actually expensive or cheap, that is called the real effective exchange rate. Both sets of data are compiled by the Bank for International Settlements, so they are very easy to find. Under this exchange rate model, the relationship between the two exchange rates is expressed by a formula: the real effective exchange rate equals the nominal effective exchange rate multiplied by the ratio of the domestic price level to the trade partners' price level—where the numerator is the domestic price level and the denominator is the price level of trading partners.

Now let's plug in the numbers. Let's take March 2022 as the starting point, as that was the peak of this round of the real effective exchange rate. The nominal effective exchange rate in March 2022 was 113.06; in between, it dropped to 103.89 last year, and in August this year, it was 113.15. Dividing 113.15 by 113.06 gives roughly 1. Comparing the two ends, on paper, the quoted rate didn't depreciate much. However, the real effective exchange rate was 107.31 in March 2022, and by August this year, it fell to just 91.77. Dividing 91.77 by 107.31 equals 0.855, representing a decline of 14.5%. The reason is that prices in China grew at a slower rate than elsewhere. Let's look at the data: China's Producer Price Index (PPI) fell continuously for 41 months starting from October 2022. It was only in March this year—when energy prices surged due to the conflict between the US and Iran—that this figure finally turned positive. In August this year, China's Consumer Price Index (CPI) rose by only 0.8% year-on-year, whereas in the same month, the US saw a 3.4% rise, and even the eurozone rose by 3.2%. Documents from the CCP's People's Bank of China (PBOC) also mentioned the real effective exchange rate, claiming that it has appreciated by 35% since 2005. This is a very tricky maneuver, because the undervaluation cited by the IMF refers to the period after 2022; the two sides are not discussing the same timeframe at all. In this regard, the CCP is simply quibbling.

Having covered this, what should we look at next? We need to look at why domestic prices are growing so slowly. This part is actually a blind spot for many, as well as a limitation of model-only thinking. It is not that Chinese citizens do not want to consume; they simply lack the conditions to do so. Let's look at household consumption as a percentage of GDP: in China, it is only around 40%, whereas in Germany, Japan, and Taiwan, it is around 53%, and in the United States, it is 68%. After looking at this proportion, everyone should realize one thing: the fundamental issue with Chinese consumption lies in income distribution. Therefore, if goods cannot be sold domestically, they can only be price-slashed and dumped overseas. According to estimates by Rhodium Group, the volume of China's exports grew by about 10% last year, but the export value measured in US dollars grew by only 5.5%. This matches the exact same consumption structure seen during the October 1st National Day holiday. The portion where volume exceeds revenue represents the slice driven out by price cuts, and last year was already the third consecutive year of massive price reductions. As for the year-on-year rebound in export prices starting in the second quarter of this year, the increase was mainly driven by AI-related products and energy. Looking over a three-year span, from the first half of 2023 to the first half of this year, the average export price of Chinese manufactured goods rose by only 2%. During the same period, suppliers in other countries raised their prices by about 17.4%. When your goods are this cheap, the outside world naturally cries out that the RMB is undervalued.

How is this 21.3% calculated by the IMF? The IMF does not look at what price money is willing to pay to acquire RMB; instead, it anchors on a single factor, which is the trade surplus—specifically China's current account surplus, meaning the net foreign exchange earned in a year from goods, services, plus investment returns, which, after deducting economic cycle fluctuations, is 3.6% of GDP. Calculated based on fundamentals by the IMF, China's surplus should only be 0.6%. Subtracting 0.6% from 3.6% leaves a surplus excess of 3 percentage points. Turning the question around, what does it ask? It asks how much the exchange rate needs to appreciate to suppress this 3-percentage-point surplus. Calculating back based on the elasticity coefficient between exchange rates and trade, the answer is 21.3%. So what does this number answer? It answers how expensive the RMB needs to become before Chinese goods stop selling. Very well, now these two major institutions have chosen this model to speak about the RMB issue, completely ignoring any offsetting factors. So what kind of ledger is this? It is a political ledger, demanding that China must reduce its export scale.

However, this model cannot answer another question: whether people holding money are willing to acquire RMB at the current price. This is a market ledger, and both of these ledgers stem from the same root cause. This root cause is that domestic purchasing power is weak, prices cannot rise, goods must be cheap, which drags down the rate of return on assets. Consequently, foreign entities shout that it is undervalued, prices refuse to rise, interest rates can only linger at just over 1%, and money wants to run outward. So how is the market ledger viewed? By watching which direction the money is running. First, look at interest rates: on October 9, the yield on 10-year US Treasury bonds closed at 5.24%, while China's 10-year Treasury bonds were at 0.68%. 5.24% minus 1.68% leaves a difference of 3.56 percentage points, or 356 basis points. As for deposits, the listed rate for a one-year fixed deposit at major state-owned banks is currently only 0.95%, whereas even the yield on US 3-month Treasury bills is 4.16%. What is there even to compare? There is nothing left to compare.

To take it a step further, do the people inside the wall want to get out? You can tell by looking at a single price. Right now, if people inside the wall want to buy US stocks, the official route is through QD funds—meaning Qualified Domestic Institutional Investors. These are funds using quotas approved by the State Administration of Foreign Exchange to go out and buy on behalf of everyone, and right now these quotas are completely insufficient. As of August 28, nearly half of the 333 QD products had suspended subscriptions or limited purchases. What to do if you can't buy them? Look at the Nasdaq ETFs. By September 23, several Nasdaq 100-tracking ETFs on the exchange had prices higher than their fund net asset values for five consecutive trading days by over 10%, with individual ones exceeding 15%. In other words, people inside the market are willing to pay a 10% to 15% premium just to hold a portion of US dollar assets in their hands. And if you go to the bank to exchange currency yourself, exchanging US dollars at a CCP bank right now is an absolute hassle. Originally, everyone had an unconditional foreign exchange purchase quota of $50,000 per year, but fucking now that is all a fake show. Right now, you must fill out the purpose of use, and in some exaggerated places, they even make the local police station issue some bullshit certificate! You tell me, exchanging a few US dollars—what the hell does that have to do with those bastard black-skin thugs? Then they try to block all channels for capital outflow. The CCP's crackdown on overseas brokerages this May was entirely for this purpose.

What is the hardest evidence of how people who already hold US dollars choose? Last year, the trade goods surplus from the customs perspective was $1,180 billion. The step where enterprises sell US dollars to banks is called settlement of foreign exchange, and buying US dollars from banks is called sales of foreign exchange. Last year's foreign exchange settlement minus sales left a net surplus of only $196.6 billion. So the math can be done, right? $196.6 billion divided by $1,180.2 billion is 17%. That means the remaining 83% was not converted into RMB. Let's look at the general ledger again: last year's current account surplus was $735 billion, while in the same year, the money sent overseas by enterprises, banks, and individuals minus the funds brought in by foreign investment resulted in a net outflow of $820.1 billion. The amount earned back was $735 billion, and the amount flowing out was $820.1 billion. In other words, calculating based on actual buying and selling, the central bank's foreign exchange reserves actually fell short by a surplus of $51.3 billion, yet those foreign exchange reserves just refuse to rise. The reason lies right here: the money earned back flowed right back out.

But with this, the CCP's regulators got to work; since enterprises were unwilling to convert, these fucking idiot CCP regulators started pushing. Right on September 14, there was a Reuters report. What did it report? It said that over the past few months, the State Administration of Foreign Exchange (SAFE) has been intensively dropping hints to banks, telling them to push up the foreign exchange hedging ratio for enterprises. The national average is around 35.3%, while major coastal exporting provinces need to raise it to over 40%, with some places even paying out of pocket to provide subsidies. What does hedging mean? It means an enterprise signs a contract with a bank to sell the US dollars it will receive in the future at an agreed price right now. For example, if a factory expects to receive $1 million in payment for goods one year from now, if it doesn't hedge, whether to convert it then or on which day to convert it is entirely up to the factory itself, and the factory can completely hold onto the US dollars and wait. If it hedges, then today it must lock in a contract with the bank so that one year later, say, this $1 million will be sold to the bank at the currently fixed rate of 6.5, which is 0.2 yuan lower than today's 6.7. If the exchange rate doesn't fluctuate, the factory gets 200,000 RMB less in exchange, so factories generally don't like to sign. Pushing the hedging ratio from 35% up to 40% means what? It means that out of every $100 in payment for goods, the amount locked in to be sold in advance increases from $35 to $40, and the amount of US dollars the factory can decide on for itself is reduced by another $5.

Let's look at the second factor affecting the exchange rate: debt. In the second quarter of this year, government sector debt rose 13.5% year-on-year, while nominal GDP reportedly grew by 5.9% year-on-year. This is the CCP's bragged figure; according to my real judgment, the growth rate is only around one percentage point higher or lower. It doesn't matter; we'll just use the CCP's data. Even under this data, the expansion rate of debt is growing more than twice as fast as GDP, but the interest offered is only 1.68%. This negative interest rate differential of 355 basis points will turn into a very strong financial pull, causing people inside the Wall to pay higher prices to buy abroad, while people outside the Wall pull out. With 80% of those holding US dollars not converting them, and debt growing faster than GDP, such a currency will definitely move downward if no one stops it.

If there were no Wall, what price would the RMB be at? This can also be calculated, and the formula is actually just one line. Let's look at this: this is an inverse application of a discount formula, which means using the multiple of current risk-free yields of the two countries as the base and the number of years as the exponent to calculate the cumulative yield difference. Actually, the logic is very easy to understand: if this Wall were torn down, no one would stop everyone from grabbing those high-interest US dollars, so the RMB would have to fall today first, falling to a point where the portion it gains back later just makes up for the lost interest. Yes, that's the logic. Let's plug the numbers in. For the starting point, I'll take the current 6.7. The yield on the US 5-year Treasury bond is 5.03%, and China's 5-year yield is 1.41%. Then 1.0503 divided by 1.0141 equals 1.0357, and multiplying it five times sequentially gives 1.192. 6.7 multiplied by 1.192 is 7.99 yuan. That is to say, for the money you should have earned five years later but didn't, the real value of the RMB in your hands is only 7.99 yuan. If calculated using a dynamic path, it depends on whether exports fall harder or the interest rate differential narrows harder. For the current Chinese economy, exports are the only remaining engine of the Chinese economy and, at the same time, its largest variable. Previously, I used another method to estimate the equilibrium price of the RMB to be 7.44 to 7.63. Putting this into the formula corresponds to the interest rate spread holding out for another three to four years. Let's compare this with the ETF premium mentioned earlier: on October 9, the onshore closing price was 6.69. Multiplied by 1.1 gives 7.36, and multiplied by 1.15 gives 7.7. The premium naturally contains a component of scrambling for US stocks, but it can only serve as circumstantial evidence. However, three mutually unrelated methods all point to the range of 7.4 to 8. So why did the RMB still appreciate from 7.35 in April last year to 6.7? The reason lies right in this Wall—the foreign exchange market within China.

Anyone allowed to enter is screened; those allowed in are mainly import-export enterprises, and the vast majority of them are enterprises owned by the Chinese Communist Party (CCP). The exporter is naturally the seller of US dollars, because they need to settle foreign exchange, while the importer is naturally the buyer of US dollars. China claims to have a trade surplus of over one trillion US dollars a year, so under normal circumstances, sales should definitely exceed purchases. But this did not happen, because enterprises now have a low willingness to settle foreign exchange after earning US dollars, yet the CCP does not dare to directly tackle these exporting enterprises, after all, this is the only economic sector still breathing. If enterprises had a high willingness to settle foreign exchange, naturally there would be more US dollars dumped in China's market, so the renminbi exchange rate should rise. But over the past two years, it has not risen at all, just because export enterprises hold onto the US dollars they earned to collect interest. Last year, the US dollar itself performed poorly; the US dollar directly fell by 9.4% against major currencies, and the renminbi was dragged up by 4.4% against the US dollar, but it actually fell by 3.4% against a basket of currencies. This was because enterprises holding US dollars calculated that, over the past twelve months, they gained three more percentage points in interest, but lost nearly six percentage points on the exchange rate, and then started to stop losses by selling outward. By the first eight months of this year, foreign exchange settlement exceeded sales by 337.9 billion US dollars. This is a liquidity shock, not a drift in the fundamentals of the renminbi. Therefore, 6.7 is the transaction price in this market inside the wall, a liquidity shock created by US dollar-holding enterprises stopping losses coupled with the CCP's administrative suppression of US dollar buying pressure, rather than money from the outside rushing to grab the renminbi. So which direction does the CCP want the renminbi to go? We do not look at rhetoric; we only look at the movement of money. Let us sort it by time first. In 2024, the renminbi drifted downward. According to estimates by the US Department of the Treasury, China's banking system, together with spot and forward markets, net sold 165 billion US dollars for exchange rate intervention and liquidity hedging. Last year on April 9, the day tariffs were most severe, the renminbi directly fell to 7.35. According to Reuters' report on that day, the central bank had greeted major state-owned banks, instructing that the banks' proprietary trading desks should not buy US dollars first, and also demanding strict reviews of customer orders to buy US dollars, as well as requiring major banks to sell US dollars on the exchange floor. By the middle of last year, the renminbi began to turn upward, and the banking system changed from selling US dollars to buying US dollars. For the whole of last year, including both spot and forward, Chinese commercial banks net bought 320 billion US dollars. The benchmark rate announced by the CCP central bank every morning is called the central parity rate. Starting from the end of October last year, it was set weaker than the market price. The central parity rate on October 9 was 6.73, while that day's tentative closing price was 6.69, weaker by 408 basis points. What can be seen from this? That is, it does not allow it to go up, and it does not dare to let it go down. The central bank's document on October 8 itself wrote what? It said that after 2010, the operating range of the renminbi against the US dollar is between 6.4 and 7.35. And then it repeatedly emphasized that it has not broken out of this box for 16 years. Therefore, what the CCP wants is neither appreciation nor depreciation; it is the same situation as current interest rates—it is best for the renminbi exchange rate not to have any fluctuations.

Why does it not allow movement in either direction? Because whichever direction it moves significantly, the CCP will suffer heavy bleeding. First, let's talk about appreciation. The foreign exchange reserves of the CCP central bank stood at 3.4 trillion US dollars at the end of September, and the foreign currency assets of China's banking system in overseas markets minus foreign currency liabilities left a net amount of 747 billion US dollars at the end of June. Adding them together gives 4.15 trillion US dollars, and then we can calculate. How much money is lost for every 1% appreciation? 4.15 trillion US dollars multiplied by 6.7, and then multiplied by 1%, equals 278 billion renminbi. In other words, for every point the renminbi rises, the US dollar accounts converted into renminbi shrink by 278 billion. Over the past twelve months, it rose by 6.1%. Deducting the extra US dollar interest earned, the net loss is around 780 billion renminbi. And what about the exporting enterprises? According to Goldman Sachs statistics, in the first half of this year, the exchange losses of export-oriented listed companies were around 70 billion renminbi, a ten-year high. China's current economy relies entirely on this single leg of exports. Therefore, if the renminbi continues to rise, this leg will also weaken.

Let's talk about depreciation, which is the trouble on the downside. What is the downside trouble? It is that once you let go, you can't rein it back in. Two IMF economists wrote a working paper back in 2013, and what they calculated was fascinating. What did they calculate? They calculated that once China opens up capital controls, assets allocated outward from within China would be 15% to 25% of GDP, whereas incoming assets would be only 2% to 10%. In other words, the scale of net outflow would reach 11% to 18%. This estimate was made years ago, so let's just look at the order of magnitude. Applying it to the 140 trillion yuan that the CCP bragged about last year, that would mean an outflow of 15 trillion to 25 trillion yuan, which translates into 2.31 trillion to 3.8 trillion US dollars. China's total foreign exchange reserves are only 3.4 trillion dollars, and 2.7 trillion of that is liabilities. It's not like this scenario hasn't played out before. In June 2014, China's foreign exchange reserves were 3.99 trillion US dollars, roughly 4 trillion. But after pulling off the "811" exchange rate reform in 2015, by 2017, only 2.998 trillion US dollars remained. In other words, over the course of more than two years, nearly 1 trillion US dollars vanished. And that was when there was still a wall in place. If you want to defend the exchange rate, of course there is another move: raising interest rates. But right now the CCP cannot move interest rates at all; banks are sitting on around 110 trillion yuan in government bonds. If you hike interest rates by just one percentage point, the market value of these bonds will drop by 5 trillion yuan, which is equivalent to 20% of the entire banking system's core capital. We also ran these numbers last month. As for what kind of system the banks are currently under, everyone knows deep down. Last year, the Ministry of Finance issued 500 billion yuan in special treasury bonds to replenish capital for the Big Four banks. This year, it issued another 300 billion to replenish capital for the Agricultural Bank of China, ICBC, the Export-Import Bank of China, and five central state trading companies—800 billion over two years. The most ridiculous thing is that on two occasions, they even borrowed nearly 80 billion yuan from China Tobacco. I remember the first time was 20 billion, and I also remember the 60 billion, which combined is 80 billion. In other words, all the money spent was nearly 900 billion yuan.

So well, going up won't work, and going down won't work either. Then the only remaining way out is, well, to keep building the wall higher, keep locking the money inside, and keep pinning interest rates down. But holding down interest rates also costs money. Who is footing the bill? As I've said before, those paying the most are the depositors. Because your money cannot leave, you can only deposit it in banks since you don't dare to invest. The banks then take these deposits to buy government bonds, buying down the bond yields even further. Just last week on October 8, the Ministry of Finance tendered five-year capital-injection special treasury bonds with a coupon rate of only 1.37%. If ordinary citizens were free to buy US Treasury bills at 4%, who on earth would buy 1.37% government bonds? If you can't sell them, you have to hike interest rates. So what is the wall really defending? It's the CCP's own borrowing costs. Household deposits at the end of August were 172.9 trillion yuan—let's call it 173 trillion. 173 trillion multiplied by 1% is 1.73 trillion. In other words, for every percentage point interest rates are suppressed, depositors lose out on 1.73 trillion yuan a year. And depositors themselves carry loans too. Deducting the roughly 82 trillion yuan in household loans, net deposits are around 90 trillion yuan. So for every percentage point the deposit interest rate drops, depositors lose out on 910 billion yuan. How many points is the CCP suppressing now? Let's look at this spread: the US-China short-term interest rate spread is currently 3.2 percentage points; let's treat that as an upper limit. So depositors are taking a net hit of between 910 billion and 2.9 trillion yuan a year. And who benefits? Whoever owes the most money benefits. The balance of government bonds is 103.69 trillion yuan; multiplied by 1%, that is 1.04 trillion yuan. Dividing 1.04 by 1.73, 60% of what the depositors surrendered went straight into the CCP government's accounts. And that only counts the statutory debt portion; I haven't even included messy things like local government financing vehicles (LGFVs).

Secondly, the export factories are also shelling out money. As mentioned earlier, in one year, over 800 billion US dollars flowed out of China, and the US dollars earned through the trade surplus are being used to fill this gap. Therefore, the trade surplus cannot be severed for China, because domestic goods cannot be sold right now and can only be dumped abroad at lowered prices. Over three years, China's manufactured goods export prices only increased by 2 percent, while other countries saw an increase of 17.4 percent. Thus, 117.4 divided by 102 means other export-oriented countries had a 15.1 percent higher price increase than China. In the first half of this year, China's manufactured goods exports amounted to 1.81 trillion US dollars. If we calculate it linearly, that makes 3.62 trillion for the year, and multiplying it by this 15.1 percent gives 547 billion US dollars, which translates to over 3.6 trillion RMB. What does this part calculate? It calculates how much more money could be collected in a year for the same goods if they were sold at other countries' prices. This figure is also an estimated upper limit, because if prices really went up, orders would certainly be lost. Well, this cannot entirely be blamed on the exchange rate, to be fair. Adding these figures together, on the US dollar ledger, it is a net outflow of 780 billion plus depositors getting 910 billion to 2.9 trillion less. The money paid out by depositors each year from this part is 1.7 trillion to 3.7 trillion, plus the price concessions made on exports, which puts it in the range of 4.6 trillion to 7.3 trillion RMB. This is equivalent to between 3.3 percent and 5.2 percent of the GDP announced by the Chinese Communist Party (CCP) last year. Of course, there is some overlap among these figures, so we can only look at the order of magnitude.

Therefore, look at what people outside are shouting about: they are shouting that the RMB is undervalued. What are they calculating? They are calculating the CCP's trade surplus, with the goal of getting the CCP to reduce its dumping on the international market and stop fucking exporting deflation internationally. If calculated according to market accounts, an RMB without the Great Firewall would definitely be above 7.4. Therefore, the CCP dares not let go on either end and can only suppress it. The suppressed money is being shelled out by savers and export factories, and how long this system can sustain itself is not decided by the CCP. Who decides it? On one end, it depends on the trade surplus, and what does the trade surplus depend on now? It depends on US capital expenditures and tariffs. On the other end, it depends on the interest rate differential, which is currently in the hands of the Federal Reserve. As I said before, as long as real economic growth cannot catch up with the interest rate on debt for a single day, this structure of suppressing interest rates cannot be dismantled for a single day. Moving forward, everyone can keep an eye on a few numbers: the first is the bank settlement and sales of foreign exchange data released in the middle of each month, the second is the foreign exchange reserves released on the 7th of each month, and the third is how much weaker the daily central parity rate is compared to the closing rate. On the day when the trade surplus in foreign exchange settlement and sales disappears, the reserves will drop on their own. In fact, if you flip through the account books yourself, everything will be completely clear.