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A Trump trade war could push China to the brink

While the sell-off in currencies of emerging markets with insufficient foreign exchange (forex) reserves and wide current account deficits — such as the Argentine peso and the Turkish lira — is still picking up steam, there is relative calm in China. On the surface, the yuan has plenty of forex reserves (over $3 trillion) and its current account has been in surplus for over 20 years. The natural question is: If there is no need for external financing, why did China lose $1 trillion in forex reserves between mid-2014 and mid-2016 before briefly arresting that decline?