China has amassed one of the largest pools of capital. It was in the form of central bank reserves. At its peak, it was around $4 trillion. The composition of these reserves is a closely guarded secret. However, if the yuan is going to be including the IMF’s SDR, it is anticipated that China report will have to report the currency allocation of its reserves. China would not necessarily publish these though IMF would include them in its aggregations process that it publishes quarterly.
China’s reserves have fallen for four consecutive quarters through the middle of the year. Over this period, the reserves have fallen a total of $300 bln. In Q2 15, reserves fell $40 bln. Stemming from its trade surplus and investment income, direct investment flows, economists expect reserves to have gone up rather than fall.
They gap between what the economists’ models say that reserves should be and what the PBOC reports them as become the proxy for capital flight. As the models differ, the estimate of the capital flight differs. One large investment bank estimates it at $800 bln. Another one claims $520 bln.
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Many observers take it another step. On the assumption that the bulk of China’s reserves is invested in Treasuries, a decline in reserves is a decline in Treasury holdings. The most authoritative source is from the US Treasury. This is depicted in this Great Graphic from Bloomberg. It shows that as of the end of May, China held $1.27 trillion of  US Treasuries. It is unchanged ($2 bln more) than it held when its reserves peaked last June.
The PBOC may hold Agency bonds as part of their reserve holdings, not just Treasuries. In the first five months of this year, China’s Agency holdings rose by $14.5 bln. By the US reckoning, China’s Treasury holdings rose by $26 bln in the Jan-May period.
Some claim that China is disguising its flows. They argue that this was done on Euroclear in Belgium. There had been a six-month period in late-2013 and into early-2014 that US data showed a large accumulation of Treasuries in Belgium. They rose from $173 bln in September 2013 to $381 bln in March 2014. At first some thought this was Russia shifting its reserves, but it was understood to be related to Euroclear’s exchange function, likely collateral.
