In light of a report that was featured on the Dow Jones newswires, I find it ironic that US presidential candidate Mr. Trump has made “currency manipulation” by China as a major component of his economic plan.

According to this report, China is estimated to have $3.22 trillion in currency reserves as of April. That is down from $4 trillion in June 2014.

The US Treasury department has estimated that China has sold more than $480 billion in foreign currency assets from August through March of this year.

Guess where this money is going? Answer – to PROP UP the YUAN. Not debase it like Trump is claiming.

Here is what has been happening ever since China did make the decision to devalue the yuan back in August of last year. It prompted a flood of currency devaluations across the entire region. Not only did the yuan fall but the unforeseen [ or perhaps unexpected is a better word] consequences of that action has been a flood of foreign currency OUTFLOWS from China.

Almost as soon as they devalued, China was forced to begin supporting the yuan in order to stabilize it. That means they had to start burning through their foreign currency reserves.

The reason for all almost panic type reaction by the Chinese authorities is that foreign investment in China began reversing course and headed out of the country.

This has led to selling pressure on the yuan which the Chinese are attempting to halt.

It is an interesting story – those large Chinese companies with large DOLLAR DENOMINATED DEBT, do not want the Yuan to fall any further as it makes servicing those Dollar debts much more expensive for them. That is eating into their profits. These are state firms with tremendous clout when it comes to influencing officials. Their argument is summed up by analysts at BNP Paribas who estimate that a 3% depreciation of the yuan will add $25.6 billion in annual interest payments on their dollar-denominated debts.

However, there are economists and others within China that are arguing that China needs a weaker yuan to avoid further dragging down the economy and eating into China’s competitiveness resulting in manufacturers having to cut prices and potentially wages.