One of the most common mistakes people make looking at Chinese data is distinguishing between absolute and relative data. $3.6 trillion is a large amount of reserves in absolute terms but much smaller in relative terms. According to my calculations, reserves relative to nominal GDP for 1997-8 Asian tigers is 23% compared to China’s current 34.7%. However, if you compare reserves to M2 money supply the picture is much different. By that measure, China only has reserves equal to 17% of M2 versus 28% in 1997-8 Asian tigers. Given the large demand to move assets out of China, primarily by Chinese firms and individuals it should be noted, the $3.6 trillion in reserve assets looks much smaller against the enormity of its wealth and asset base. If Chinese investors and individuals start to feel significant concern about the RMB, the demand for foreign assets could turn into a flood rapidly if the PBOC fails to arrest the decline. $3.6 trillion is a large number but in the world second largest economy with 1.3 billion, that should be thought of as a small $3.6 trillion.
That is from Christopher Balding.