Exhibit 28: Total Foreign Currency Holdings of 2016. At that pace, China’s total official foreign China’s Official Sector currency holdings could drop below the IMF’s If the recent pace of decline continues, China's reserves reserve threshold of $2.8 trillion by mid-2017, as could soon fall below the IMF's adequacy threshold. shown in Exhibit 28. USS billions Of course, China’s leadership has not stood on 5,000 mmm P300C FX reserves the sidelines. Since September 2015, the People’s 4,500, mene tne LofielaL 2X holdings Bank of China and the State Administration of = Scenario 1 (avg. pace since Aug-2015) ; . . 4,000 Scenario 2 fava. pace in 2016} Foreign Exchange have introduced a series of osm measures to limit capital outflows. These measures 3,000. ; have included orders to financial institutions a = SS to carefully check and strengthen controls on _— all foreign exchange transactions”! and strict -------------1700 oversight of Chinese companies’ outward 1,500 IMF FX reserve threshold ‘ ‘ E +00 (with capital controls) investment in overseas property, hotels, cinemas and the entertainment and sports industries.” 500 . ‘ According to reports, leadership has also ordered 0 é A n be, Janis JuktS—s Jan 1G6 Wu ant (uel? increased oversight of trade activities to make sure companies are not over-invoicing the value Data through November 2016. . 3 ne Source: Investment Strategy Group, CEIC, Bloomberg, IMF. of their imports or under-invoicing the value of TT their exports as a means of circumventing capital controls.*? Exports and imports are 20% and time is different” is extremely dangerous for the 15%, respectively, of China’s GDP. It is virtually investment well-being of our clients’ portfolios. impossible for China to halt capital flows in such China, in fact, faces greater risk of a financial a porous economy without slowing GDP growth crisis because of growing capital outflows. An rates. Thus, China will not be able to completely astounding $1.3 trillion of capital ha