How long before the cracks show in China's great currency wall?

CHINA still owns the world's largest currency reserves, but it has been burning through them at such a pace that some think Beijing might soon have to allow a sharp fall in the yuan or back-pedal on liberalisation and tighten its capital controls.

Foreign exchange reserves in China declined $99.5 billion in January to $3.23 trillion, following a record fall the previous month, and have shrunk by $762 billion since mid-2014, more than the gross domestic product of Switzerland.

That still leaves a mighty arsenal, and the People's Bank of China (PBOC) says it is more than adequate, though it has not said what the minimum might be and did not return a request for comment.

PBOC governor Zhou Xiaochuan told Caixin magazine a week ago that much of the outflow had been Chinese companies repaying dollar debt as the greenback rose, which would bottom out, or outbound investment, which was to be welcomed.

Most economists agree China has a way to go before running out of road, but some believe it will have to hit the brakes in months, not years.

The pace of decline has accelerated as the PBOC fought to keep the yuan steady in the face of speculative selling offshore and capital flight at home, a task made harder by China's slowest economic growth in 25 years and the bank's own decision to guide the currency down in August and again in early January.

Though it has huge reserves, an economy the size of China's needs them to cover imports and foreign debts, and the less liquid assets in reserves can't readily serve those purposes.

Though the composition of China's reserves is a state secret, officials also say the falling dollar value of other currencies it holds accounts for some of the fall.

Economists and foreign exchange professionals around the world are nevertheless asking how low can they go before Beijing is forced to choose between fresh capital controls or giving up selling dollars to defend the yuan, also known as the renminbi.

French bank Societe Generale says International Monetary Fund guidelines put $2.8 trillion as the minimum prudent level for China, which is not far away if reserves keep falling at the current pace.

"If that occurs in the next few months," says SocGen, "expect to see a tidal wave of speculative selling, forcing the PBOC to throw in the towel and let the market decide the level of the renminbi exchange rate."

A G20 deputy central banker was considerably more sanguine.