There are many reasons China’s reserves were dropping.

  • The reserves are in worthless Dollars; China wants to diversify so it was moving money out of dollars and into Gold and other tangible assets. They don’t want to hold onto worthless paper that the Fed can create whenever it so wishes.
  • China could have been paying down debt; another way to put this money to good use, instead of holding it while the U.S continues to inflate the supplies of dollars at a mindboggling rate.
  • Finally,  Money was being deployed into new infrastructure projects. Again this is another way to put this money to use.  Improving a nations infrastructure creates Jobs and provides a great rate of return over the long run. look at the U.S the infrastructure is falling apart. With the passage of each it looks more like a 3rd world country and this is costing the economy billions of dollars.

Source: Tactical Investor