China just stunned the markets

China just stunned the markets.

The People's Bank of China announced on Thursday that its foreign-exchange reserves surged by $13 billion to $3.21 trillion in June - much to everyone's surprise.

Economists surveyed by Bloomberg expected reserves to come in at $3.17 trillion, in part because of the weaker pound and euro post-Brexit.

Although, the stronger yen - which appreciated by over 7% against the US dollar last month - could have offset some of those effects.

This was the biggest increase in 14 months - although holdings are still down by about 20% from their June 2014 peak of $4 trillion.

Notably, after the data crossed, economists and analysts all expressed different opinions on what this says about capital outflows.

A Morgan Stanley team led by Gordian Kemen wrote in a note to clients that "...the continued stabilization of China's FX reserves over June ... suggests an easing of prior capital outflow pressures."

Capital Economics' Julian Evans-Pritchard and Mark Williams argued that there's some evidence the PBoC is still defending its currency, although pressures have moderated. As they wrote in a note to clients:

"... although today's data don't offer a clear picture on the direction of capital flows there is little doubt that the flows remain much more manageable than in late-2015 and early-2016, when China was witnessing outflows of over $120bn per month. Nonetheless, if the PBOC continue to let the renminbi slide against the dollar, there is a risk that more serious concerns over the trajectory of the currency could re-emerge, leading to another surge in capital outflows."

Meanwhile, Reuters' Elias Glenn and John Ruwitch quoted Sue Trinh, Hong Kong-based head of Asia FX strategy at the Royal Bank of Canada, who said: "Capital outflows have been continuing at pace and they are a lot larger than what the authorities would have us believe through the official data."

She added that the "over-invoicing of China's imports from Hong Kong, seen as a proxy for speculative outflows, is at record highs."

Notably, this week also saw the yuan touch a five and half year low of 6.68 per the dollar following a slow, "stealth devaluation" over the last year.

But while investors went into crisis-mode when China devalued its currency last August, everyone more or less yawned it off this time around. (One could argue that they were been distracted by the Brexit drama.)

"...While the PBOC's past statements on the currency have lost credibility, the reality is that the central bank retains a large degree of control. Indeed, the fact that the renminbi has already fallen by around 10% on a trade-weighted basis over the past 12 months means that the PBoC could now slow the pace of decline and still have gained a sizeable competitive advantage," suggested Capital Economics' chief global economist Julian Jessop in a separate note.

Basically, nobody has any clue what's going on in China.