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China's foreign exchange reserves declined by $99.5 billion in January to $3.23 trillion, the People's Bank of China – the Chinese central bank – said on Sunday.

As the Chinese economy rebalances, growth has reportedly slowed to 6.9 percent in 2015, after decades of above 7 percent GDP growth rate. China, along with other emerging market economies (EMEs), has been experiencing an outflow of investors’ capital as the U.S. Federal Reserve signaled to interest rates hike and the U.S. dollar strengthens.   

The value of the yuan has dropped to 1.2 percent against the dollar since the start of the year. The Chinese currency has also lost about 5 percent over the past 12 months.

According to data from the Bank for International Settlements (BIS), global liquidity conditions may have begun to tighten for EMEs. The stock of U.S. dollar-denominated debt of non-banks outside the United States, which is an important gauge of global liquidity, remained at $3.3 trillion in the third quarter of 2015.

The Chinese authorities are trying to avoid a rapid devaluation of their currency. A severely weakened yuan would create a crisis for Chinese businesses that hold debt in U.S. dollars, thereby destabilizing the economy.

To stabilize its currency, Chinese authorities have been using FX reserves to buy yuan. The country's FX reserves declined by $108 billion in December.

However, China still has the world's biggest reserves of foreign currency holdings, despite having declined by $420 billion over the past six months.

Rajiv Biswas, chief Asia-Pacific economist at IHS Global Insight, told CNN Money, "The PBOC is caught between the devil and the deep blue sea, facing a choice of either continued slow erosion of FX reserves, or a rapid currency adjustment that could be destabilizing for China and plunge global currency markets into turmoil."