China’s foreign exchange reserves jumped $6.1 billion from the end of April to $3.1 trillion at the end of May, the highest figure in nine months, according to the State Administration of Foreign Exchange (SAFE) on Monday, June 10.
Wang Chunying, spokesperson of the SAFE, noted that steady economic growth in China will stabilize the foreign exchange market despite future uncertainties and turbulence in the global financial markets.
Wang said on June 10 that market sentiment is shifting toward risk aversion in response to global trade and political uncertainties, including escalating global trade disputes and Brexit, as shown by the rising US Dollar Index and global bond index. The combination of fluctuations in the exchange rate and asset prices contributed to the increase in foreign exchange reserves.
Liu Jian, a senior research fellow at the financial research center of the Bank of Communications, said that the key reason for the rise was the valuation factor. In May, both the euro and the pound depreciated, while the yen appreciated, causing a loss of about $5 billion in the foreign exchange reserves. However, government interest rates in the US, Japan, the UK and the Eurozone all declined. In May, the main US Treasury interest rate fell from 2.5 percent to 2.1 percent, leading to a significant increase in the foreign reserves, Liu said.
Liu also said that foreign institutions will continue to increase holdings of yuan-denominated bonds, but the overall flow of foreign reserves will remain stable.
Source：Global Times
