Compared to the end of July, China's foreign exchange reserves decreased by 44.2 billion US dollars, and by the end of August, China's foreign exchange reserves were 316.01 billion US dollars
According to data released by the State Administration of Foreign Exchange on the 7th, as of the end of August 2023, the scale of China's foreign exchange reserves was 3160.1 billion US dollars, a decrease of 44.2 billion US dollars or 1.38% compared to the end of July.
According to the relevant person in charge of the State Administration of Foreign Exchange, in August 2023, the US dollar index rose and global financial asset prices overall declined. The combined effect of exchange rate conversion and changes in asset prices has led to a decrease in the size of foreign exchange reserves for the month.
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At the end of July, the scale of China's foreign exchange reserves was 3204.3 billion US dollars, an increase of 0.35% compared to the end of June
On August 7th, data released by the State Administration of Foreign Exchange showed that as of the end of July 2023, the scale of China's foreign exchange reserves was 3204.3 billion US dollars, an increase of 11.3 billion US dollars or 0.35% compared to the end of June.
The State Administration of Foreign Exchange stated that in July 2023, the US dollar index fell and global financial asset prices overall rose due to factors such as monetary policies and expectations of major economies, and global macroeconomic data. The combined effect of exchange rate conversion and changes in asset prices has led to an increase in the size of foreign exchange reserves for the month.
In the view of industry insiders, the month on month increase in foreign exchange reserves in July was mainly affected by the positive valuation effect of exchange rate translation and asset price changes. Zhou Maohua, a macro researcher in the financial market department of Everbright Bank, said that the economic data released by the United States in July was not as expected, and the market bet that the Federal Reserve's interest rate hike had come to an end, and the US dollar had weakened significantly. At the same time, the prices of major international financial assets rebounded, and the exchange rate and financial asset prices pushed foreign exchange reserves higher.
Wen Bin, Chief Economist of China Minsheng Bank, said that from the perspective of exchange rate factors, the US dollar index in July fell overall due to the near end of the Federal Reserve's interest rate hike and the rise of European and British currencies, falling by 1.0% to 101.9 for the entire month; Among non US dollar currencies, the Japanese yen, euro, and pound appreciated by 1.4%, 0.8%, and 1.1% against the US dollar, respectively. Overall, exchange rate factors have led to an appreciation of the non US dollar portion of foreign exchange reserves.
"In July, the scale of China's foreign exchange reserves increased by 11.3 billion US dollars month on month, with most of the contribution coming from exchange rate conversion." Zhao Qingming, Vice President of the China Foreign Exchange Investment Research Institute, said that according to preliminary statistics, exchange rate conversion factors have formed a value-added effect of over 10 billion US dollars on the balance of foreign exchange reserves. In terms of asset prices, due to the relatively stable global bond prices in July, the impact on foreign exchange reserves is relatively small.
In addition, in terms of international balance of payments, Wen Bin believes that based on high-frequency data and forward-looking indicators, it is expected that China's import and export surplus will remain high in July, foreign direct investment will remain stable, and the stock market will show a net inflow from the "northbound" capital flow. After excluding exchange rates and asset prices, it can be inferred that the changes in foreign reserves caused by international balance of payments in July should be within a reasonable range. This indicates that China's foreign exchange market is generally stable, and the domestic foreign exchange supply and demand remain basically balanced.
The State Administration of Foreign Exchange stated that China's economy has enormous development resilience and potential, and the long-term positive fundamentals have not changed, which is conducive to maintaining basic stability in the scale of foreign exchange reserves.
"The current external environment is complex and severe, with many unstable and uncertain factors. The global economy is still facing downward pressure, and the volatility of the international financial market is still high. With a series of policies to stabilize foreign trade and foreign investment taking effect, trade in goods will continue to play a stabilizing role in the balance of payments, cross-border investment is expected to improve, and the balance of payments will continue to maintain a basic balance pattern, which is conducive to maintaining the basic stability of foreign exchange reserves," Wen Bin said.
Zhou Maohua said that from the trend, China's economy has recovered steadily, foreign trade resilience and RMB asset attractiveness have been growing, RMB exchange rate flexibility has been enhanced, and the balance of payments is expected to maintain a basic balance. Meanwhile, as the US dollar interest rate hike comes to an end, China's foreign exchange reserves are expected to remain relatively stable.
