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Discussion on foreign reserves assets: the foreign exchange market is generally stable2022-08-05 11:00:29

China's foreign exchange reserves ushered in the largest month of growth since January 2021--The latest data released by the State Administration of Foreign Exchange recently showed that as of the end of July this year, China's foreign exchange reserves stood at 3,104.1 billion US dollars, an increase of 328% from the end of June. billion, an increase of 1.07%.

 

In this regard, the interviewed experts said that in the context of increasing fluctuations in the current external financial environment, China's large-scale foreign exchange reserves will continue to play the role of ballast against various external shocks. In the future, as the effects of various policies and measures to stabilize the economy continue to emerge, China's economy will continue to maintain a positive momentum of recovery, supporting the overall stability of the scale of foreign exchange reserves. However, the continuous growth of foreign reserves is not a long-term trend. In the future, more efforts should be made in the stability and security of foreign reserves.

 

The foreign exchange market is generally stable

 

In July, foreign exchange reserves returned to above US$3.10 trillion after a lapse of one month. Wang Chunying, deputy director of the State Administration of Foreign Exchange and spokesperson, believes that the increase in foreign exchange reserves in the month was mainly affected by comprehensive factors such as exchange rate conversion and changes in asset prices.

 

She further analyzed that in July, China's foreign exchange market was generally stable, and domestic foreign exchange supply and demand were basically balanced. In the international financial market, under the influence of major countries' monetary policies, economic growth prospects, inflation expectations and other factors, the US dollar index rose, and the prices of major global financial assets rose in general.

 

The reporter noticed that in parallel with China's increase in foreign exchange holdings, other Asia-Pacific countries have also increased their foreign exchange holdings.

 

According to the latest data released by the Bank of Korea, in July, South Korea’s foreign exchange reserves were US$438.61 billion, an increase of US$330 million from the previous month. According to the latest data released by the Japanese Ministry of Finance, in July, Japan's foreign exchange reserves were US$1.323 trillion, an increase of US$11.7 billion from US$1.3113 trillion in the previous month. The latest weekly data from the RBI showed that as of the end of July, the RBI's foreign exchange reserves rose to $573.875 billion, an increase of $2.315 billion from the previous week.

 

Wei Hongxu, a researcher from Anbang Think Tank, analyzed to a reporter from the International Business Daily that the scale of China's foreign exchange reserves has increased, including other countries' increased holdings, which is related to the fluctuation of US dollar asset prices. However, with the appreciation of the US dollar, non-US dollar-denominated assets will also depreciate, and the overall currency structure of foreign exchange reserves also needs to be looked at. At present, US dollar assets in China's foreign exchange reserves may still account for a relatively high proportion, thus showing an increase in foreign exchange reserves in US dollars.

 

Wen Bin, chief economist of China Minsheng Bank, said that from the perspective of exchange rate factors, the dollar index at the end of July was driven by factors such as rising inflation expectations and the Federal Reserve's interest rate hike, which rose 1.1% from the end of June; among non-dollar currencies, the euro fell 2.5%, and the pound Down 0.1%, the yen rose 1.8%; on the whole, exchange rate factors led to a slight discount to the non-dollar portion of foreign exchange reserves.

 

"In July, the yields of 10-year treasury bonds in major developed economies were mostly lower than the previous value, and the yield of the dominant 10-year U.S. Treasury bond closed at 2.98% in June and 2.67% in July, down 0.31 percentage points. Percentage points, more foreign exchange reserves." Zheng Houcheng, director of the British University Securities Research Institute, said to a reporter from the International Business Daily.

 

In addition, the latest data released by the General Administration of Customs showed that the trade surplus in July was US$101.27 billion, a record high. Wei Hongxu said that foreign trade exports grew rapidly in July, and the large trade surplus that month formed support for foreign reserves.

 

Do a good job in foreign storage security

 

As a reflection of the country's comprehensive national strength and financial anti-risk capability, the reserve of foreign exchange assets is of great significance for stabilizing the domestic currency exchange rate, enhancing macroeconomic control, attracting foreign investment and expanding international trade.

 

Especially in the current environment, the regulatory role of foreign exchange reserves is still very important.

 

"As a currency reserve corresponding to trade settlement, when the domestic currency is weak, the increase in foreign exchange reserves is not only conducive to foreign trade, including imports and exports, but also conducive to investment by foreign-funded enterprises, thereby ensuring the stability of the domestic currency exchange rate." However. , Wei Hongxu said that excessive foreign reserves will also promote the appreciation of the national currency, which is not conducive to export trade.

 

Regarding the trend of foreign exchange reserves in the next stage, Wang Chunying said that the current global economic situation is full of challenges, unstable and uncertain factors have increased significantly, and the international financial market is volatile. However, China has effectively coordinated epidemic prevention and control and economic and social development. Its economy has strong resilience, great potential and sufficient vitality. The fundamentals of long-term improvement will not change, and it will continue to support the overall stability of the scale of foreign exchange reserves.

 

"Looking forward to August, geopolitical conflicts persist, overseas inflation is running at a high level, major overseas economies raise interest rates substantially, and global economic growth slows down as a high probability event. It is expected that the US 10-year bond maturity yield will be higher than the euro zone 10-year government bond yield. It is difficult for the yield to rise sharply, and the probability of falling is greater than the probability of rising, which will continue to be good for my country's foreign exchange reserves." Zheng Houcheng said.

 

In addition, Wei Hongxu also mentioned that foreign trade should pay more attention to balanced development, maintain the balance of the current account account, and keep the foreign exchange reserves roughly stable. Therefore, it is necessary to maintain a certain scale of foreign exchange reserves, but the continuous growth of foreign reserves is not a long-term trend, and the focus should be on the stability and safety of foreign reserves.

 

The reporter noticed that the relevant departments have also paid great attention recently to ensuring the safety of foreign exchange reserve assets. A few days ago, the State Administration of Foreign Exchange held a foreign exchange management work meeting in the second half of 2022. The meeting clearly pointed out that in the second half of the year, it is necessary to maintain the stable operation of the foreign exchange market and improve the micro supervision of the foreign exchange market; Liquidity and preservation of value.