(Yicai Global) Sept. 8 -- China’s foreign exchange reserves decreased slightly in August from the month before as the US dollar strengthened, causing the value of non-dollar assets to depreciate.

China’s forex reserves amounted to USD3.23 trillion last month, USD3.8 billion less than in July, according to the latest official data.

The figure has remained above USD3.2 trillion for the last four months, indicating that the scale of forex reserves remains stable, said Wang Chunying, spokesperson for the State Administration of Foreign Exchange. In August, China’s forex market ran smoothly and domestic supply and demand of foreign exchange were basically balanced, he added.

Foreign reserves are denominated in US dollars, so the value of non-US dollar currencies would decrease after being converted into dollars, which, together with changes in asset prices, resulted in shrinking foreign exchange reserves in August, Wang said.

The US Dollar Index climbed by 0.5 percent, while the British pound depreciated 1.1 percent against the dollar, the euro by 0.5 percent and the Japanese yen by 0.3 percent.

Non-US dollar assets account for about one third of the country’s forex reserves, Shanghai Securities News reported, citing Xie Yaxuan, director of the Research and Development Center at China Merchants Securities. The exchange rate translation would result in a devaluation of around USD5 billion, which is basically equivalent to how much the reserves shrank last month.

China’s exports, denominated in dollars, jumped 25.6 percent last month from the same period last year, beating market expectations.

Chinese yuan-denominated assets continued to be highly attractive to overseas investors. Northbound funds, or funds flowing from Hong Kong to the mainland stock exchanges, reached CNY26.9 billion (USD4.2 billion) in August, according to China Central Depository & Clearing. And the amount of yuan bonds held by overseas institutions rose CNY30.5 billion (USD4.7 billion) from July to CNY3.4 trillion (USD526 billion).

“China’s economy will continue to recover steadily and should maintain the major economic gauges within a reasonable range, which will in turn support the stabilization of the foreign exchange reserves,” Shanghai Securities News reported, citing Wen Bin, chief researcher at China Minsheng Bank.

However, there remain many uncertainties in the global economic situation and China should focus on the cross-cycle adjustment of macro-policies, strengthen domestic demand, maintain a balance between stable growth and risk prevention as well as keep a close eye on the US Federal Reserve’s tendency to guard against possible impacts by tightening its policies.

Editor: Kim Taylor