(Yicai Global) Aug. 9 -- Due to increasing prices of global financial assets, China’s foreign exchange reserves rose by USD21.9 billion to USD3.2 trillion last month, the highest level since January 2016, according to the latest official data.

Affected by the Covid-19 pandemic and major countries’ monetary policies and macroeconomic data, non-US dollar currencies have strengthened slightly and global financial asset prices have risen, said Wang Chunying, spokesperson for the State Administration of Foreign Exchange.

Forex reserves are denominated in US dollars, and the amount of non-US currencies converted into dollars has increased, which, together with changes in asset prices, resulted in rising foreign exchange reserves in July, Wang said.

The US Dollar Index fell 0.3 percent to 92.2 last month, while the euro rose by 0.1 percent, the pound sterling rose by 0.5 percent, and the yen rose by 1.3 percent.

In terms of assets, the dollar-denominated Barclays Global Aggregate Total Return Index USD Hedged rose 1.2 percent and the S&P 500 Index gained 2.3 percent. The Euro Stoxx 50 Index edged up 0.6 percent, while the Nikkei 225 Index dropped 5.2 percent.

“Exchange rate translation factors have led to an increase in the valuation of foreign exchange reserves, while real trade and cross-border capital flows are expected to contribute to the growth of foreign exchange reserves,” Wen Bin, chief researcher at China Minsheng Bank, told Yicai Global.

China’s economy will remain steady and domestic demand will continue to recover, which will support the stability of foreign exchange reserves, Wen said. Meanwhile, external demand is expected to remain relatively strong, and China’s foreign trade will continue to grow. 

The current global Covid-19 pandemic is still evolving, and there are many uncertain and unstable factors in the international economic and financial situation, Wang said. “But China’s economy has registered stable performance with good momentum for growth, with new results achieved in high-quality development, which will support the overall stability of foreign exchange reserves.”

Editor: Tom Litting