China’s Forex Reserves Hit Over Five-Year High in May Amid Weak US Dollar, Strong Exports
Xu Yanyan
DATE:  Jun 08 2021
/ SOURCE:  Yicai
China’s Forex Reserves Hit Over Five-Year High in May Amid Weak US Dollar, Strong Exports China’s Forex Reserves Hit Over Five-Year High in May Amid Weak US Dollar, Strong Exports

(Yicai Global) June 8 -- China’s foreign exchange reserves rose to the highest level since February 2016 last month amid the weakening US dollar and the surging Chinese exports.

Forex reserves climbed to USD3.2 trillion in May, the State Administration of Foreign Exchange said yesterday.

The central bank's holdings of assets in currencies other than the US dollar were converted into dollars, which lifted the value of the reserves.

Strong Currencies, Assets

Non-US dollar currencies strengthened, said Wang Chunying, spokesperson of the SAFE. Moreover, financial asset prices in major economies rose due to the Covid-19 pandemic and the advancing vaccination programs, monetary policies, and inflation expectations, as well as macroeconomic factors, Wang added.

The falling US Dollar Index, the surging financial asset prices, and China's rapid export growth were some of the reasons behind the widening foreign exchange reserves, Wen Bin, chief researcher at China Minsheng Bank, told Yicai Global.

In May, the DXY slid 1.6 percent. Meanwhile, non-US currencies appreciated. The British pound got 2.8 percent firmer against the greenback and the euro strengthened 1.7 percent.

Stock markets have been bullish. The EuroStoxx 50 index climbed 1.6 percent in May, while the S&P 500 rose 0.5 percent. The Nikkei 225 gained 0.2 percent.

Domestic Fundamentals

Trade has been lively. The value of Chinese exports, measured in US dollars, increased by 27.9 percent last month from a year ago, maintaining a higher than 20 percent growth rate for the fifth straight month. China's trade surplus rose by USD2.7 billion to USD45.5 billion from April.

Capital inflows have been reasonable. Net inflows of northbound funds were USD55.8 billion last month, which contributed to the growth of China’s foreign exchange reserves.

The Chinese yuan has been getting stronger. The renminbi's exchange rate will move in two directions while remaining at a reasonable level, said Wen. Forex demand and supply should stay balanced, the chief researcher added.

China’s steady economic recovery will support the stability of foreign exchange reserves, Wen added.

Editor: Emmi Laine, Xiao Yi

 

 

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Keywords:   SAFE,Foreign Exchange Reserve