(Yicai Global) March 8 -- China’s foreign exchange reserves fell in February from a month earlier, but stayed above USD3.2 trillion for the 10th consecutive month, mainly because of changes in foreign exchange rates and global financial asset prices.

China’s forex reserves came to USD3.21 trillion at the end of last month, down USD7.8 billion from January, data released by the State Administration of Foreign Exchange showed yesterday.

Exchange rates, asset price changes and others factors remain the main reasons for the decline, SAFE spokesperson Wang Chunying said at a news conference.

The US dollar index edged up 0.2 percent to 96.7 last month, while the euro and the UK pound slipped 0.1 percent and 0.2 percent, respectively. The Japanese yen inched up 0.1 percent.

In terms of trade and cross-border capital flow, strong external demand is conducive to maintaining stable forex reserves, Wen Bin, chief analyst at China Minsheng Bank, told Yicai Global.

The J.P. Morgan global composite purchasing managers’ index jumped 2.3 points to 53.4 last month. China’s new export orders index, a sub-gauge of the PMI, rose 0.6 point in February to a nine-month high of 49. In the first two months of 2022, China’s export value soared 16.3 percent from a year earlier.

“In a more uncertain external environment, trade has started smoothly this year, supporting the stability of foreign exchange reserves,” Wen said, adding that the “Russia-Ukraine conflict resulted in a volatile financial market, leading to more fluctuations in cross-border capital.”

But northbound funds [which flow to the Chinese mainland from Hong Kong via the stock connect programs] had a small net inflow of CNY3.98 billion (USD629.6 million) last month, “which is good to maintain stable forex reserves,” Wen noted. It was CNY16.8 billion (USD2.6 billion) in January.

The Covid-19 pandemic continues, heightening volatility in global financial markets, Wang said, noting that China’s economy keeps running within a reasonable range, which is conducive to stable forex reserves. 

Editor: Futura Costaglione