(Yicai) Jan. 8 — China’s foreign exchange reserves jumped for the fifth consecutive month in December to the highest in 10 years, mainly because the weak US dollar lifted valuations.
China’s forex reserves rose by USD11.5 billion to USD3.3579 trillion as of Dec. 31 from Nov. 30, the State Administration of Foreign Exchange announced yesterday. The figure compares with USD3.2024 trillion as of Dec. 31, 2024.
Last month’s increase was due to the combined effect of currency conversions and global asset price changes, as the US Dollar Index declined and the performance of global financial assets was mixed, as well as monetary policies and macroeconomic data of major economies, the SAFE noted.
The slight rise in the scale of China’s forex reserves in December was mainly driven by the drop in the US Dollar Index, said Wang Qing, chief macroeconomic analyst at Golden Credit Rating International. Influenced by Federal Reserve interest rate cuts, the US Dollar Index decline in December pushed up the value of non-US dollar assets within China’s forex reserves, he added.
China’s trade surplus broke the USD1 trillion mark for the first time in the first 11 months of the year. This also provided a solid foundation for the stable growth of forex reserves.
China’s exports have grown in both volume and quality, the structure of export products has upgraded, and export markets have flourished across multiple points, playing a significant role in supporting the balance of payments, said Wen Bin, chief economist at China Minsheng Bank.
Meanwhile, the People’s Bank of China raised its gold holdings by 30,000 ounces to 74.15 million ounces in December from the previous month, up for the 14th consecutive month, according to SAFE data. However, the increment has remained at a low level for several months, aligning with market expectations.
The logic for the long-term rise of gold reserves remains solid, Wen noted. On one hand, geopolitical conflicts and intensified competition among major powers have weakened market confidence for the US dollar, and on the other hand, various central banks continue to optimize their forex reserves structure by increasing gold holdings to follow the ‘de-dollarization’ trend.
Editor: Futura Costaglione
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