On September 7, the State Administration of Foreign Exchange released the data on the scale of foreign exchange reserves at the end of August 2023. The data shows that by the end of August 2023, the scale of China's foreign exchange reserves is US $3160.1 billion, a decrease of US $44.2 billion or 1.38% from the end of July.
(Related data drawing)
It is worth noting that, according to the data updated on the official website of the SAFE on the same day, as of the end of August, China's official gold reserves had reported 69.62 million ounces, up 930000 ounces from the previous month, up for 10 consecutive months.
According to the SAFE, in August 2023, influenced by macroeconomic data of major economies, monetary policy expectations and other factors, the US dollar index rose and global financial asset prices fell overall. Exchange rate translation, asset price changes and other factors combined to reduce the scale of foreign exchange reserves in the month. China's economy has maintained a trend of recovery and improvement, with strong economic resilience, great potential and sufficient vitality. The fundamentals of long-term improvement have not changed, which is conducive to the continued stability of the scale of foreign exchange reserves.
The rise of US dollar index affects global financial asset prices
At the end of August, China's foreign exchange reserves were US $3160.1 billion, down from the end of July. The SAFE explained that the US dollar index rose in August and global financial asset prices fell overall due to macroeconomic data of major economies, monetary policy expectations and other factors.
According to the statistics of the research team of Minsheng Bank, in terms of currency, the US dollar exchange rate index (DXY) rose 1.7% to 103.6, and non US dollar currencies generally depreciated. In terms of assets, the Barclays Global Aggregate Total Return Index USD Hedged, which is denominated in US dollars, fell 0.1% in August; The S&P 500 stock index fell 1.8%. Exchange rate translation, asset price changes and other factors combined to reduce the scale of foreign exchange reserves.
In the opinion of Zheng Houcheng, the chief macro economist of Yingda Securities, the yield of 10-year US government bonds rose to a certain extent in August, driving up the yield of 10-year Eurozone bonds, 10-year Japanese bonds and 10-year British bonds, and lowering the price of bond assets in foreign exchange reserves. From the perspective of exchange, the US dollar index rose in August, driving down the US dollar price of non US assets. In addition, China's trade surplus in August declined from that in July, hitting a new low for nearly three months, which weakened the support for China's foreign exchange reserves to a certain extent.
He also pointed out that it is expected that the yield of 10-year US treasury bonds will remain high in September, and the dollar index will remain relatively resilient. On the basis of the above judgment, China's foreign exchange reserves in September may lack a substantial upward basis.
The scale of external reserves is expected to remain stable in the future
Looking forward to the future, the SAFE said that China's economy has maintained a recovery trend, with strong economic resilience, great potential, and sufficient vitality. The fundamentals of long-term improvement have not changed, which is conducive to the continued stability of the scale of foreign exchange reserves.
Wen Bin, chief economist of China Minsheng Bank, said that the current momentum of world economic growth has weakened, uncertainty and instability have increased, and the international financial market is volatile. With the implementation of the recently introduced stable growth policy, China's economic endogenous power will continue to strengthen, and the economy will continue to maintain a stable recovery trend, which is conducive to the stability of the RMB exchange rate and the smooth operation of the foreign exchange market, and provides support for the basic stability of the scale of foreign exchange reserves.
The People's Bank of China's second quarter monetary policy implementation report pointed out that externally, the Federal Reserve's interest rate hike is nearing the end, and the momentum for the sharp rise of the US dollar is limited. Internally, the balance of foreign exchange reserves remained above 3 trillion US dollars, ranking first in the world.
Wang Chunying, deputy director of the State Administration of Foreign Exchange and spokesman of the State Administration of Foreign Exchange, also said that looking ahead, the tightening of monetary policies in major economies around the world is nearing the end, and the related spillover effects will be mitigated. At the same time, China's balance of payments structure has become more stable, the rationality of market players has continued to improve, macro prudential adjustment tools have continued to improve, and the foundation for the steady operation of the foreign exchange market remains solid.
Gold reserves have increased for 10 consecutive months
It is worth noting that, according to the data updated on the official website of the SAFE on the same day, as of the end of August, among the official reserve assets, gold reserves reported 69.62 million ounces, up 920000 ounces from the previous month. At present, China's official gold reserves have increased for 10 consecutive months.
Since 2022, driven by geopolitical risks and global economic stagflation risks, the central banks of emerging market economies have significantly increased their gold reserves. It is generally believed that three factors, namely, the COVID-19 epidemic, the geopolitical crisis and the US banking crisis at the beginning of this year, may be the main reasons for stimulating a large number of gold investment and speculation in the gold market.
John Reade, the chief market strategist of the Eurasian region of the World Gold Council, pointed out that next, under the general forecast of a mild recession in the U.S. economy, it is expected that gold will continue to be supported by bond yields dominated by range shocks and a somewhat weak dollar in the future. If the economy deteriorates further, the demand for gold investment will be stronger. On the contrary, if the economy has a soft landing or the monetary policy is more aggressive, it will weaken.
From the perspective of domestic demand, Jia Shuchang, senior analyst of the World Gold Association, pointed out that seasonal factors and high domestic gold prices may continue to affect domestic upstream physical gold demand in the short term. However, with the development of various gold jewelry industry activities in September, gold demand may rebound; The National Day holiday in early October is also the traditional wedding season, when merchants will also be more active in replenishing goods.
