China's overall forex reserves likely to fall in 2023 as imports increase: analyst
Published: Mar 07, 2023 08:50 PM
forex File photo:VCG

forex File photo:VCG

China's foreign exchange reserves slightly decreased in February on a monthly basis to $3.1332 trillion, which analysts said the figure remained within a safe range and that China's current foreign exchange reserves are large enough to cover international payments.

At the end of February, China's foreign exchange reserves amounted to $3.1332 trillion, down by $51.3 billion or 1.61 percent from the end of January, according to statistics from the State Administration of Foreign Exchange (SAFE) released on Tuesday. 

In 2022, China's foreign exchange reserves ranged within $3-3.2 trillion, according to statistics from SAFE.

The administration said that in February, influenced by global macroeconomic data, monetary policy expectations of major economies and other factors, the US dollar index rose and global financial asset prices fell in general. Due to the combined effect of exchange rate translation and asset price changes, the size of foreign exchange reserves declined in the past month.

China is striving to promote a steady economic recovery and high-quality development. The domestic economy has huge potential and momentum of development, which is conducive to keeping the size of foreign exchange reserves basically stable, said SAFE on its website.

There is no need to over-interpret fluctuations in the size of foreign exchange reserves. It is totally fine if they stay above $3 trillion, Hu Qimu, deputy secretary general of the digital-real economies integration Forum 50, told the Global Times on Tuesday.

"I think the February drop is mainly due to currency translation, as the dollar index has been strengthening recently," said Hu.

The US dollar index, which tracks the greenback against a basket of six other currencies, increased to 104.44 on Tuesday, as of press time, from its lowest reading in 2023 of 101.22 on February 1.

"In 2022, China's imports were depressed, so the country certainly spent less in foreign exchanges. Now, as domestic demand recovers, imports will increase, which will definitely consume foreign exchange reserves," said Hu, noting that with exports likely not be as strong as last year, China's overall foreign exchange reserves are expected to fall slightly in 2023.

Hu also stressed that at present, China's foreign exchange reserves are large enough to cover international payments. Therefore, small fluctuations in foreign exchange reserves are normal, as long as they are within a predictable range.

Meanwhile, China's gold reserves at the end of February stood at 65.92 million ounces (205.03 tons), up 800,000 ounces from January, marking the fourth consecutive month of increasing in gold holdings, showed statistics from the central bank on Tuesday.

Global Times