SAFE: China’s foreign exchange reserves maintain an overall stability

As of the end of February 2020, China’s foreign exchange reserves were measured at US $ 3.1067 trillion, a decrease of US $ 1.2 billion or 0.04% from the beginning of the year, according to the data released by the State Administration of Foreign Exchange.

As of the end of February 2020, China’s foreign exchange reserves were measured at US $ 3.1067 trillion, a decrease of US $ 1.2 billion or 0.04% from the beginning of the year, according to the data released by the State Administration of Foreign Exchange.

Experts said that China ’s foreign exchange market was generally stable in February. Valuation variables such as exchange rate translation and asset prices were the main reasons for the change of foreign exchange reserves in February. China’s foreign exchange reserves still have a stable foundation for the next phase.

According to the chief researcher of China Minsheng Bank, from the perspective of exchange rate fluctuation, the US dollar index rose from 97.4 at the end of January to 98.1 at the end of February, with an increase of 0.8%. The exchange rate of the euro to the US dollar depreciated from 1.1094 to 1.1027, down by 0.6%. Therefore, when non-US currencies are converted into US dollars, the value of the foreign exchange reserves drops.

Also, the fluctuation in the real trade due to the epidemic has helped drag down the size of China’s foreign exchange reserves, said the researcher.

Besides, the stock price has a particularly negative impact on the reserves. The US and European stock markets have nosedived since February. Assuming that about 10% of the foreign exchange reserve assets were invested in stocks, the decline in the stock market could lead to USD 20 billion’s loss of the reserve, said a senior researcher in the financial research center of Bank of Communication.

Disclaimer: This is an article created by Michael Liang for Chinasdg.org. You can find the original article here: https://chinasdg.org/2020/06/07/safe-china-s-foreign-exchange-reserves-maintain-an-overall-stability/.

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