The scale of our country's foreign exchange reserves has risen for three consecutive months. Last year, the scale of our country's foreign exchange reserves remained above 3 trillion US dollars

According to the data released by the State Administration of Foreign Exchange on January 7, as of the end of December 2022, the scale of our country's foreign exchange reserves was 3.1277 trillion US dollars, an increase of 10.20 billion US dollars from the end of November, an increase of 0.33%.

Throughout 2022, the scale of our country's foreign exchange reserves has always remained above 3 trillion US dollars, and it has rebounded for three consecutive months in the fourth quarter. In the context of the sharp decline in the scale of foreign exchange reserves in many countries around the world, the industry believes that this is conducive to strengthening confidence in our country's economy. Our country's foreign exchange reserves have fully played the role of "stabilizer" and "ballast stone" of national economy and finance.

Looking forward to the trend of changes in the scale of foreign reserves in 2023, experts said that our country's economy has rebounded steadily, and the balance of payments will continue to be stable. At the same time, the possibility of economic recession in the United States has increased, and the Federal Reserve's interest rate cut expectations have increased. Looking at internal and external factors, the scale of foreign exchange reserves in our country will remain stable.

Rising for three consecutive months

The external economic sector demonstrates resilience

Changes in the scale of our country's foreign exchange reserves reflect the combined impact of exchange rate translation and asset price changes.

The foreign exchange bureau said that in December 2022, influenced by factors such as monetary policies and expectations of major economies, global macroeconomic data, etc., the US dollar index fell, and global financial asset prices generally fell. The combined effect of exchange rate translation and asset price changes, the scale of foreign exchange reserves rose in that month.

Looking back at the performance of international financial marekt in December last year, although global inflation fell from a high level, it was still far higher than the policy targets of various countries. Developed countries continued to tighten monetary policies, and global bond and stock prices generally fell. On the other hand, with the expected ebb of the Federal Reserve's sharp interest rate hike, the high of the US dollar index fell, falling 2.3% for the whole month.

"Our country's foreign exchange reserves are negatively affected by changes in asset prices, but the decline of the US dollar is conducive to the appreciation of the non-US dollar part of our country's foreign exchange reserves due to exchange rate conversion." Wen Bin, chief economist of Minsheng Bank, said that under the circumstance of exchange and asset valuation factors hedging each other, our country's foreign exchange reserves increased by 10.20 billion yuan in December last year, indicating that the improvement of the balance of payments has played a greater role.

Wen Bin said that especially in December last year, the net inflow of funds into our country's Shanghai and Shenzhen stock markets exceeded 35 billion US dollars, which shows that overseas funds continue to be optimistic about China's economic development and the prospects of capital markets.

Throughout 2022, the scale of our country's foreign exchange reserves was basically stable throughout the year, always above 3 trillion US dollars, and rose for three consecutive months in the fourth quarter. Affected by factors such as changes in exchange rates and asset prices, the scale of foreign exchange reserves in many countries around the world declined. The latest data from the International Monetary Fund (IMF) shows that in the first three quarters of 2022, the scale of global foreign exchange reserves fell by 1.30 trillion US dollars to 11.60 trillion US dollars, a decrease of 10.22%.

Our country's external economic sector has shown resilience. Wen Bin said that this is conducive to strengthening the confidence of the outside world in our country's economy and giving full play to the role of the "stabilizer" and "ballast stone" of the national economy and finance.

The scale of foreign exchange reserves will remain stable

Looking forward to the new year, what are the characteristics of the changing trend of China's foreign reserves?

"Stability" remains the main theme. "Our country has strong economic resilience, great potential and full vitality. The long-term positive fundamentals have not changed, which is conducive to maintaining overall stability in the scale of foreign exchange reserves," SAFE said.

The State Administration of Foreign Exchange recently held a national foreign exchange management work conference in 2023. The meeting mentioned that in the new year, one of the key tasks of foreign exchange management is to "improve the operation and management of foreign exchange reserves", "promote the building of professional investment capacity, scientific and technological operation capacity, and market-oriented institutional governance capacity. Ensure the safety, flow and value preservation and appreciation of foreign exchange reserve assets."

Wen Bin said that looking forward to 2023, affected by factors such as high inflation and monetary policy tightening in major economies, global economic growth and external demand may slow down, but our country's export potential is large and resilient, and the current account will continue to maintain a surplus pattern; at the same time, with our country's economy rebounding steadily, RMB assets still have great attractiveness, capital and financial accounts tend to improve, and the overall balance of payments situation is stable, which will help the scale of foreign exchange reserves remain stable.

Zheng Houcheng, director of the British Securities Institute, believes that looking forward to 2023, the scale of our country's foreign exchange reserves is likely to show the characteristics of "upward quarter by quarter", mainly due to the high probability that the Federal Reserve will cut interest rates in the second half of 2023. It is expected that the US dollar index and the 10-year US bond maturity yield will be under pressure, which will increase our country's foreign exchange reserves quarter by quarter.

It is worth noting that the data also shows that as of the end of December last year, the central bank's gold reserves were 64.64 million ounces, up 970,000 ounces from the previous month. This is also the second consecutive month of increase in the gold reserves of the People's Bank of China. In November last year, the gold reserves of the People's Bank of China rose 1.03 million ounces from the previous month. Before November last year, the gold reserves of the People's Bank of China remained unchanged for 37 consecutive months.