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Strong economic resilience, high-level opening-up measures sustain trend China's foreign exchange reserves, the largest in the world, expanded
to $3.1646 trillion in August, the fifth consecutive month of growth,
as strong economic resilience and high-level opening-up measures
bolstered momentum, experts said. The State Administration of Foreign Exchange said on Monday that
total foreign exchange reserves rose by 0.3 percent on a monthly basis
to $3.1646 trillion by the end of last month, compared with $3.1544
trillion at the end of July. The country's foreign exchange reserves have risen by $56.7 billion
from the end of last year. Experts attribute the growth in reserves to
the fluctuations in the US dollar index, especially at a time when major
central banks have adopted monetary easing policies to offset the
negative effect of the COVID-19 pandemic. Influenced by the major economies' monetary policy expectations and
macroeconomic data, nondollar currencies have appreciated against the US
dollar. This has affected the financial asset prices and raised the
total value of China's foreign exchange reserves, said Wang Chunying,
deputy director and spokeswoman of the SAFE. With the COVID-19 pandemic yet to be controlled globally, there are
still many uncertainties in the financial markets, said Wang. The SAFE official said that China's strong economic resilience, and
the accelerated establishment of a "dual circulation" development
pattern, which takes the domestic market as the mainstay while domestic
and foreign markets complement each other, would be conducive to further
growth in the foreign exchange reserves. China's economy has recovered quickly from the COVID-19 outbreak,
thanks to the resolute containment of the epidemic and the relatively
effective policy stimulus. Globally, most of the economies still have a
long way to go before they can see a full recovery after the COVID-19
induced plunge in output, said the experts. Most of the major economic indicators in recent months have indicated
that industrial and investment activities continue to run ahead of
consumption. Louis Kuijs, head of Asia Economics at Oxford Economics, said:"Going forward, we expect China's recovery to continue." Kuijs expects China's economic growth in the fourth quarter of the
year to be around 2.3 percent as recoveries in several major economies
are facing head winds amid difficulties to contain the virus. He expects
China's 2021 growth to be around 7.6 percent, slightly moderate from
his earlier projections. Buoyed by an optimistic economic outlook, the yuan has strengthened
against the US dollar by nearly 5 percent since the end of May. Last
month, the yuan appreciated by 1.8 percent against the greenback to
around 6.84 per dollar. Lu Ting, chief economist in China with Nomura Securities, believes
that in the short term, some social and political issues in the United
States may add to uncertainties in the economy and the same could cause
further fluctuations of the US dollar index or further drive down the
greenback. But a long-term weakening of the US dollar is unlikely, and it is
possible that the currency may rebound in the future. Hence it is
advisable for Chinese investors to watch out for potential foreign
exchange risks, said Lu. Wen Bin, chief analyst at China Minsheng Bank, said that as China
continues to deepen the opening up of the financial sector, more foreign
investors will increase their holdings of yuan-denominated assets,
which will boost cross-border capital inflows into the domestic
financial markets. The inflows will support the foreign exchange market
and help maintain the reserves at a stable level, he said.
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