On October 7, the State Administration of Foreign Exchange released data on the size of foreign exchange reserves at the end of September 2023. Data show that as of the end of September 2023, the scale of China's foreign exchange reserves was 3115.1 billion US dollars, down 45 billion US dollars from the end of August, a decline of 1.42%.
According to the data updated on the official website of the Administration of Foreign Exchange on the same day, as of the end of September, the official reserve assets of gold reserves were 70.46 million ounces, an increase of 840,000 ounces (about 24 tons) from the previous month. China's official gold reserves have now increased for 11 consecutive months.
Safe said that in September 2023, affected by the monetary policies and expectations of major economies, macroeconomic data and other factors, the US dollar index rose, and global financial asset prices overall fell. The combined effect of exchange rate translation and asset price changes, the scale of foreign exchange reserves declined in the month. China's overall economic recovery and solid progress in high-quality development are conducive to maintaining the basic stability of the scale of foreign exchange reserves.
China's reserves stood at $3.11 trillion at the end of September
At the end of September, China's foreign exchange reserves were 3,115.1 billion US dollars, down from the end of August. Safe explained that due to the monetary policies and expectations of major economies, macroeconomic data and other factors, the US dollar index rose, and global financial asset prices overall fell.
The report of the National Economic Research Center of Peking University pointed out that in September, under the influence of factors such as the inverted interest rate spread between China and the United States, the strengthening of the US dollar index, and the divergence of monetary policies, the RMB exchange rate showed a volatile downward trend, and the overall two-way fluctuation was between 7.1717 and 7.3226. Among them, the onshore RMB exchange rate fell from 7.2904 to 7.3002, a cumulative decline of 98 basis points; The central parity rate of the RMB was raised from 7.1811 to 7.1798, a cumulative increase of 13 basis points. The offshore rate fell 204 basis points to 7.2957 from 7.2753.
According to the research team of Minsheng Bank, in terms of currencies, the US dollar exchange rate index (DXY) rose 2.5% to 106.2, and non-US dollar currencies generally depreciated. In assets, the Barclays Global Aggregate Total Return Index USD Hedged 1.7%; The Standard & Poor's 500-stock index fell 4.9%. Due to the combined effect of exchange rate translation and asset price changes, the scale of foreign exchange reserves has declined.
Wen Bin, chief economist of Minsheng Bank, said that the current external environment is still complex and severe, the world economic growth has slowed down, global inflation has once again faced pressure from the recovery of oil prices, and the uncertainty of monetary policies of major economies has increased, leading to increased volatility in the international financial market. In terms of the domestic economy, as the steady growth policy has taken effect, China's economy has shown a good momentum of recovery, which is conducive to the overall balance of international payments and the basic stability of the scale of foreign exchange reserves.
The spillover impact will be weakened in the future
Looking ahead, the SAFE said that the overall recovery of China's economy is good, and high-quality development is solid, which is conducive to the basic stability of the scale of foreign exchange reserves.
"China's foreign exchange market has the foundation and conditions to become more stable in the future." Wang Chunying, deputy director of the State Administration of Foreign Exchange and spokesperson, said recently that on the one hand, the positive factors in the internal and external environment will further increase. With the gradual effect of macro-control policies, the domestic economy is expected to continue to recover and improve, and the supporting role of the foreign exchange market will be further consolidated. The tightening monetary policies of major developed economies are coming to an end, and the spillover impact will generally weaken. Short-term effects such as seasonal factors in China's cross-border capital flows will also weaken in the near future.
On the other hand, China's foreign exchange market is becoming more rational and mature, the ability of market players to adapt to changes in the environment has been further improved, and the macro-prudential management tools of the foreign exchange market have been improved, which are conducive to market stability.
A report by the Center for National Economic Research at Peking University expects the exchange rate to fluctuate in a two-way range of 7.25 to 7.35 in October. In summary, domestic and foreign monetary policies remain differentiated, the interest rate spread between China and the United States continues to invert, and domestic economic data is weak and other negative factors will bring down the RMB in the future. However, favorable policies are frequent, and market expectations are gradually stabilizing; The central bank launched the exchange rate stabilization tool in a timely manner to support the RMB.
Gold reserves have increased for 11 consecutive months
According to the data updated on the official website of the Administration of Foreign Exchange on the same day, as of the end of September, the official reserve assets of gold reserves reported 70.46 million ounces, an increase of 840,000 ounces from the previous month. China's official gold reserves have now increased for 11 consecutive months.
In the view of Zheng Houcheng, chief macroeconomist of Yingda Securities Company, in the short term, China's high probability will continue to increase its gold reserves. The Federal Reserve continues to raise interest rates, while pulling up the US dollar index in the short term, it will inevitably exert greater pressure on the US macro economy, and then form a negative impact on the US dollar index in the medium and long term. Like the US dollar, gold belongs to the category of currency, and the two have a substitution relationship. In the context of the long-term decline of the US dollar index, the substitution effect of gold has become prominent, and the demand for gold in the market, including the central bank, has risen.
The National Day holiday, the international gold price showed a shock correction, London gold is now from September 25 to October 5, 9 consecutive trading days fell, a new record in the year. However, on October 6, after the London gold now hit $1810.2 / ounce, it seems to have stabilized, and by the end of the day, the London gold was up 0.7% at $1832.54 / ounce. However, compared with the close of London gold on September 22 at $1,924.68 / ounce, there is still a decline of nearly 5%.
Shanghai Topix Futures Research report said that the downside risk of gold has been fully released and gradually ushered in the allocation point. London gold is expected to hold the bottom of $1,800 an ounce, waiting for the Fed marginal turn. The possibility of the Federal Reserve to open the interest rate cut cycle is low in the year, leading to the fourth quarter gold is difficult to break through the previous high, it is expected that the gold price will fluctuate upward, London gold running range of 1800-2100 US dollars/ounce, Shanghai gold main contract running range of 440-500 yuan/gram.
Zheng Hou Cheng believes that the international gold price has a high probability of short-term upward, medium-term pressure, and long-term upward trend, with the characteristics of "wave forward and spiral upward". In this context, increasing gold holdings has a strong function of preserving and increasing value, and forms support for China's official reserve assets.
Jia Shu Chang, a senior analyst at the World Gold Council, said record yuan gold prices have become a major challenge for domestic gold consumption, and this trend is likely to continue for some time. Despite the challenges, China's improving economic outlook is expected to provide some boost to domestic gold demand.