The scale of foreign reserves will continue to be stable
Our reporter Yao Jin
According to data recently released by the State Administration of Foreign Exchange, as of the end of May, my country’s foreign exchange reserves stood at US$322.1 trillion, again standing at US$3.2 trillion and setting a new high since February 2016.
The increase in foreign exchange reserves in May was mainly due to the recent decline in the U.S. dollar index, the appreciation of non- U.S. dollar currencies against the U.S. dollar, the rise in prices of major financial assets, and the rapid growth of my country’s exports.
In the international financial market, affected by factors such as the new crown pneumonia epidemic and vaccine progress, monetary policies and inflation expectations of major economies, and macroeconomic data, non-US dollar currencies have generally strengthened and financial asset prices have risen.
Foreign exchange reserves are denominated in U.S. dollars, and the amount of non- U.S. currencies converted into U.S. dollars has increased. Coupled with the combination of asset price changes and other factors, the scale of foreign exchange reserves has increased.
Foreign exchange reserves play an important role in the steady operation of the economy.
On the one hand, foreign exchange reserves can maintain international payment capabilities and stabilize the exchange rate of domestic currencies.
For example, my country implements a managed floating exchange rate system based on market supply and demand, adjusted with reference to a basket of currencies. When supply and demand are disordered and the market exchange rate fluctuates abnormally, foreign exchange reserves can be used to adjust exchange rates, stabilize currency values, and maintain a normal international currency. Ability to pay.
On the other hand, foreign exchange reserves can withstand external shocks and prevent financial risks.
Regarding the inflow and outflow of cross-border capital, foreign exchange reserves are similar to "reservoirs", which can withstand the impact of large-scale cross-border capital flows on the economy.
For example, with the support of abundant foreign exchange reserves, my country successfully withstood the impact of the 1997 Asian financial crisis and the 2008 international financial crisis, and became the cornerstone of stabilizing market confidence.
Therefore, the data on the scale of foreign exchange reserves has a high degree of market attention, and some people are therefore overly nervous about the monthly changes in the scale of foreign exchange reserves. Whether there is hot money flowing in and out.
As the flexibility of the RMB exchange rate increases, so does the ability to adapt to the market. The exchange rate "automatic stabilizer" function is gradually emerging, and foreign exchange reserves more reflect the situation of valuation and investment income.
Monthly fluctuations in the scale of foreign exchange reserves are normal and should be treated rationally.
The steady growth of foreign exchange reserves is an important indicator of the continued improvement of my country's economic fundamentals.
At present, the global economic and financial situation is still facing many unstable and uncertain factors.
my country's economy as a whole continues to stabilize and recover, and the momentum for development continues to increase. It will continue to provide support for the basic stability of foreign exchange reserves, and the scale of foreign exchange reserves still has a stable foundation.
Our reporter Yao Jin