BEIJING: China’s foreign exchange reserves fell to $3.3421 trillion at the end of March, official data showed on April 7, as a stronger U.S. dollar and weaker prices for major global financial assets weighed on the value of the country’s reserve holdings. The March total was down $85.7 billion, or 2.5%, from the end of February, reversing the increase recorded a month earlier and marking one of the sharper monthly swings in the headline reserves figure over the past year.
The State Administration of Foreign Exchange said the dollar index rose in March while prices of major global financial assets declined under the influence of the global macroeconomic environment, monetary policies in major economies and market expectations. Those factors, through exchange-rate conversion and changes in asset prices, led to a decrease in China’s foreign exchange reserves during the month, the administration said in its official explanation accompanying the latest data release.
The March fall came after China’s reserves rose by $28.7 billion, or 0.85%, to $3.4278 trillion at the end of February. The reversal leaves reserves still above $3.3 trillion, a level they have maintained in recent months, but shows how shifts in the dollar and in global asset prices can quickly change the reported value of official reserve assets from one month to the next. The data were released as financial markets continued to react to changing global conditions.
Official data highlights valuation effects
Separate central bank data released the same day showed China’s gold holdings rose for a 17th straight month to 74.38 million fine troy ounces at the end of March, up from 74.22 million at the end of February. But the value of those gold reserves fell to $342.76 billion from $387.59 billion a month earlier, reflecting a sharp decline in gold prices during March even as the physical volume of holdings continued to increase.
Taken together, the foreign exchange and gold figures pointed to the role of market pricing in China’s March reserve picture. SAFE’s explanation centered on the stronger dollar and lower prices for major global financial assets, while the gold data showed that falling market prices could pull down the reported dollar value of reserve assets even when official holdings rose in volume. The monthly releases focused on updated totals and valuation changes rather than on any broader policy shift.
Economy seen supporting reserve stability
SAFE said China’s economy maintained steady and improving performance during the period and that new, higher-quality growth drivers continued to develop. It said that steady economic performance provided solid support for keeping the scale of the country’s foreign exchange reserves basically stable. The administration repeated language it has used in recent monthly statements to describe the domestic backdrop, even as March’s reserve total moved lower because of exchange-rate translation and asset-price changes.
China publishes foreign exchange reserve data monthly, and the March reading will be watched by investors as they track the interaction between the dollar, global asset prices and the reported value of official holdings. For March, the headline figure showed a decline of $85.7 billion after February’s gain of $28.7 billion, while gold holdings rose in quantity but fell in dollar value, underscoring how valuation swings shaped the month’s reserve data. – By Content Syndication Services.