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China's foreign exchange reserves reach $3.25 trillion, hitting 6-year high

beijingwalker

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China's foreign exchange reserves reach $3.25 trillion, hitting 6-year high
By Global Times
Published: Jan 08, 2022 02:11 PM

A staff member counts banknotes at a bank in Qionghai of south China's Hainan Province.(Photo: Xinhua)

A staff member counts banknotes at a bank in Qionghai of south China's Hainan Province.(Photo: Xinhua)
China's foreign exchange reserves stood at $3.25 trillion at the end of December, 2021, up $27.8 billion month-on-month and hitting a six-year high, according to data released by the State Administration of Foreign Exchange on Friday.

The Chinese currency's rising valuation continued to be the main factor behind the increase in China's foreign exchange reserves in 2021, officials said.

Wang Chunying, a spokesperson from the forex administration, said that due to the recent coronavirus flare-ups and expectations of monetary policy shift in some major countries, the US dollar index has fallen, which caused "valuation rise" of non-US dollar currencies and contributing to the upward trend of China's foreign exchange reserves.

Resulting from the stronger-than-expected production of the manufacturing sector thanks to the government's effective anti-pandemic prevention and control measures, China's exports are fired up, which help support the robust growth in the country's foreign exchange reserves, Xi Junyang, a professor at Shanghai University of Finance and Economics, told the Global Times on Saturday.

While China's December trade data is due to be released on Friday, the market is broadly expecting Chinese exports to continue its upward trajectory.

China's solid economic fundamentals and rising foreign exchange reserves are to offer support to the yuan's value in 2022, which performed relatively well against a variety of other currencies in 2021, particularly the US dollar.

Although an appreciating domestic currency will hamstring China's exports, Xi said the exchange rate is just one of many factors that impact exports. How the Chinese exports will fare in 2022 will depend on the overall performance of the Chinese economy and the world economy in the post-pandemic era, he said.

"In any case, an abundant foreign exchange reserve will shore up the country's financial system stability and security, when it comes to emergence of sudden financial risks in the foreign exchange market or foreign debt market," Xi noted.

 

Shotgunner51

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Beijing financial policy makers are too damn slow in action, should expedite moving FXR to SWF like what Singapore is doing. China should setup a third SWF in Temasek model (equity focused) to differentiate investment strategy from the existing two SWFs (CIC, SAFE) especially when SAFE is acting almost like a stabilization fund.

As of end Dec 2021, there is $3.4T of FDI stock inside China (90% from the 5 East Asian countries/economies) but China only holds $2.4T outbound FDI, the difference is staggering! China must boost at least another $1T outbound investment.

 
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Song Hong

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There is already massive swap line with different countries on the name of infrastructure development. I suspect some of the currency swap involve trading out of US denomination debt to Yuan denomination debt.

A good way to use up dollar and redeem the debtor nation from debt trap.

I have always reiterate that SWF is a tough necessity for nations whereby the free float USD is now running rogue printing press.

And even with good investment, the reserve surplus nations are at a loss. US can just inflate land price or other asset price, interpreting runaway inflation as economic growth. The reserve surpus nations got wipe out.
 

MH.Yang

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Increase the capital investment of B&R.
Too much foreign exchange reserves is not a good thing. We need to bear too much losses from the depreciation of the US dollar.
 

Shotgunner51

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Increase the capital investment of B&R.
Too much foreign exchange reserves is not a good thing. We need to bear too much losses from the depreciation of the US dollar.
We have been expanding import to fill strategic commodities reserves (grains, oil/gas, metal ore ...) but physical storages are already approaching full capacities, so outbound FDI is our only way out to solve the FXR problem.

Yes, investment in BRI and central Asia, that has been our focus for decades, say just energy projects in Sub-Saharan Africa alone are already sizable (see below). Like I've mentioned, we must boost another $1T investment asap, a huge challenge citing the lack of opportunities. I expect MENA, ASEAN and Latin America to pickup lion share in the coming decade.

11.jpg
 
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Viet

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China's foreign exchange reserves reach $3.25 trillion, hitting 6-year high
By Global Times
Published: Jan 08, 2022 02:11 PM

A staff member counts banknotes at a bank in Qionghai of south China's Hainan Province.(Photo: Xinhua)'s Hainan Province.(Photo: Xinhua)

A staff member counts banknotes at a bank in Qionghai of south China's Hainan Province.(Photo: Xinhua)
China's foreign exchange reserves stood at $3.25 trillion at the end of December, 2021, up $27.8 billion month-on-month and hitting a six-year high, according to data released by the State Administration of Foreign Exchange on Friday.

The Chinese currency's rising valuation continued to be the main factor behind the increase in China's foreign exchange reserves in 2021, officials said.

Wang Chunying, a spokesperson from the forex administration, said that due to the recent coronavirus flare-ups and expectations of monetary policy shift in some major countries, the US dollar index has fallen, which caused "valuation rise" of non-US dollar currencies and contributing to the upward trend of China's foreign exchange reserves.

Resulting from the stronger-than-expected production of the manufacturing sector thanks to the government's effective anti-pandemic prevention and control measures, China's exports are fired up, which help support the robust growth in the country's foreign exchange reserves, Xi Junyang, a professor at Shanghai University of Finance and Economics, told the Global Times on Saturday.

While China's December trade data is due to be released on Friday, the market is broadly expecting Chinese exports to continue its upward trajectory.

China's solid economic fundamentals and rising foreign exchange reserves are to offer support to the yuan's value in 2022, which performed relatively well against a variety of other currencies in 2021, particularly the US dollar.

Although an appreciating domestic currency will hamstring China's exports, Xi said the exchange rate is just one of many factors that impact exports. How the Chinese exports will fare in 2022 will depend on the overall performance of the Chinese economy and the world economy in the post-pandemic era, he said.

"In any case, an abundant foreign exchange reserve will shore up the country's financial system stability and security, when it comes to emergence of sudden financial risks in the foreign exchange market or foreign debt market," Xi noted.

You are too rich. Others in the world survive on $1 per day. Not good. The rich get richer, the poor eat the rest from trash bins.
 

Shotgunner51

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I have always reiterate that SWF is a tough necessity for nations whereby the free float USD is now running rogue printing press.
Most importantly if the PRC wants to create a new Financial Architecture then off-loading the fiat is the way to go.
Yes you guys are right. Most people misunderstand this huge FXR as success, it isn't. It's result of strong economic fundamentals (exports) but a failure of financial management.

No surplus nation maintains such heavy weight of low-yield FXR in her portfolio like China does. Take the world's largest creditor nation as an example, as of end Sep 2021, Japan's FXR stands at JPY 157.668T which is only 12.8% of their total international assets. Oil exporters like Norway and UAE practically have 0% FXR, they bet all-in SWF. China? It's 37.2%.

The practice of hoarding forex (囤积宝贵的外汇) can trace its history back to the old days when China was a deficit stricken economy, old habits die hard. Though China has turned to a surplus economy for some years, policy makers face a new challenge: currency appreciation. China indeed has tried to expand outbound investment and results so far aren't too bad, but political hostility from the west still creates a lot of barriers especially in M&A sector, say US has expanded CFIUS role in censoring Chinese M&A of American assets, EU is also very hostile towards Chinese takeovers. The west even sabotage Chinese investment in 3rd countries using whatever possible means from propaganda to regime change e.g. Libya, Kazakhstan, Namibia.


But despite all the headwinds, Beijing has to expand outbound investment, it's a tough multi-dimensional war but it's the only way out.
 
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