China’s foreign reserves growth has narrowed to its lowest level since reversing seven-months of consecutive decline in February, due to seasonal factors and a fall in sovereign bond prices.
Figures released by the State Administration of Foreign Exchange (SAFE) on 7 July indicates that China’s foreign reserves rose to USD$3.0586 trillion by the end of June, on the back of non-USD valuation effects.
China’s foreign reserves saw an increase of USD$3.2 billion in june compared to May, for a month-on-month rise of 0.11%.
A SAFE representative said that China’s cross-border capital flows continued to stabilise in June, with supply and demand remaining comparatively balanced.
On international financial markets non-US currencies have appreciated relative to the dollar and asset prices have seen modest fluctuations, which has had a diffuse, levelling impact on the money and assets that China holds in the form of foreign reserves.
Bank of Communications estimates that the shift in exchange rates led to an increase in the value of China’s foreign reserves by roughly $10 billion.
Gains in the yields and declines in the prices of US, EU and Japanese long-term sovereign debt may have offset the positive impact of ongoing exchange rate shifts, however, as did seasonal factors such as increases in the purchase of foreign exchange for travel during summer, and dividend issuance by Chinese companies listed overseas.
Early in February China’s foreign reserves hit the end of seven months of consecutive decline, with an increase of $6.9 billion that returned the total balance to over $3 trillion.
China’s foreign reserves have risen ever since, rising by $3.964 billion, $20.42 billion, and $24.034 billion in the months of March, April and May respectively.