China’s Foreign Reserves Post Second Consecutive Month of Decline in May


China’s foreign reserves saw a modest drop in May for the second consecutive month of decline.

Data released by the Chinese central bank on 7 June indicates that as of the end of May China held USD$3.110623 trillion in foreign reserves, for a decline of approximately $14.2 billion compared to $3.124852 end of April, and the second month of decline.

Wen Bin (温彬), chief researcher from China Minsheng Bank, said that in May the US Dollar Index maintained steady growth last month, rising from 91.841 at the end of April o 93.979 by the end of May for an increase of 2.33%.

As a consequence the euro exchange rate saws a sizeable decline, leading to valuation losses for foreign reserves denominated in euros.

Yields for 10-year US and German sovereign bonds also saw marked declines in May, triggering a rise in the value of sovereign debt held by China.

Valuation losses arising from a weaker euro failed to compensate, however, for gains in the value of sovereign debt, leading to a modest decline in China’s foreign reserves.