China's foreign exchange reserves have reached a new multi-year high, according to the latest official data.
The State Administration of Foreign Exchange (SAFE) released figures on June 7th showing that as of the end of May 2026, the country's foreign exchange reserves stood at $3.4422 trillion. This represents an increase of $31.7 billion, or 0.93%, from the level recorded at the end of April. This marks two consecutive months with reserves holding above the $3.4 trillion threshold, reaching the highest level since November 2015.
SAFE attributed the monthly increase to a combination of factors, including exchange rate translation effects and changes in global asset prices. The administration noted that in May, the US dollar index rose and prices of major global financial assets generally increased, influenced by factors such as the global macroeconomic environment and monetary policy expectations from major economies.
Valuation Gains Drive Reserve Increase
Analysts point to positive valuation effects from asset price changes as the primary driver behind the rise in reserves in May.
Wang Qing, Chief Macro Analyst at Dongfang Jincheng, explained that the significant increase in global stock indices in May largely offset the impact of a slight decline in US Treasury bond prices and a rising US dollar index. This combination pushed up the overall valuation of China's foreign reserves.
Wang Qing stated that by various measures, the current reserve level exceeding $3.4 trillion is considered ample.
Wen Bin, Chief Economist at China Minsheng Bank, also highlighted that stronger-than-expected US inflation data reinforced market expectations for a Federal Reserve rate hike within the year, leading to rising US bond yields and a stronger dollar. However, the stock market, particularly the tech sector, performed independently. The combined effect of these asset price changes and exchange rate fluctuations resulted in the month-on-month increase in reserves.
Guan Tao, Global Chief Economist at BOC International, provided further detail. He noted that while the rebound in the US dollar index caused non-dollar reserve assets to shrink in dollar terms, the overall rise in global financial asset prices, including major stock indices reaching record highs, led to book profits for the foreign exchange reserves. The latter effect was larger, resulting in a net positive valuation impact for the month.
Looking ahead, Wang Qing believes that in the context of increasing volatility in the external political and economic environment, a moderately ample level of foreign reserves provides crucial support for maintaining the RMB exchange rate at a reasonable equilibrium level and serves as a stabilizing ballast against potential external shocks.
Gold Reserves Continue 19-Month Climb
Data released the same day by the central bank showed that gold reserves reached 74.96 million ounces by the end of May, an increase of 320,000 ounces from the previous month. This marks the 19th consecutive month of official gold purchases, with the pace of accumulation accelerating.
Wang Qing noted that the increase of 320,000 ounces in May represents a third consecutive month of expanding purchases, aligning with market expectations.
He explained that the central bank's continued accumulation of gold is fundamentally driven by new developments in the global political and economic landscape. This suggests that, despite gold prices being at historical highs, the necessity of increasing gold holdings has risen from the perspective of optimizing the structure of international reserves.
This view aligns with previous comments from Wang Lixin, CEO of the World Gold Council in China, who stated that central banks' purchases of gold are not motivated by short-term profit from price increases but are based on a longer-term strategic perspective for asset allocation.
Wang Lixin emphasized that the primary requirements for central bank reserve assets are safety and liquidity, with return being a secondary consideration. A major goal of sustained gold purchases by central banks is to diversify the composition of their reserve assets and reduce over-reliance on any single sovereign currency. Another key aspect is the recognition of gold's safe-haven function amid increasing volatility in global financial asset prices, which helps reduce the overall fluctuation of reserve portfolios.
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