Foreign reserves returned to a record high of 3.2 trillion US dollars since May 2016

In 2020, China's foreign exchange reserves achieved a "good result" of US $108.6 billion. On January 7, the latest data released by the State Administration of Foreign Exchange showed that by the end of December 2020, China's foreign exchange reserves had reached 3216.5 billion US dollars, an increase of 38 billion US dollars or 1.2% compared with the end of November.

The foreign exchange reserves have reached a new high of 3.2 trillion US dollars since May 2016. The reason for the increase of foreign exchange reserves in December last year is still the comprehensive factors such as exchange rate translation and asset price changes. Wang Chunying, deputy director of the State Administration of Foreign Exchange and spokesman of the State Administration of Foreign Exchange, interpreted that in December 2020, China's foreign exchange market was generally stable and the market transactions were rational and orderly. On the international financial market, influenced by the progress of COVID-19 vaccine, monetary and fiscal policies of major countries, the US dollar index fell, while the prices of non US dollar currencies and assets of major countries rose. The foreign exchange reserves are denominated in US dollars. The amount of foreign exchange reserves increases after the non US dollar currencies are converted into US dollars. Combined with factors such as asset price rise, the scale of foreign exchange reserves increases in the month.

Wen Bin, the chief researcher of Minsheng Bank, told reporters that from the perspective of major exchange rate changes, the US dollar exchange rate index fell 2.1% in December and closed at 89.9, while non US dollar currencies rose against the US dollar as a whole; From the perspective of asset price changes, asset prices in major countries rose as a whole. Considering the effects of exchange rate translation and asset price changes, the valuation of foreign exchange reserve formation increased.

At the same time, real trade and cross-border capital flows also contributed to the growth of foreign exchange reserves in December. Wen Bin said that the overall recovery of major overseas economies has been taking place. The recovery of the overseas economic boom will help drive the increase of foreign demand and be beneficial to China's exports. The capital market is generally good, and cross-border funds are flowing in. Trade and cross-border capital inflows contribute to the scale of foreign exchange reserves.

Looking forward to the future situation of foreign exchange reserves, the mainstream view is that China's foreign exchange reserves will remain stable. Wang Chunying said that looking ahead, the world economic situation is complex and severe, the derivative risks caused by the impact of the epidemic situation cannot be ignored, and there are still many uncertain factors in the international financial market. However, China's foreign exchange market has the conditions to continue to maintain a stable and balanced operation, and the scale of foreign exchange reserves will be generally stable.

Wen Bin also said that the scale of China's foreign exchange reserves will remain stable. On the one hand, China's economic recovery continues to improve. In 2020, the economy will achieve positive growth and remain ahead of the rest of the world, laying a solid foundation for the stability of the scale of foreign exchange reserves. On the other hand, China's macro-control, foreign exchange management and other policies have taken stock of the situation. Since 2020, by fading out the use of "counter cyclical adjustment factors", we have adjusted the foreign exchange risk reserve ratio for forward foreign exchange sales, macro prudential adjustment parameters for cross-border financing, macro prudential adjustment coefficients for overseas loans of domestic enterprises, etc. to guide market expectations, and promoted two-way fluctuations in the RMB exchange rate at a balanced and reasonable level, We will maintain the basic balance of cross-border capital flows and the smooth operation of the foreign exchange market, so as to ensure the stability of the scale of foreign exchange reserves.

On January 7, the People's Bank of China and the State Administration of Foreign Exchange announced that they had decided to lower the macro prudential adjustment parameter of cross-border financing of enterprises from 1.25 to 1. This is after the macro prudential adjustment parameter of cross-border financing of financial institutions was lowered from 1.25 to 1 in December last year, and then the enterprise's parameter was lowered.

Guan Tao, the global chief economist of BOC International Securities, previously told the Securities Times that lowering the macro prudential adjustment parameters of cross-border financing is a countercyclical adjustment and also a temporary policy exit to deal with the epidemic. The RMB exchange rate has been appreciating for several months. Through counter cyclical adjustment of the macro prudential coefficient, it releases signals, promotes the differentiation of market expectations, and promotes the balance of foreign exchange revenue and expenditure.