Q: The State Administration of Foreign Exchange (SAFE) has just released the latest data regarding China’s foreign exchange reserves. Could you explain the causes for the changes in foreign exchange reserves of June 2022? What will be the future trends?

A: By the end of June 2022, China’s foreign exchange reserves stood at USD 3.0713 trillion, down by USD 56.5 billion, or 1.81%, from the end of May.

In June 2022, China’s foreign exchange market was stable, and the domestic supply and demand of foreign exchange remained in basic balance. In the international financial market, influenced by the monetary policies and inflation expectations of major countries, global economic growth prospects, and other factors, the US dollar index rose significantly, and the financial asset prices of major countries fell sharply. Denominated in the US dollar, China’s foreign exchange reserves declined this month due to the combined effects of non-US dollar currency translation decrease and asset price changes.

The current global economic slowdown, together with the stubbornly high inflation and the increasingly volatile international financial market, led to a more complex and severe external environment. However, China has effectively coordinated epidemic prevention and control with economic and social development. China has sustained its strong resilience and great potential in economy with its fundamentals of sound long-term growth unchanged, which is conducive to the overall stability of the foreign exchange reserves.