Q: The State Administration of Foreign Exchange (SAFE) has just released the latest data regarding China’s foreign exchange reserves. Can you explain the causes for the changes in foreign exchange reserves of December 2021? What will be the future trends?

A: By the end of December 2021, China’s foreign exchange reserves stood at US$3.2502 trillion, up by US$27.8 billion, or 0.86%, from the end of November.

In December 2021, the foreign exchange market was generally stable with active and orderly flows of cross-border capital. The international financial market, influenced by factors like the trends of the COVID-19 pandemic and the expectations of monetary policies in major countries, saw a fall in the US dollar index and a mix in the financial asset prices of major countries. Denominated in the US dollar, China’s foreign exchange reserves rose this month due to the combined impacts of changes in asset prices and currency translation that the amount of non-US dollar currencies increased after being converted into US dollars.

Under the complex and grim situation of the COVID-19 pandemic and the global economy, the international financial market is still facing many instabilities and uncertainties. However, thanks to coordinated pandemic response with economic and social development, China remains unchanged in its economic resiliency and its fundamentals for a long-term sound growth, which is conducive to overall stability of the foreign exchange reserves.