Nation’s foreign exchange reserves see slight increase amid uncertainties

China’s foreign exchange reserves moderately increased to $3.101 trillion at the end of May, the highest level in nine months. They were up by $6.1 billion or 0.2 percent from April, according to data from the country’s top foreign exchange regulator on Monday.

Wang Chunying, a spokeswoman for the State Administration of Foreign Exchange, attributed this moderate rise to exchange rate fluctuations and changes in asset prices.

In May, escalating global trade tensions and uncertainty surrounding Brexit boosted the market sentiment of risk aversion, pushing up the dollar index as well as global bond indexes, she said on Monday.

The country’s foreign exchange reserves snapped a five-month growth trajectory in April, when they stood at $3.094 trillion, compared with $3.098 trillion at the end of March, the official data showed.

Several hours after the SAFE reported the new foreign exchange reserve data, the onshore-traded RMB dropped to its weakest level in six months at 6.9352 per dollar.

A statement from the administration said there is a great deal of uncertainty related to global political and economic factors, and fluctuations in international financial markets could intensify.

“China’s economic development has resilience and potential. The capacity to deal with external shocks is strengthening. The sound economic foundation will strongly support a stable foreign exchange market, and it will provide a stable basis for the reserves,” said the statement.

The central bank will further improve market-based exchange rate regime reform, and keep the RMB exchange rate generally stable at an adaptive and equilibrium level, Yi Gang, governor of the People’s Bank of China, told G20 finance ministers and central bank chiefs in Japan over the weekend.

After a two-day discussion in Fukuoka, Japan, G20 finance ministers and central bank governors agreed that while global growth appears to be stabilizing, the risks remain tilted to the downside, especially as trade and geopolitical tensions have intensified.

The G20 Finance Ministers and Central Bank Governors’ Meeting also reaffirmed financial chiefs’ exchange rate commitments made in March 2018.

On Sunday, Yi met with US Treasury Secretary Steven Mnuchin on the sidelines of the meeting. They exchanged views on the global economic and financial situation, as well as G20 issues, said a statement on the central bank’s website.

Yi stressed that “all parties of the G20 should collectively show their willingness to defuse trade tensions cooperatively and send a positive signal to the international community”, according to the statement published on the central bank’s website late on Sunday.

“China is able to respond to various uncertainties, supported by ample space for macroeconomic policies with a rich set of policy tools,” said Yi, as quoted in the statement.