China’s foreign exchange reserves are expected to maintain an upward trend in the coming months as yuan-denominated assets remain more attractive to foreign investors amid renewed optimism for a resolution to the China-US trade war and the country’s continuing opening-up efforts in the financial sector, according to analysts.
China’s foreign exchange reserves rose for a fifth straight month in March, increasing by $9 billion to $3.099 trillion, up 0.3 percent from February, data from the State Administration of Foreign Exchange showed on April 7.
With the economy expected to maintain reasonable growth and improved flexibility in the yuan exchange rate, China’s forex reserves will remain stable, the forex regulator said.
China’s foreign exchange reserves will keep edging up as more foreign capital will be attracted to China’s stock and bond markets, Liu Jian, a senior research fellow at the financial research center under Bank of Communications, told the Global Times on Monday.
Assuming continued US dollar weakness and progress in the trade talks, the yuan is likely to hold on to its recent gains, Liu said.
China’s foreign exchange reserves are mainly composed of the total foreign trade surplus in the current account and the net inflow of foreign direct investment in the capital account.
Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Monday that as China is promoting opening-up in the financial sector and increasing imports, closer regulation should be put on capital flows.
Increasing foreign exchange reserves will offer more leverage for the country to maintain exchange rate stability, Dong said.