By Xie Fang
Data released by the People's Bank of China (PBC) on Monday morning showed that China's foreign exchange reserve had reached $3.1121 trillion by the end of June, rising by $1.5 billion or 0.05 percent from a month earlier.
When analyzing the moderate increase in China's foreign exchange reserve last month, an official from the State Administration of Foreign Exchange (SAFE) noted that with a reasonable balance of payments, China's foreign exchange market is now operating in a generally stable condition.
According to the official, the small uptick in China's foreign exchange reserve last month was a result of multiple factors including a rise seen in the international financial market which remains volatile, a 0.5 percent increase in the US Dollar Index, a depreciation of major non-US Dollar currencies against the US dollar, as well as the fluctuation of the asset prices.
He pointed out that the Chinese economy has been keeping stable since the beginning of this year regardless of the slowdown in the recovery of the world economy, the escalation of trade frictions, and the issues like capital outflow and currency depreciation that are putting pressure on several emerging economies.
What's more, China's upbeat economic fundamentals also reassured the market and maintained a stable cross-border capital flow last month.
When it comes to the outlook of China's foreign exchange market, the official said that the ongoing supply-side structural reforms and the enhanced innovation capabilities will ensure a steady growth of the Chinese economy, which in turn will guarantee the stability of China's foreign exchange market.
However, he also cautioned that China's foreign exchange market is expected to brace for more volatility in the future due to the reoccurrence of trade protectionism, the effort of the Federal Reserve to raise its interest rates, and the growing liquidity risk worldwide.
