China's Foreign Exchange Reserves Bounce Back, Gold Holdings Reach All-Time High

China increases foreign exchange and gold reserves in response to global uncertainties, including a stronger U.S. dollar and trade tensions

China’s foreign exchange reserves showed a positive shift, rising to $3.209 trillion, marking an increase of $6.7 billion from the previous month. According to a report by China's state-run Xinhua News Agency, the country's foreign exchange holdings had remained around the $3.2 trillion mark since September of the previous year. This growth marks a notable change after two months of stagnation since November 2024.

China’s gold reserves also saw a substantial rise, continuing to grow amid a surge in global gold prices, which have been hitting record highs. As of January 2025, China’s gold reserves reached $206.5 billion, an increase of $15.2 billion from the prior month. The gold reserves now account for approximately 6.4% of the country’s total foreign exchange holdings, setting a new record. In terms of volume, the country's gold reserves grew by 360,000 ounces, reaching a total of 73.45 million ounces.

The ongoing strength of the U.S. dollar, despite fluctuations in the exchange rate with the Chinese yuan, has led to a decline in the yuan's value relative to the dollar. However, by the end of January, the yuan had slightly strengthened compared to the end of the previous year. This reflects a degree of stability in the foreign exchange market, despite the volatility created by external factors.

Experts have noted that China’s foreign exchange reserves have been managed with resilience, despite growing uncertainties in the global financial environment. According to Guan Tao, the chief economist at China Bank Securities, the Chinese foreign exchange market has shown strong elasticity in response to market fluctuations. He stated that China’s foreign exchange reserves are essentially stable, providing a solid foundation for maintaining economic resilience in the face of challenges like the ongoing trade tensions with the U.S. and other geopolitical risks.

The increase in reserves is seen as part of a broader strategy by China to fortify its financial position against external uncertainties. These include rising U.S. tariffs and the volatility in the global financial markets. Experts predict that the ongoing fluctuations in international finance, driven by the uncertainty surrounding U.S. Federal Reserve interest rate policies and international trade tensions, will continue to affect China’s foreign exchange reserves.

Furthermore, analysts expect that China’s proactive economic policies, including structural reforms and enhanced macroeconomic policies, will help stabilize the yuan exchange rate and bolster foreign exchange reserves. Yuan Bin, the chief economist at the Bank of China, emphasized the importance of China’s diversified international trade structure in strengthening its foreign trade resilience, ensuring a stable foundation for maintaining foreign exchange reserves at a sustainable level.

Overall, China's ability to maintain the stability of its foreign exchange reserves amid global economic uncertainty is a key indicator of the country’s financial robustness. As China continues to expand its foreign exchange reserves and gold holdings, it is positioning itself to navigate the challenges posed by a fluctuating global economy and external trade pressures.