China‘s FX Reserves Hit Nearly a Decade High Amid Gold Accumulation
China's foreign exchange reserves reached $3.34 trillion at the end of October, the highest level since December 2015, according to the State Administration of Foreign Exchange (SAFE). This represents a $4.7 billion increase, or 0.14%, from September, maintaining a three-month trend above $3.3 trillion (approximately S$4.3 trillion).
SAFE officials attributed the increase to a combination of factors, including movements in major economies’ monetary policies, macroeconomic data, and exchange rate adjustments. Rising global asset prices, coupled with a stronger US dollar, contributed to the growth in reserves.
Global financial conditions played a key role. Wen Bin, Chief Economist at Minsheng Bank, noted that the US Federal Reserve's rate cuts released liquidity internationally, supporting equity markets. In October, the S&P 500, Nikkei 225, and STOXX Europe 600 indices all posted gains, while the US dollar index climbed 2.1% to 99.8, the highest since August.
In parallel, China's gold reserves rose to 74.09 million ounces, up 30,000 ounces from September. This marks the 12th consecutive month of incremental gold accumulation. Pang Ming, Senior Research Fellow at the National Finance and Development Laboratory, described China’s approach as “small, frequent purchases,” designed to reduce market impact while hedging global macroeconomic risks. Wen Bin added that gold's safe-haven and inflation-hedging properties further support its role in preserving and enhancing reserve value.
The data illustrate China's dual strategy: maintaining liquidity in foreign currency assets while steadily building gold reserves as a hedge against global volatility. For international investors, these trends signal a cautious but proactive reserve management approach, reflecting the country’s focus on financial stability amid uncertain macroeconomic conditions.
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