China’s forex reserves strategy to be ‘dynamically optimised’ amid uncertain external conditions
- From November to December, China’s foreign exchange reserves rose by 1.23 per cent, or US$38 billion, to US$3.22 trillion – the highest level since April 2016
- But China’s holdings of US Treasury securities have fallen to the lowest level since January 2017
Chinese authorities are adopting a “forward-looking” investment strategy for the country’s massive foreign-exchange reserves, with plans to “dynamically optimise” its portfolio even as the value of its reserves assets have climbed to a four-and-a-half-year high.
The wording in Thursday’s statement by the State Administration of Foreign Exchange (SAFE), which manages the bulk of the country’s reserve assets, likely reflects Beijing’s rising concerns about international uncertainties – including the outlook for the global economic recovery, the possibility of financial market turmoil due to the aggressive policy-easing measures adopted by major Western countries, and the potential challenges from the incoming administration of US president-elect Joe Biden, according to analysts.
“We will improve our forex reserve management,” the SAFE said in its statement, which summarised its work priorities for this year. “While sticking to market rules, we’ll make strategic allocations in a forward-looking way and dynamically optimise our investment portfolios, so that the security, liquidity and the value of foreign-exchange assets are safeguarded.”
From November to December, the nation’s foreign exchange reserves rose by 1.23 per cent, or US$38 billion, to US$3.22 trillion – the highest level since April 2016, SAFE data showed. For all of 2020, China’s reserve assets expanded by US$108.6 billion, or 3.5 per cent, year on year.