On April 7th, data from the State Administration of Foreign Exchange showed that China's gold reserves at the end of March were 73.7 million ounces, and the central bank had continuously expanded its gold reserves for five consecutive months.
Wang Qing, chief macro analyst at Oriental Gold, pointed out that the official gold reserves increased for the fifth consecutive month as of the end of March, which was in line with market expectations. The central bank has been increasing its gold holdings for five consecutive months, mainly due to new changes in the global political and economic landscape after the new U.S. administration took office. The international gold price may be prone to rise rather than fall for a considerable period of time. This means that the necessity of pausing the increase in gold holdings from the perspective of cost control has decreased, while the demand for increasing gold holdings from the perspective of optimizing the structure of international reserves has risen. Additionally, the unique risk-averse function of gold may also be one of the considerations for the recent continuous increase in gold holdings by the central bank. The tariff storm stirred up by the new U.S. administration around the world has also confirmed this point.
Wang Qing believes that in the future, the central bank will continue to increase its gold holdings. The main reason is that the proportion of gold reserves in China's international reserves is relatively low — as of December 2024, the proportion of gold in China's official international reserve assets was 5.5%, significantly lower than the global average of around 15%. Additionally, gold is a globally accepted ultimate payment method. Increasing gold holdings by the central bank can enhance the credibility of the sovereign currency and create favorable conditions for advancing the internationalization of the renminbi. Therefore, from the perspectives of optimizing the structure of international reserves and steadily promoting the internationalization of the renminbi, it is expected that the central bank will continue to increase its gold holdings in the future.
Data from the State Administration of Foreign Exchange also showed that as of the end of March 2025, China's foreign exchange reserve scale was $3,240.7 billion, an increase of $13.4 billion compared to the end of February, with a growth rate of 0.42%.
The website of the State Administration of Foreign Exchange pointed out that in March, affected by major economies' macroeconomic data, fiscal policies, monetary policies, and expectations, the US dollar index fell, and the overall global financial asset prices declined. Factors such as exchange rate conversion and changes in asset prices collectively led to an increase in the foreign exchange reserve scale for that month. China's economic operation remained generally stable and progressed steadily. A series of existing policies and incremental policies continued to exert their effects, high-quality development was steadily promoted, providing support for maintaining the basic stability of the foreign exchange reserve scale.
Wang Qing stated that the slight increase in the foreign exchange reserve scale in March was mainly due to the decline in the US dollar index that month, which effectively offset the impact of the overall decline in global financial asset prices, driving the increase in China's foreign exchange reserve scale. It can be seen that driven by the fermentation of trade war expectations, the US dollar index fell sharply by 3.14% in March. This would lead to an increase in the prices of non-US dollar assets in China's foreign exchange reserves.
Wang Qing estimated that the impact in March was approximately $4 billion. The risk of a trade war loomed closer in March, leading to a significant decline in global stock markets, while falling US Treasury yields drove up bond prices. Overall, the decline in global financial asset prices in March would have a certain negative impact on the valuation of China's foreign exchange reserve assets, but was fully offset by the decline in the US dollar index.
Wang Qing noted that on Eastern Time April 2nd, the United States announced a significant increase in so-called "reciprocal tariffs" globally, with the increase on China reaching as high as 34%, putting some pressure on the renminbi exchange rate. "We believe that the tariff negotiation process in the near future, changes in the US dollar index, and the direction of domestic macro policies will be the main factors affecting the renminbi exchange rate. Considering that the imposition of tariffs will also exert a certain suppressive effect on the US dollar, and that the US tariff increase will undoubtedly accelerate the pace of domestic macro policy countermeasures, both will provide support for the renminbi exchange rate, and the risk of renminbi depreciation is controllable. This means that in the foreseeable future, regulatory authorities do not need to use foreign exchange reserves to intervene in the foreign exchange market."
According to different standards, the current scale of China's foreign exchange reserves of around $3 trillion is at a moderate and sufficient level. Wang Qing said, "We judge that in the short term, the decline in the US dollar index and the global financial market decline will form a counterbalance effect, and China's foreign exchange reserve scale is expected to remain basically stable. This will provide a solid foundation for keeping the renminbi exchange rate within a reasonable and balanced range, becoming a stabilizing ball against various potential external shocks."
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Original source: https://www.toutiao.com/article/7490464160598229504/
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