China’s Foreign Exchange Reserves Increase in February

China’s foreign exchange reserves climbed to $3.22 trillion in February 2025, up from $3.209 trillion in January, aligning with market forecasts. The increase reflects stable capital flows, strong external demand, and China’s ongoing efforts to manage its financial stability amid global uncertainties.

Yuan Strengthens Amid Global Currency Shifts

In February, the yuan appreciated by 0.5% against the US dollar, supported by:

• Strong capital inflows into Chinese assets.
• Government efforts to stabilize the economy through monetary policies.
• A weaker US dollar, which declined 0.9% against a basket of major currencies due to market concerns over US economic policies.

Despite external trade pressures, China’s central bank has maintained ample reserves, reinforcing confidence in the yuan’s stability.

Gold Reserves See Fourth Consecutive Monthly Gain

China’s gold reserves continued their upward trend, increasing to 73.61 million fine troy ounces, up from 73.45 million in January. The value of these holdings surged to $208.64 billion from $206.53 billion, reflecting the global rally in gold prices.

This rise in gold reserves aligns with China’s long-term strategy of diversifying its foreign exchange holdings and reducing reliance on the US dollar. Analysts believe China’s central bank will continue accumulating gold as a hedge against economic volatility and geopolitical risks.

China’s Stock Markets End the Week Higher

China’s Shanghai Composite Index closed at 3,373, down 0.25% on Friday, while the Shenzhen Component Index fell 0.5% to 10,844. However, both indexes ended the week in positive territory, rising 1.56% and 2.19%, respectively.

Investor sentiment improved as China:

• Reaffirmed its commitment to economic stimulus measures.
• Announced plans to enhance technological innovation.
• Focused on boosting domestic consumption.

Despite these gains, escalating trade tensions with the US remain a significant risk, with Beijing signaling its readiness to engage in a prolonged trade dispute.

Outlook: China’s Forex Reserves and Economic Strategy

With a strong foreign exchange position, China is expected to:

• Continue diversifying its reserves, increasing gold holdings.
• Maintain policies that support the yuan’s stability.
• Implement monetary and fiscal measures to counteract global economic uncertainties.

While trade tensions and external risks persist, China’s rising forex reserves and strengthening currency reflect its resilience in navigating economic challenges.