China's Forex Reserves Hold Above $3.4 Trillion for Fifth Straight Month, Up 0.57% in August

On September 7, the State Administration of Foreign Exchange (SAFE) released data showing that China's foreign exchange reserves stood at USD 3,438.3 billion at the end of August 2026, an increase of USD 19.5 billion, or 0.57%, from the end of July.

This marks the fifth consecutive month that China's foreign exchange reserves have remained above the USD 3.4 trillion level. The end-of-month reserve sizes from April to August this year were USD 3,410.5 billion, 3,442.2 billion, 3,416.3 billion, 3,418.8 billion and 3,438.3 billion respectively.

According to SAFE, in August 2026, influenced by global macroeconomic data and expectations for monetary policy in major economies, the US dollar index declined and global financial asset prices showed divergent performance. The combined effects of currency translation and asset price changes drove the month-on-month increase in reserve scale.

Wang Qing, chief macro analyst at Golden Credit Rating, told reporters that the modest rise in reserves at end-August was mainly driven by the broad rebound in global equity markets in August following the sharp AI valuation correction in July, which lifted the valuation of China's reserve assets. In addition, the US dollar index fell 0.37% in August amid cooling expectations of Federal Reserve rate hikes, which also boosted the dollar value of non-USD assets in the reserves.

Positive valuation effect drives reserve rebound

A recurring phenomenon in financial markets is that whenever the US dollar index falls notably in a given month, many countries' foreign exchange reserves tend to post month-on-month growth as non-dollar assets are worth more when translated back into dollars.

Guan Tao, chief economist at Huafu Securities, pointed out that the slight rebound in China's reserve balance in August mainly reflected the positive valuation effect arising from currency translation and asset price changes under the influence of monetary policy in major economies and the global macro environment.

During the month, the US dollar index continued to decline, though at a much slower pace. Global financial asset prices diverged, with non-dollar currencies mixed: the euro and pound sterling kept appreciating against the dollar but at a slower pace, while the Japanese yen reversed from gains to losses, depreciating 1.4% cumulatively to around 160 per dollar. On the asset side, the dollar-hedged global bond index rose 0.1%, and the S&P 500 index climbed 2.6%, ending two consecutive months of declines.

Wang Qing noted that measured by various standards, China's reserve scale above USD 3.4 trillion is at an ample level. Taking all factors into account, the reserves are expected to remain broadly stable around USD 3 trillion going forward. Against the backdrop of heightened geopolitical and trade volatility, adequately ample reserves provide important support for keeping the RMB exchange rate at a reasonable and balanced level and serve as a ballast against potential external shocks.

Looking ahead, Wen Bin, chief economist at Minsheng Bank, said exports are expected to maintain strong resilience and continue to consolidate the foundation of China's balance of payments. First, the global manufacturing upcycle driven by AI capital expenditure will likely continue, boosting both volume and prices across the semiconductor supply chain and powering export growth. Second, various foreign trade entities keep diversifying into overseas markets, continuously unlocking new drivers of trade growth.

Wen Bin also noted that coordinated growth of imports and exports helps keep the current account balance within a reasonable and equilibrium range. On the import side, import growth has held above 25% for five consecutive months, reflecting both price effects from earlier supply disruptions in energy and chips and the tangible results of policies to expand imports.