China's FX Reserves Slip 1.11% in September to $3.4003 Trillion: What Drove the Decline?

Statistics from the State Administration of Foreign Exchange (SAFE) show that as of the end of September 2026, China's foreign exchange reserves stood at $3.4003 trillion, down $38.1 billion, or 1.11%, from the end of August.

SAFE noted that in September 2026, affected by the global macroeconomic environment and monetary policy in major economies, the US dollar index rose while prices of major global financial assets fell overall. Exchange rate conversion and changes in asset prices worked together to reduce the month's foreign exchange reserve scale. China's economy has been generally stable, with new growth drivers and an improving structure, and high-quality development has produced new results, which is conducive to keeping the foreign exchange reserves basically stable.

Wen Bin, chief economist at China Minsheng Bank, told Jiemian News that in September the Federal Reserve launched its first rate hike of the year, raising the federal funds rate by 25 basis points to 3.75%-4.00%. The dot plot indicated one more hike within the year, and hawkish remarks from Warsh reinforced market expectations of consecutive hikes ahead.

Wen pointed out that after the FOMC meeting, multiple factors further lifted rate hike expectations: first, tightening Middle East tensions pushed oil prices above $100 a barrel again; second, stronger-than-expected US PMI data; and third, hawkish statements from Fed officials. As a result, global bonds, led by US Treasuries, were sold off with yields rising across the board, and the US dollar index moved higher.

Looking ahead, Wen said exports will remain highly resilient and continue to serve as the cornerstone of the balance of payments. On one hand, global AI capital expenditure remains at a high level, with strong demand for chips, servers and related supporting products; on the other hand, in September China and the United States reached consensus on a framework for reciprocal tariff reductions covering $30 billion of goods, under which more than 90% of products will be exempted from all mutually imposed additional tariffs and have most-favored-nation rates restored.

"US tariff cuts are concentrated in consumer goods such as toys, home appliances, baby products, kitchen and bath items and holiday gifts, which helps improve exports of labor-intensive products. Export market diversification and supply chain advantages will also continue to provide long-term support for exports," Wen said.

Zhao Wei, chief economist at SWS Research, told Jiemian News that exports are likely to remain resilient after September, with AI and consumption as the main supports.

Zhao noted that the global AI revolution may continue to support exports, with AI-related exports sustaining relatively high growth, especially in terms of price support. Meanwhile, consumer goods exports may also stay resilient: beyond the emerging "supply substitution" effect, tariffs have delayed the US import cycle, which may also support China's consumer goods exports. Judging by inventory cycle patterns, this logic could continue to play out for more than half a year.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating, also told Jiemian News that imports will continue to be supported by several factors. On one hand, chip imports will maintain relatively high growth in the near term. Recent swings in the Middle East situation may affect the volume of China's crude oil imports in September, but import value growth could accelerate on the back of higher international crude prices. Beyond these two factors, weather disruptions faded in September.

Since September 14, multinational companies' domestic and foreign currency cross-border cash pooling business has been implemented nationwide. By unifying the management of domestic and foreign currency funds and optimizing cash collection and cross-border receipt and payment arrangements, it further improves multinationals' cross-border capital allocation efficiency and investment and financing convenience. In September the People's Bank of China held a symposium with foreign financial institutions, making clear that it will continue to steadily expand the two-way opening of financial markets, optimize cross-border payment services and facilitate the international use of the renminbi.

"These policies all help increase the appeal of renminbi assets to international investors. On the whole, China's economy has been generally stable, with new growth drivers and an improving structure, and high-quality development has produced new results, providing support for keeping the foreign exchange reserves basically stable," Wen said.

On gold reserves, China's official gold reserves increased for a 23rd consecutive month at the end of September 2026, with a monthly increase of 740,000 ounces and a seventh straight monthly increase in purchase volume. The Fed resumed rate hikes in September, international gold prices fell sharply again, and mounting concerns over the fiscal sustainability of developed economies such as the United States, Europe and Japan may be the direct reasons for the central bank's continued acceleration of gold purchases in September.

Wang Qing said in the interview that the fundamental reason for 23 consecutive months of gold buying is that global political and economic conditions have changed since the current US administration took office. This means that although gold prices remain elevated, the necessity of increasing gold holdings has risen from the perspective of optimizing the international reserve structure.

Data show that as of the end of September 2026, gold reserves accounted for about 8.5% of China's official international reserves, which mainly consist of foreign exchange reserves and gold reserves. According to data released by the European Central Bank on June 2, as of the end of 2025 gold accounted for 27% of all reserve assets held by central banks worldwide, up from 20% at the end of the previous year. This means China's gold reserve share is clearly low and there is still considerable room for further increases.