China's FX Reserves Hold Above US$3.4 Trillion for a Seventh Straight Month

China's foreign exchange reserves stood at US$3,405.2 billion at the end of October 2026, up US$4.9 billion, or 0.14%, from the end of September, according to statistics released by the State Administration of Foreign Exchange (SAFE) on November 7.

It is the seventh consecutive month that reserves have held above the US$3.4 trillion mark. Month-end levels from April to October this year were US$3,410.547 billion, US$3,442.238 billion, US$3,416.262 billion, US$3,418.776 billion, US$3,438.325 billion, US$3,400.251 billion and US$3,405.178 billion respectively.

Currency translation and changes in asset prices remained the main drivers of the monthly change. SAFE said that in October 2026, reflecting global macroeconomic data and shifts in major economies' monetary policy and expectations, the US dollar index rose while prices of major global financial assets were mixed. The combined effect of currency translation and asset price changes lifted the headline reserve figure for the month.

Guan Tao, chief economist at Huafu Securities, said the modest rebound in October mainly reflected a positive valuation effect generated by currency translation and asset price changes against the backdrop of the global macroeconomic environment and major economies' monetary policy.

On the currency side, the dollar index extended its advance but at a slower pace than the previous month, gaining 0.4% to 101.9. Major non-dollar currencies diverged: the euro and the yen depreciated 1.5% and 0.1% against the dollar respectively, while sterling rose 1.0% against the dollar — implying an overall negative valuation effect from currency translation.

On the asset side, the dollar-denominated hedged global bond index reversed its decline, rising 1.7% after a 1.6% drop a month earlier, while the S&P 500 extended its slide, with the fall widening to 0.9% from 0.5%. Asset price changes therefore produced a positive valuation effect for the month.

Pang Ming, a member of the China Chief Economist Forum, cautioned that changes in reserve levels are usually driven by a combination of translation effects, asset price moves and the balance of payments, so a single month's increase or decrease is not the key observation point. More important is the resilience demonstrated by reserves remaining broadly stable over the long run.

Adequately ample reserves provide important support for keeping the RMB exchange rate at a reasonable and balanced level, and act as ballast against potential external shocks. In October, all three RMB exchange rate indices rose: the CFETS RMB index gained 0.6%, the BIS currency basket index 0.9% and the SDR basket index 0.8%. Over the first ten months of the year, the three indices have risen 5.9%, 6.6% and 6.6% respectively.

Looking ahead, Wen Bin, chief economist at China Minsheng Bank, expects China's exports to remain relatively resilient and continue to anchor the balance of payments.

Among supporting factors, the global AI supply chain remains buoyant. China's integrated circuit exports rose 99.1% year on year in the first three quarters, and continued expansion of global AI capital expenditure is expected to further support related exports.

At the same time, an easing in China-US trade relations should help improve exports to the United States. The two sides have reached a consensus on reciprocal tariff reductions covering US$30 billion of goods, and implementation of the cuts would lift exports of traditional consumer products.

Wen Bin also noted that China-EU trade consultations could generate a temporary pull-forward in exports. The two sides have reached an understanding on hybrid vehicle trade and, given the EU's planned import quota from 2027, some automakers may bring export orders forward, providing near-term support for vehicle exports.

On cross-border capital flows, regulators released a dense set of policy signals during this year's Financial Street Forum. The China Securities Regulatory Commission proposed improving QFII investment facilitation and promoting the inclusion of RMB-denominated stock trading counters and REITs in the Stock Connect schemes, further widening channels for overseas investors to allocate Chinese assets.

In addition, the People's Bank of China proposed advancing connectivity between the interbank and exchange bond markets and launching a pilot that allows eight RMB offshore clearing banks to conduct proprietary trading in the onshore interbank FX market. SAFE said it will roll out a new batch of cross-border fund facilitation measures.

Wen Bin said these policies all help enhance the international appeal of RMB-denominated assets. Overall, China's economy is operating steadily and high-quality development has produced new results, providing solid support for reserves to remain broadly stable.