China Foreign Reserves Reach $3.029 Trillion, Seeing A Major Drop Of Over $20 Billion
The global currency market has been in a very volatile state following the incredible surge in oil prices. Furthermore, the increase in inflation worldwide and the corresponding war in Ukraine are making it very hard for countries to properly support their currencies without avoiding tapping into their reserves.
Despite their reluctance, nearly every country has had to make use of their reserves to support their currencies through frequent injections. These injections allow them to sustain their currency and ensure that they do not drip too low.
And along with various other countries, China has also seen its foreign reserves drop significantly, as it tried its best to better support its currency. According to official reports, China has already spent upward of $25 billion trying to support its currency. While it does have one of the largest foreign reserves in the world, its reserves can dry up fast if they don’t act quickly.
China Spokesperson Quells Concerns Over Decline in Reserves
China has put out a public statement about the decline of its reserves and why it happened in the first place. According to SAFE’s deputy administrator Wand Chunying, the drop in prices was a direct result of the exchange rates changing and major asset prices fluctuating.
During the month of September, China was able to maintain a fairly stable cash flow, along with maintaining domestic demand for various foreign currencies.
Along with being one of the biggest countries in the world, China also took into account the possibility of its foreign reserves sinking. As currencies throughout the world still see their prices fall, they have to stabilize it through a cash injection. Therefore, they have assured all of their investors and residents that they don’t have to worry, since China’s forex reserves will likely stabilize despite the many uncertainties.
Other currencies are likely to slide further down
While China has the heavy reserves necessary for various injections, which can help stabilize the price of its currency, many other currencies do not have that luxury. If the recession lasts longer than expected, then it is likely that other currencies will dry out their reserves, and will instead have to rely on loans to maintain their currencies.
US Currency Index Continues to Rise
Due to various economic and social factors worldwide, the US dollar index continues to increase significantly. Therefore, many believe that China’s Yuan will likely come out of the recession unscathed. While they will lose a chunk of their reserves, their currency will more or less retain a lot of its value.
Since they knew just how quickly value was about to deteriorate, Russia and China stocked up on their foreign reserves.