SMM: since the beginning of this year, the scale of China's foreign exchange reserves has been stable, always fluctuating around 3.1 trillion US dollars. China's foreign exchange reserves stood at US $3.1052 trillion by the end of October 2019, up US $12.7 billion, or 0.4 per cent, from the end of September, according to the latest figures released by the State Administration of Foreign Exchange (safe) on the 7th.
It is worth noting, however, that the central bank stopped increasing its gold reserves in October, ending a 10-month model of "hoarding" gold.
Wang Chunying, spokesman for the State Administration of Foreign Exchange and chief economist, answered a reporter's question on the changes in the scale of foreign exchange reserves in October 2019. China's economy has maintained an overall steady and steady trend, with the main indicators in line with expectations and the steady progress of structural adjustment since the beginning of this year. On this basis, China's cross-border capital flows have remained stable, the supply and demand of the foreign exchange market has been basically balanced, and the scale of foreign exchange reserves has increased steadily.
Valuation changes increase the size of reserves
In October, the operation of China's foreign exchange market was generally stable. "affected by the global trade situation, the monetary policy of major central banks and the prospect of Brexit, the dollar index (98.13220.00050.00%) fell and the prices of major national bonds fell. Exchange rate conversion and asset price changes and other factors, the scale of foreign exchange reserves increased. "said Wang Chunying.
Zhao Qingming, an expert on international financial issues, told first Finance and Economics that the reasons for the change in the scale of foreign exchange reserves in October 2019 were mainly related to exchange rate changes between major international currencies, bond price fluctuations, investment returns, and so on. Wen Bin, chief researcher at Minsheng Bank of China, also said that the valuation changes have contributed to the increase in the size of foreign exchange reserves this month. "the valuation of foreign exchange reserves has increased after the euro (1.1050,0.00010.01%) and yen denominated parts have been converted into US dollars," Wen Bin, chief researcher of Minsheng Bank of China, said. "
In October 2019, the dollar index of global financial markets fell, the major national bond index fell and the stock index rose. On the currency side, the dollar exchange rate index (DXY) fell 2.0% to 97.4 from 99.4 at the end of September. Among non-dollar currencies, the euro rose 2.3%, while the pound (1.2810,-0.0006,-0.05%) rose 5.3%, while the yen was basically flat. On the asset side, the dollar-denominated hedged global bond index (Barclays Global Agg Total Return Index USD Hedged) fell 0.6 per cent, the S & P 500 stock index rose 2.0 per cent, the eurozone Stoxx 50 index rose 1.0 per cent and the Nikkei 225 index rose 5.4 per cent.
In terms of bond yields, the yield on the 10-year Treasury note rose to 1.78% from 1.68% at the end of September. "this has led to a decline in the price of US Treasuries held by China and a reduction in the book value of foreign exchange reserves. Taken together, the effect of exchange rate conversion is stronger than asset price changes, and valuation changes contribute to the increase in the size of foreign exchange reserves this month. " Wen Bin said.
Wang Chunying said: looking ahead, world economic growth is slowing, and there are still many unstable and uncertain factors in international financial markets. However, the fundamentals of China's long-term improvement of the economy have not changed, the intensity of reform and opening up has continued to increase, the driving force for endogenous development has been continuously enhanced, and has the ability to resist various risks and challenges, providing a solid foundation for the overall stability of the scale of foreign exchange reserves
Unincreased gold holdings in October
Since the beginning of this year, central banks have begun to "buy" gold one after another, and China is no exception. However, the data showed that gold reserves of 62.64 million ounces in October did not continue to increase their holdings of gold reserves, unchanged at the previous value, ending the central bank's 10-month increase in gold holdings.
At present, gold prices are at phased highs and have appreciated by more than 15 per cent since the start of the year. In the eyes of industry experts, the central bank will still choose the opportunity to increase the proportion of gold reserves.
Li Chao, chief macro researcher at Huatai Securities, believes that gold has multiple attributes of both finance and commodities, which helps to adjust and optimize the overall risk-return characteristics of the international reserve portfolio. In the near future, some economies have made some efforts against the cycle, the situation of trade frictions has improved, the market risk sentiment has been repaired, and gold is expected to fluctuate in the short term. However, in the medium to long term, the dollar is likely to enter the downward channel, the real interest rate downward environment, is still firmly optimistic about the value of medium-and long-term gold investment.
Wen Bin, chief researcher at Minsheng Bank of China, said that in the short term, the future trend of gold prices will also be affected by global economic growth, changes in monetary policy in various countries, various emergencies and many other factors. In the medium to long term, the proportion of gold in China's foreign exchange reserves still has room to improve, and the central bank is expected to choose opportunities to increase the proportion of gold in foreign exchange reserves according to the trend of gold prices.
The exchange rate fluctuation of RMB (6.9717,-0.0067,-0.10%) has been normalized since the beginning of this year. Due to the influence of external uncertainties, the exchange rate market has fluctuated sharply. But recently, the yuan has appreciated against the dollar one after another. In the face of the complex and changeable international economic situation, China's economy has maintained an overall steady development trend.
On November 5, the onshore and offshore renminbi returned to the "7" barrier against the US dollar at one point; on November 7, the renminbi was trading at 7.0008 against the US dollar, up 72 basis points from the previous trading day and 7.0080 on the previous trading day.
In the past month, the offshore RMB has appreciated by nearly 1700 points. Institutions generally believe that the rebound of the RMB exchange rate means more and more.
"in the past period of time, the depreciation and appreciation of the RMB exchange rate has been seen in the international foreign exchange market, which is roughly the same as other major international currencies, and the market has become more and more adaptable and receptive to RMB exchange rate fluctuations." Zhao Qingming told reporters that the dollar has weakened recently, while non-US currencies such as the euro and sterling have strengthened, which has become the reason for affecting the recent trend of the RMB exchange rate. RMB exchange rate fluctuations are becoming more and more normal and increasingly in line with the exchange rate fluctuations of other major international currencies. "
In terms of major exchange rate movements, the dollar index weakened, falling by 2.1% from 99.4021 at the end of September to 97.3133 at the end of October, the euro rose from 1.0899 to 1.1153, an appreciation of 2.3%, and the yen rose slightly from 108.075 to 108.025.
According to the analysis, the gap between economic fundamentals and monetary policy between China and the United States will gradually narrow, and the dollar index will most likely enter the downward channel, opening a window for the medium-and long-term appreciation of the RMB. It is expected that the RMB exchange rate center against the US dollar in 2020 will appreciate compared with this year.
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