Over the past few months, the United States has struggled to suppress the exchange rate of non-US currencies, resulting in three consecutive months of foreign exchange reserves**. However, the latest data shocked the United States, as China's foreign exchange reserves increased by $70.6 billion, equivalent to 500 billion yuan, in just one month. This growth trend is remarkable, but it is also putting pressure on the United States.
However, unlike in the past, China's foreign exchange reserves have not been increased primarily through the purchase of US dollar assets. In the past few years, when our foreign exchange reserves have increased, it has mainly increased in US dollar assets, and then we have bought US bonds aggressively, and even held them as high as 1$4 trillion. But now, even as our foreign exchange reserves have increased, we continue to sell US Treasuries. Our current holdings of U.S. debt have been reduced to less than $780 billion, nearly $600 billion from the peak. After breaking through the integer mark in a row, we even raised $27.3 billion in the latest month, making the scale of US debt holdings fall below the 800 billion mark. This trend is getting bigger and bigger, and the determination is getting stronger and stronger. Therefore, in this case, the United States will not be able to continue to lend us more US debt, despite the increase in our foreign exchange reserves.
At the same time, the United States is also disturbed by the fact that foreign exchange reserves are not increasing in dollars, but in other foreign exchange assets. At present, the share of the US dollar in global foreign exchange reserves is gradually declining, and has fallen by nearly 20 percentage points in the past 20 years. It is clear that the importance of the dollar as a foreign reserve asset is declining for global central banks. Although recent data released by the SWIFT system show that the US dollar still accounts for the largest share of global payments, even higher than half a year ago, in reality this is just an illusion. This set of data relates only to payment systems. With the United States expelling some countries from the system from time to time, the monopoly of the SWIFT system is gradually disintegrating, and many payment data are not reflected, so the share of US dollar payments is rising.
So, where do we spend our money after we sell our bonds?Undoubtedly, part of this money was used to purchase ** reserves. Over the past 12 months, our country's reserves have been increasing every month. This sends a clear signal to the outside world that we are not only buying**, but will continue to increase our holdings. Quantitative change will eventually lead to qualitative change. As we continue to buy**, the RMB gradually receives more and more full credit support, and the international demand for the RMB is becoming more and more intense. The most direct manifestation of this is that the offshore exchange rate of the renminbi against the US dollar surged by 1,961 points in November. When the Fed announces its decision to raise interest rates this week, it is likely that the US dollar will continue**, while the yuan will continue**.
The news of a $500 billion increase in China's foreign exchange reserves has attracted widespread attention. Despite the fact that the increase was not mainly used to buy dollar assets, but to increase the holdings of ** reserves, this move still put pressure on the United States. The U.S. is unable to sell further U.S. debt to China, and the dollar's global standing is declining. China's continued increase in holdings demonstrates the importance we place on the role of a reserve asset, while also strengthening the credit support of the RMB. With the increasing international demand for the renminbi, the renminbi is expected to continue to appreciate. This incident shows that China's foreign exchange reserve strategy is evolving in the direction of diversification, value preservation and appreciation, and provides strong support for the stable development of China's economy.