Recently, the State Administration of Foreign Exchange released the foreign exchange reserve data at the end of November 2023, showing that the scale of China's foreign exchange reserves is 3$1,718 trillion, up from $705 at the end of October$8.6 billion, an increase of 228%, ending the previous three consecutive months of **. Among them, the ** reserves of the People's Bank of China also increased significantly, reaching 71.58 million ounces (about 2226.).4 tons), an increase of 380,000 ounces (about 11.)82 tonnes), which has risen for the 13th consecutive month, hitting a record high.
This data has sparked widespread concern in the market, and many people are speculating about why the People's Bank of China is increasing its holdings aggressively at this time, what is the role and significance of international reserves, and what the future trend of *** is.
The background of China's central bank holdings**.
Uncertainties and risks in the international situation. Since 2023, the global economic and political situation has undergone many changes and fluctuations, including the United States' war, sanctions, debt ceiling, inflation, monetary policy and other issues, Europe's Brexit, France**, Germany's political crisis and other issues, the Iran nuclear deal in the Middle East, the Saudi journalist incident, the Syrian war and other issues, as well as geopolitical conflicts, terrorism, refugee crises and other issues in other regions. These problems have brought instability and instability to the global economy and financial markets, and increased the challenge of the safety and liquidity of foreign exchange reserves.
Multipolarization of the international reserve currency system. With the changes in the global economic pattern, the proportion of the US dollar in international reserves has gradually declined, while other currencies, such as the euro, the yen, the British pound, the yuan, etc., as well as non-monetary assets such as **, have gradually increased their proportion in international reserves. This reflects the multipolar trend of the international reserve currency system, and also means that the international monetary hegemony of the US dollar has been challenged and impacted. In this case, diversifying and optimizing the structure of international reserves and increasing the allocation of non-US dollar assets such as ** are conducive to improving the anti-risk ability and profitability of international reserves.
Steady development of the domestic economy. In 2023, China's economy maintained a steady and positive trend, achieving high-quality development, continuously optimizing its economic structure, continuously improving its innovation capabilities, expanding its opening-up, basically balancing the balance of payments, basically balancing the supply and demand of the foreign exchange market, and generally stabilizing the scale of foreign exchange reserves. All these provide favorable conditions and space for the People's Bank of China to increase its holdings**, and also reflect the confidence of the People's Bank of China in the domestic economy and its responsibility to the international economy.
The reason why the People's Bank of China increased its holdings**.
Enhance the security of international reserves. **It is an asset with no credit risk, no liquidity risk, no political risk, and is a means of final payment and the last safe haven. In extreme situations such as the international financial crisis and geopolitical crisis, it can be used as the last line of defense for international reserves, ensuring the country's wealth security and financial stability. The People's Bank of China (PBOC) increased its holdings in order to improve the safety of international reserves, hedge the risk of depreciation of US dollar assets, and increase the diversity and flexibility of international reserves.
Enhance the liquidity of international reserves. ** It is an internationally recognized, widely circulated and highly convertible asset, and is an important means and tool for international clearing. In the case of tension and disorder in the international financial market, it can be used as the most effective liquidity of international reserves to meet the country's international payment needs and the intervention needs of the foreign exchange market. The People's Bank of China (PBOC) increased its holdings in order to improve the liquidity of international reserves and increase the availability and flexibility of international reserves.
Enhance the profitability of international reserves. **It is an asset with value preservation and appreciation, anti-inflation and risk diversification, and is a long-term strategic investment. Over the course of the long-term evolution of international financial markets, the company has shown a stable trend, with its returns and volatility showing a low correlation with other major asset classes, providing effective diversification and optimization for the portfolio of international reserves. The People's Bank of China (PBOC) has increased its holdings in order to improve the profitability of international reserves and increase the value and efficiency of international reserves.
The impact of the PBOC's increase in holdings**.
Impact on domestic financial markets. The People's Bank of China (PBOC) increased its holdings**, indicating confidence and support for the domestic financial market, and also providing stable expectations and signals for the domestic financial market. The increase in holdings by the People's Bank of China is conducive to promoting the development and improvement of the domestic market, improving the internationalization level and influence of the domestic market, increasing the supply and demand of the domestic market, and promoting the reasonable formation and stable operation of the domestic market.
Impact on international financial markets. The increase in holdings by the People's Bank of China (PBOC) shows its participation and contribution to the international financial market, and also provides strong demand and support for the international financial market. The increase in holdings by the People's Bank of China is conducive to promoting the activity and prosperity of the international market, improving the liquidity and efficiency of the international market, increasing the diversity and inclusiveness of the international market, and promoting the fair reflection and stable volatility of the international market.