Record Forex Reserves Power Yuan to a Stronger Position

After the downswing, due to the Covid-19 pandemic, the Chinese economy has bounced back strongly and is hitting record highs.

One of the critical parameters that has shown robust growth is foreign exchange reserves. By the end of November, it had reached $3.179 trillion, the highest in the last four years since $3.185 trillion in August 2016. These are as per the figures released by the officials of the State Administration of Foreign Exchange.

The Chinese Yuan is also becoming stronger by the day, riding on the back of the optimism of further growth and higher returns on investment on domestic financial assets that will bring more capital to the country.

At the same time that Forex figures were released, the Central Bank announced the Yuan’s daily trading reference or central parity rate. It stood at 6.536 per USD, which is the highest since July 2018. Similarly, the offshore Yuan is trading at 6.518 per dollar, which is the highest in the last two and a half years. Overall, the present bull run in Yuan is the longest consecutive monthly gains in six years.

This optimism about the strength of the second-largest economy in the world has had a positive effect on the confidence of global investors. Therefore, it is expected that there will be a continual inflow of capital in the Chinese economy even as the dollar is on a downslide. Some of the CEOs of the largest multinational corporations in the world have told CNBC that they are more hopeful of the Chinese economy than that of the USA. China’s GDP has also been upgraded by the CNBC Global CFO Council Survey from “stable” in the third quarter to “modestly improving” as of today.