Gold reserves have increased for 17 consecutive months

On April 7, the State Administration of Foreign Exchange disclosed that as of the end of March 2026, China’s foreign exchange reserves stood at $334.21 billion, down by $85.7 billion from the end of February, a decline of 2.5%.

In this regard, the State Administration of Foreign Exchange said that in March 2026, affected by factors such as the global macro environment, the monetary policies of major economies, and expectations, the U.S. dollar index rose and the prices of major global financial assets fell. As a result of the combined effects of factors including foreign exchange rate conversion and changes in asset prices, the size of foreign exchange reserves decreased that month.

Wen Bin, chief economist at China Minsheng Bank, pointed out that in March, the U.S.-Iran conflict continued to escalate, with Iran imposing controls on the Strait of Hormuz, a shipping gateway; Iran’s restrictions on oil shipping through the strait led to a surge in crude oil prices and a broad decline in global asset prices.

In addition, at the end of March, official reserve gold rose to 74.38 million ounces, up by 0.16 million ounces from the end of the previous month. This marks the 17th consecutive month of increases in China’s gold reserves, and the size of the increase was larger than before. Wang Qing, chief macro analyst at Oriental Jinceng, said that although the gold price is at a historical high, from the perspective of optimizing the international reserve structure, the necessity of increasing gold holdings is rising. Judging from all factors, whether the central bank will continue to increase its gold holdings remains the general direction.

Foreign exchange reserve size remains relatively ample

After several months of consecutive increases in scale, official foreign exchange reserves saw some contraction at the end of March.

In this regard, Wang Qing analyzed that in March, geopolitical risks in the Middle East flared up, driving safe-haven demand and accelerating the rise of the U.S. dollar index, with a month’s increase of 2.41% (Tonghuashun data), the largest rise in nearly 8 months. This would directly lead to depreciation of non-U.S. dollar assets in China’s foreign exchange reserves, lowering the size of U.S.-dollar-denominated foreign exchange reserves. According to his estimate, the impact of the U.S. dollar’s appreciation in March on China’s foreign exchange reserves was about $30 billion.

Meanwhile, in March, the fighting in the Middle East continued, causing prices of global financial assets to fall broadly. Among them, the yield on 10-year U.S. Treasuries rose by 33 basis points that month, U.S. Treasury prices fell, and global stock indices declined by larger margins. Judging from the data, the decline in prices of major global financial assets in March had a greater impact on the valuation of China’s foreign exchange reserves.

Wen Bin noted that in March, the rise in oil prices drove inflation expectations higher, and the market even began to price in the possibility of the Federal Reserve raising interest rates. Supported by two factors—higher interest rates staying in place for longer and safe-haven capital returning—the U.S. dollar index continued to strengthen. Affected by the combined impact of changes in asset prices and exchange-rate fluctuations, China’s foreign exchange reserves fell by $85.7 billion month over month to $334.21 billion at the end of March.

Specifically, Wen Bin analyzed that on the exchange-rate front, in March the U.S. dollar index once broke through the 100 level and closed at 99.96 at month-end. Non-U.S. currencies fell across the board; the Japanese yen, euro, and British pound against the U.S. dollar fell by 1.7%, 2.22%, and 1.9%, respectively. Since China’s foreign exchange reserves are denominated in U.S. dollars, depreciation of non-U.S. currencies would compress the size of U.S.-dollar-denominated foreign exchange reserves. On the bond price front, inflation expectations led the yield on 10-year U.S. Treasury notes to rise by 33 basis points to 4.3%, and the 10-year government bond yield in the euro area rose by 37 basis points to 3.09%. Global stock markets fell broadly. The S&P 500 fell 5.09%. U.S. stocks were already moving lower amid volatility due to high valuations of technology stocks, and the geopolitical conflict further intensified this trend; Japan’s Nikkei 225 plunged 13.23%. Japan’s energy supply is highly constrained—about 95% of its crude oil imports depend on the Middle East—so the capital market reacted sharply to this conflict.

Wang Qing pointed out that at the end of March, China’s foreign exchange reserves were still near the highest levels in nearly 10 years, thus remaining relatively ample. Taking all factors into account, China’s foreign exchange reserve size is expected to remain broadly stable around $3 trillion going forward. Against the backdrop of increased fluctuations in the external political and economic environment, an appropriately ample level of foreign exchange reserves can provide important support for keeping the RMB exchange rate within a reasonable and balanced range, and can also serve as ballast to help withstand various potential external shocks.

Foreign exchange reserve stability has solid support

Exports lay the foundation for foreign exchange reserves. With March import and export data not yet disclosed, looking at January to February, with the joint effect of a marginal improvement in global demand, the entry of the world’s emerging industries into an upward phase, and enhanced competitiveness of China’s advantageous products, China’s foreign trade recorded rapid growth in the first two months of this year.

Specifically, in terms of RMB, in January and February, the value of China’s goods imports and exports grew 18.3% year over year, accelerating sharply compared with the full year of the previous year. Both export and import growth rates rebounded. In January and February, the value of goods exports grew 19.2%, accelerating by 13.1 percentage points compared with the full year of the previous year, and the value of goods imports grew 17.1%, accelerating by 16.6 percentage points.

From major trading partners, in January and February, China’s import and export growth rates with ASEAN, the European Union, and Belt and Road co-building countries remained at around 20% as well. The rapid growth in imports and exports reflects China’s strong resilience and development momentum in foreign trade, and also helps maintain sustained basic stability of foreign exchange reserves at the foundational level.

Looking ahead to the next stage, Wen Bin said exports will continue to play the role of the basic pillar in the balance of international payments. Since the beginning of the year, China’s export performance has far exceeded expectations. This reflects not only the strength and resilience of external demand, but also the result of diversification of China’s export markets and upgrading of its export commodity structure. Against the backdrop of global production and supply chains being affected by oil price shocks, China’s advantages in new energy manufacturing and across the entire industrial chain will further stand out.

Regarding cross-border capital flows, as China continues to expand market access for the services sector and deepen institutional-level opening-up in a steady manner, the level of facilitation for cross-border investment and financing continues to improve, and foreign direct investment will maintain steady operations. At the same time, the valuation advantage and allocation value of RMB-denominated assets have become more prominent, and portfolio investment is expected to continue to see inflows on a reasonable scale. With China’s economic operations generally steady and making progress while staying stable, and with new achievements in high-quality development, this provides solid support for maintaining the basic stability of the foreign exchange reserve size.

In addition, at the end of March, China’s official reserve gold rose to 74.38 million ounces, up by 0.16 million ounces from the end of the previous month.

Wang Qing said this is the 17th consecutive month of official gold reserve increases, with the amount of gold added reaching 0.16 million ounces in the month, the highest in nearly 13 months. As the situation in the Middle East evolves and substantially pushes up international oil prices, cooling expectations for global monetary easing—including rate cuts by the Federal Reserve—have weighed on the outlook. In March, the decline in international gold prices reached double digits, which may be a direct reason why the central bank accelerated its gold purchases that month. In addition, the outbreak of geopolitical risks in the Middle East itself is also a factor driving the central bank to increase its gold holdings.

Wang Qing further analyzed that the fundamental reason the central bank continues to increase its gold holdings in recent times is that after the current U.S. administration took office, global political and economic conditions underwent new changes. This means that even though the gold price is at a historical high, from the perspective of optimizing the structure of international reserves, the necessity of increasing gold holdings is rising. Data show that as of the end of March 2026, among official international reserves mainly composed of foreign exchange reserves and gold reserves, the share of gold reserves is about 9.14%, which is clearly below the global average of around 15%. Moreover, gold is a widely accepted final means of payment worldwide, and the central bank’s increase in gold holdings can enhance the credibility of sovereign currency and create favorable conditions for advancing the internationalization of the RMB in a prudent and orderly manner. Judging from all factors, the direction for the central bank to keep increasing gold holdings remains the general direction.