On April 7, the State Administration of Foreign Exchange released the foreign exchange reserve scale data at the end of March 2025. As of the end of March 2025, my country's foreign exchange reserves were US$324.07 billion, up 13.4 billion from the end of February, an increase of 0.42%.

The State Administration of Foreign Exchange stated that in March 2025, affected by macroeconomic data, fiscal and monetary policies and expectations of major economies, the US dollar index fell, and global financial asset prices generally fell. The combined effect of factors such as exchange rate conversion and asset price changes, the scale of foreign exchange reserves increased in the month.

At the end of March 2025, the official gold reserves were 73.7 million ounces, an increase of 90,000 ounces from the end of last month. This is the fifth consecutive month that the central bank has increased its holdings of gold.

Wen Bin, chief economist of China Minsheng Bank, analyzed that the current external instability and uncertainty factors have increased significantly, but my country's economic foundation is stable, has many advantages and great potential, and has sufficient macro-control reserve tools and policy space, which is conducive to releasing huge potential for domestic demand.

Foreign reserves increased by US$13.4 billion from the end of last month

Wen Bin analyzed that in March 2025, affected by factors such as macroeconomic data, fiscal and monetary policies and expectations of major economies, the US dollar index fell, and global financial asset prices rose and fell. In terms of currency, the US dollar index (USDX) fell 3.2% to 104.2, while non-US dollar currencies generally appreciated. In terms of assets, the S&P 500 stock index fell 5.8%. Under the combined effect of factors such as exchange rate conversion and asset price changes, my country's foreign exchange reserve scale increased by US$13.4 billion from the end of last month.

Specifically, the yield on maturity of the US 10-year Treasury bond closed at 4.23% at the end of March, down 1bp from 4.24% at the end of last month, a decrease of 0.24%. The yield on maturity of the US 1-year Treasury bond closed at 4.03% at the end of March, down 5bps from 4.08% at the end of last month, a decrease of 1.23%.

The above-mentioned US bond data shows that US bond prices rebounded slightly in March, contributing to the increase in the scale of foreign exchange reserves to a certain extent.

Judging from the US dollar index, the US dollar index closed at 104.2 at the end of March, down 3.2% from the end of last month, and the exchange rate conversion contributes to the scale of foreign exchange reserves accordingly.

On March 20, Beijing time, the Federal Reserve announced its interest rate results and decided to maintain the target range of the federal funds rate between 4.25% and 4.5%. But since April, the Federal Reserve's monthly redemption cap on U.S. Treasury bonds has been lowered from $25 billion to $5 billion, slowing the pace of balance sheet shrinking.

Tao Chuan, chief economist at Minsheng Securities, pointed out that the Federal Reserve was cautious about the future path of interest rate cuts at the FOMC (Federal Open Market Committee) meeting in March. The dot chart conveyed a relatively hawkish signal, but announced that the balance sheet shrinking began in April, which was interpreted by the market as loose. The market's interpretation of the Fed's balance sheet reduction dynamics has increased momentum for the downward trend of the US dollar index.

Tao Chuan's team pointed out that the last round of the Federal Reserve announced a slowdown in May 2019 and officially stopped shrinking the balance sheet in August 2019. There are two subsequent policy paths for the Federal Reserve: the cooling of inflation brings interest rate cuts, or the sharp economic deterioration brings interest rate cuts, both of which are possible.

Central Bank Increases Holdings in Gold for the Fifth Month

At the end of March 2025, the official gold reserves were 73.7 million ounces, an increase of 90,000 ounces from the end of last month. This is the fifth consecutive month that the central bank has increased its holdings of gold.

Lian Ping, president and chief economist of Guangkai Chief Industrial Research Institute and chairman of China Chief Economist Forum, pointed out in an interview with the Daily Economic News that in a complex environment with continuous geopolitical conflicts, the "black swan" event may continue to appear in the future, promoting more obvious risk aversion needs for gold.

Lian Ping also said that there have been a series of new changes in the international monetary system, with the US dollar's credit shaking and the euro performing weakly. Against the backdrop of de-dollarization, the RMB has won development opportunities. However, the RMB is still in its early stages of internationalization. In this case, for the consideration of reserve functions, central banks in various countries may pay more attention to maintaining and increasing their holdings of gold reserves.

As of the end of March, the price of spot gold in London exceeded $3,100 per ounce, compared with about $2,200 per ounce in the same period last year. As of the end of March, the settlement price of COMEX gold futures was US$3,150.3/oz, compared with US$2,238.40/oz in the same period last year.

Wen Bin analyzed that the current external instability and uncertainty factors have increased significantly, but my country's economic foundation is stable, has many advantages and great potential, and has sufficient macro-control reserve tools and policy space, which is conducive to releasing huge potential for domestic demand. At the same time, with the diversification of my country's foreign trade region, the upgrading of trade structure, and the continued increase in the attractiveness of RMB assets to foreign investment, my country's international balance of payments will continue to remain stable, laying the foundation for the basic stability of the scale of foreign exchange reserves.

Export data shows that among the major export products this year, electronic products have strong export momentum. From January to February, the export amount of China's automatic data processing equipment, its components and integrated circuits increased by 10.5% and 11.9% year-on-year respectively, with growth rates accelerating by 0.6 and 6.4 percentage points respectively compared with the whole year of the previous year.

The State Administration of Foreign Exchange stated that my country's economic operation is generally stable and steady, and a package of stock policies and incremental policies continue to make efforts and effective, and high-quality development is steadily promoted, providing support for the basic stability of the scale of foreign exchange reserves.

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[Editor in charge: Wang Fang PF210]