China's Forex Reserves Rise for 6th Straight Month on Weak Dollar and Global Rally

China's foreign exchange reserves extended their upward trend in January, boosted by a weaker U.S. dollar and a broad rally in global financial markets.

Data released by the State Administration of Foreign Exchange (SAFE) on February 7 showed that reserves stood at $3.3991 trillion at the end of January, up $41.2 billion (or 1.23%) from December 2025.

Separately, the People's Bank of China (PBOC) reported that its gold reserves increased by 40,000 ounces month-on-month to 74.19 million ounces. This marks the 15th consecutive month of gold purchases by the central bank.

Monthly Gain Hits Near 2-Year High

The January increase marks the sixth straight month of growth for China's reserves. The $41.2 billion monthly rise is the largest since January 2024.

Commenting on the data, Guan Tao, Global Chief Economist at BOC Securities, told the Shanghai Securities News, "This mainly reflects the positive valuation effect driven by exchange rate conversions and asset price changes, influenced by the monetary policies and expectations of major economies, as well as macroeconomic data."

Guan elaborated: "In January, the U.S. dollar experienced volatility and weakened for the third consecutive month, affected by changes in U.S. economic fundamentals, evolving geopolitical risks, and factors such as the Federal Reserve Chair nomination. Meanwhile, major global financial asset prices trended higher overall."

Global Market Review for January:

Currency Markets: The U.S. Dollar Index fell 1.4% to 97.0, briefly touching a four-year low mid-month. Non-U.S. dollar currencies strengthened, with the Japanese Yen, Euro, and British Pound rising 1.23%, 0.9%, and 1.6% respectively against the dollar.
Asset Prices: The yield on the 10-year U.S. Treasury note rose by 8 basis points to 4.26%. Global stock markets oscillated but trended upwards, with the S&P 500 up 1.4%, Europe's STOXX 600 up 3.4%, and Japan's Nikkei surging 5.9%.

Reserves Act as "Ballast" Against External Shocks

Looking ahead, amid high uncertainty in international financial markets, experts believe China's reserves remain well-positioned.

Wen Bin, Chief Economist at Minsheng Bank, stated, "China's economic operation has maintained steady progress with enhanced resilience, providing strong support for the basic stability of forex reserves."

"China's foreign trade demonstrated strong resilience in 2025, with export volume hitting a record high. Foreign investors' willingness to allocate RMB assets for the long term has steadily increased," Wen added. "With continued policy support for cross-border investment and financing facilitation, the attractiveness of China's capital market to foreign capital will continue to grow."

Wang Qing, Chief Macro Analyst at Oriental Jincheng, emphasized that China's reserves, slightly above $3 trillion, are in a "moderately abundant" state. "Against the backdrop of increasing external volatility, ample reserves not only support the RMB exchange rate at a reasonable and balanced level but also serve as a 'ballast stone' to resist potential external shocks."

PBOC Maintains Gold Buying Pace for Strategic Diversification

While the PBOC has increased gold reserves for 15 straight months, the pace of buying remained modest in January, in line with market expectations.

Wang Qing explained, "Amid high global geopolitical risks and continued Fed rate cuts, international gold prices continued their rapid rise in January. This is one reason why the central bank's gold purchase increment remained low that month."

The World Gold Council (WGC), in its recent Global Gold Demand Trends Report, noted that central banks often balance strategic considerations with tactical operations. "Since 2025, as gold prices soared, the PBOC has gradually reduced its gold purchase scale, demonstrating tactical flexibility. However, strategically, the buying has not stopped, possibly reflecting China's growing demand for diversifying its expanding forex reserves."