End of February Official Foreign Exchange Reserves Surpass $3.4 Trillion Experts: Export Will Continue to Play a Fundamental Role in Stabilizing Cross-Border Capital Flows

Everyday Reporter | Zhang Shoulin Everyday Editor | Wendu

On March 7, the State Administration of Foreign Exchange disclosed official foreign exchange reserve data as of the end of February 2026. At the end of February, China’s foreign exchange reserves reached $3.4278 trillion. Meanwhile, the central bank has been increasing gold holdings for 16 consecutive months.

On March 7, Guantao, Chief Economist of Bank of China Securities Global, analyzed that this mainly reflects the positive valuation effects caused by exchange rate conversions and asset price changes influenced by factors such as major economies’ monetary policies and expectations, macroeconomic data, and others.

On the same day, Wen Bin, Chief Economist of China Minsheng Bank, stated that the government work report for 2026 emphasizes “further expanding high-level opening-up,” demonstrating the determination and confidence to promote reform through opening-up. With strong support from national strategies, exports will continue to play a fundamental role in stabilizing cross-border capital flows.

Foreign exchange reserves have increased for the seventh consecutive month

As of the end of February 2026, China’s foreign exchange reserves increased by $28.7 billion from the end of January, a 0.85% rise, marking the seventh consecutive month of growth.

Guantao analyzed that in that month, macroeconomic data, monetary policy expectations of major economies, geopolitical tensions, and other factors combined to push the US dollar index (DXY) to end its previous three-month decline, rising 0.6% to 97.6. Non-dollar currencies generally declined. Prices of major global financial assets fluctuated, with dollar-hedged global bond indices rising 1.4% month-on-month, while the S&P 500 stock index fell 0.9%.

In February, the overall foreign exchange market continued the trend of a strong dollar and even stronger renminbi. Guantao noted that the RMB against the US dollar midpoint rate continued to strengthen, reaching 6.9228 by month’s end, a new high since May 12, 2023. Onshore and offshore spot rates showed a “V-shaped” trend, with offshore and onshore RMB against USD spot rates peaking at 6.8267 and 6.8310 respectively on February 26, reaching new highs since March 27, 2023, and April 17, 2023. After the first trading day following the Spring Festival holiday (February 24), when the onshore RMB spot rate broke through 6.90, bank interbank market inquiry days on February 25 and 26 saw average daily transactions of $56.3 billion, significantly higher than the previous four trading days’ average of $35.1 billion, indicating signs of a herd effect in the foreign exchange market. On February 27, the People’s Bank of China announced a reduction of the foreign exchange risk reserve ratio for forward sales from 20% to 0, signaling a move to stabilize the exchange rate. Subsequently, offshore and onshore RMB against USD spot rates retreated to 6.8612 and 6.8559 at month’s end, appreciating 1.42% and 1.35% respectively from the previous month’s end, but retreating 0.25% and 0.24% from February 26.

Wen Bin said that in February, as tensions between the US and Iran intensified and geopolitical risks increased, global investors’ risk aversion rose, leading funds to shift from risk assets like US stocks and commodities to US bonds and the dollar. Long-term US bond yields declined, the dollar index rose, and global asset prices fluctuated.

In terms of currencies, Wen Bin noted that the US dollar index (DXY) increased 0.6% month-on-month to 97.6, while non-dollar currencies generally declined, with the Japanese yen, euro, and British pound falling 0.8%, 0.3%, and 1.5% respectively against the dollar. Asset-wise, dollar-hedged global bond indices (Barclays Global Aggregate Total Return Index USD Hedged) rose 1.4% month-on-month, while the S&P 500 declined 0.9%. Due to the combined effects of exchange rate conversions and asset price changes, foreign exchange reserves increased.

The proportion of cross-border trade payments using RMB has reached 30%

On March 6, at the Fourth Session of the 14th National People’s Congress, Pan Gongsheng, Governor of the People’s Bank of China, stated that exchange rate influences are very complex, involving geopolitical factors, emergencies, monetary policies, financial markets, and more. Currently, these factors are changing significantly and with high uncertainty. For example, recent military strikes by the US and Israel on Iran have sharply increased risk aversion in international financial markets, causing the US dollar index and major currencies to fluctuate violently. This phenomenon has been very evident in the international financial markets over the past week.

Pan Gongsheng said that after years of development, China’s foreign exchange market participants are more mature and the market is more resilient. The People’s Bank encourages financial institutions to provide services for enterprises managing exchange rate risks. Currently, about 30% of enterprises use exchange rate hedging tools and RMB in cross-border trade payments, meaning roughly 60% of import and export trade is less affected by exchange rate fluctuations. This proportion is expected to further increase this year.

Looking ahead, Wen Bin analyzed that the government work report for 2026 emphasizes “further expanding high-level opening-up,” demonstrating the determination and confidence to promote reform through opening-up. With strong support from national strategies, exports will continue to play a fundamental role in stabilizing cross-border capital flows. Diversification of trading partners, optimization and upgrading of export structures, and rapid development of new trade formats will help keep export scale at a high level. In terms of cross-border capital flows, China’s capital markets are stabilizing and warming, reforms to promote foreign investment are deepening, and foreign investors’ long-term allocation of RMB assets continues to rise. Securities investments maintain reasonable net inflows, and foreign direct investment remains steady. China’s economy will continue to achieve qualitative improvements and reasonable quantitative growth, laying a solid foundation for the stable scale of foreign exchange reserves.

A relevant person from the State Administration of Foreign Exchange stated that China’s economy is progressing steadily and developing towards new and better qualities. The long-term positive trend and supporting conditions remain unchanged, which is conducive to maintaining the basic stability of foreign exchange reserves.

Cover image source: AIGC