China's forex reserves rise to $3.44 trillion, beating estimates in May

China's foreign exchange reserves rose to $3.442 trillion in May, beating economist expectations, as a stronger US dollar and gains in global financial assets boosted the value of existing holdings.

"The increase was mainly driven by exchange-rate translation and asset-price gains," the State Administration of Foreign Exchange said, adding that a resilient domestic economy helped anchor the country's steady reserves.

The $31.7 billion increase pushed reserves above the $3.4 trillion median estimate in a Trading Economics survey and above the $3.4 trillion level that economists polled by The Wall Street Journal had anticipated. The current stockpile is the highest since late 2015, according to Bloomberg data.

A larger reserve buffer strengthens Beijing's hand in managing the yuan, which has been firming recently with USD/CNY trading around 6.8157. DBS, the Singapore-based bank, said officials may try to slow further appreciation if a stronger currency starts weighing on exporter earnings and showing up in reported profits.

The PBOC also added 320,000 troy ounces of gold during the month, bringing total holdings to 74.96 million troy ounces and extending its buying streak to 19 consecutive months — the longest since at least 2015. The concurrent gold purchases signal a longer-term strategy of diversifying away from dollar-denominated assets, with China joining emerging-market peers in reducing reliance on US Treasuries as a reserve asset.

For global investors, the reserve build matters beyond the headline number. A bigger stockpile gives the PBOC more ammunition to smooth one-way currency moves, which can reduce day-to-day volatility in USD/CNY. That in turn affects how exporters price contracts and hedge currency exposure, and how quickly exchange-rate shifts filter into corporate earnings. The last time reserves approached this level was after China's 2015 currency devaluation, when the PBOC spent heavily to defend the yuan before rebuilding its stockpile over subsequent years.

This article is for informational purposes only and does not constitute investment advice.