China’s Forex Reserves Hit $3.44 Trillion, a 10-Year High
China’s foreign exchange reserves rose to $3.4422 trillion at the end of May 2026, marking the highest level in more than a decade and underscoring the resilience of the world’s second-largest economy amid global financial volatility. The figure represents an increase of $31.7 billion, or 0.93%, from the end of April, according to data released by the State Administration of Foreign Exchange (SAFE) on June 7 and reported by Xinhua News Agency.
Context & Background
The $3.4422 trillion figure is the highest since November 2015 and marks the 10th consecutive month that reserves have remained above the $3.3 trillion threshold. This sustained recovery follows a period of significant decline between 2015 and 2016, when capital outflows and RMB devaluation pressure drove reserves down to $3.0105 trillion. Since then, reserves have fluctuated in the $3.0–3.2 trillion range before beginning a steady climb in 2025.
China’s foreign exchange reserves first surpassed Japan to become the world’s largest in February 2006, reaching an all-time high of $3.9688 trillion in August 2014. The current level, while still below that peak, signals a robust recovery in China’s external financial position.
Key Developments
According to SAFE, the May increase was driven by a combination of exchange rate translation effects and asset price changes. The US Dollar Index rose 0.9% to 98.9 during the month, while global major financial asset prices generally increased, creating a positive valuation effect that more than offset currency translation losses.
“In May, the US Dollar Index stopped falling and rebounded, non-US currencies generally depreciated, causing non-US dollar reserve assets to shrink when converted to dollars,” said Guan Tao, chief global economist at BOC International, as quoted by the China Securities Journal. “But global major financial asset prices generally rose, giving China’s foreign exchange reserves book profits. The latter’s increase was particularly larger, creating a positive valuation effect.”
In a separate development, the People’s Bank of China continued its gold purchasing streak for the 19th consecutive month. Gold reserves reached 74.96 million ounces at the end of May, an increase of 320,000 ounces from April. Wang Qing, chief macro analyst at Dongfang Jincheng, told the China Securities Journal that this gold accumulation “enhances the credit of sovereign currency and creates favorable conditions for steadily and prudently advancing RMB internationalization.”
Analysis & Implications
The sustained reserve buildup carries multiple implications for China’s economic strategy. Pang Ming, a specially appointed senior researcher at the National Institution for Finance & Development, described the reserves as a “ballast stone” against external shocks, as reported by China News Service.
“In the complex and volatile global financial environment, China’s foreign exchange reserves remaining at a high level above $3.4 trillion not only reflects the inherent stability of cross-border capital flows, but also demonstrates the ‘ballast stone’ effectiveness of foreign exchange reserves in resisting external shocks,” Pang said.
Analysts broadly agree that the May increase was primarily driven by valuation effects rather than active capital inflows. The high reserve level provides the People’s Bank of China with greater policy flexibility, supporting RMB exchange rate stability and offering a buffer against potential external shocks.
Pang Ming further noted that a moderately ample foreign exchange reserve scale “leaves more comfortable space for China’s monetary policy operations,” enabling the authorities to smooth short-term exchange rate fluctuations while attracting medium- to long-term foreign investment through solid balance of payments credit.
Looking ahead, Wang Qing expects China’s foreign exchange reserves to remain broadly stable around $3 trillion, describing this level as “moderately ample” and sufficient to serve as a ballast against external risks.
What’s Next
The 19-month consecutive gold buying streak suggests a deliberate strategy by Beijing to diversify reserve assets away from dollar-denominated holdings, which are estimated to account for approximately 70% of China’s total reserves. This diversification aligns with China’s long-term goal of increasing the RMB’s role in global trade and finance.
Key questions going forward include whether the PBOC will continue its gold accumulation, how potential Federal Reserve policy changes may affect reserve valuations, and whether the current trajectory of reserve growth can be sustained amid ongoing global economic uncertainties. Analysts expect reserves to stabilize around the $3 trillion mark, providing a comfortable cushion for China’s policymakers as they navigate an increasingly complex global financial landscape.