China Foreign Exchange Reserves

Foreign Exchange Reserves reflect the total amount of foreign currency held by the People's Bank of China. Foreign exchange reserves include foreign banknotes, bank deposits, bonds, treasury bills and other government securities, as well as special drawing rights issued by the IMF, and a reserve position in the IMF.

China's foreign exchange reserves include all global reserve currencies (the US dollar, which accounts for more than half of the reserves, the euro, the British pound, the Japanese yen and the Swiss franc), as well as currencies of other largest world economies.

Foreign exchange reserves are mainly used to ensure the flexibility and stability of China's financial system. The diversification of financial assets protects against sharp shocks. Also, foreign exchange reserves are traditionally used to control the national currency. Any currency of any country (in particular, the yuan) is only an IOU from the issuing state with the assurance that its value will be upheld. The country's foreign exchange reserves are alternative forms of money to back the yuan. Moreover, foreign exchange reserves are commonly used as an instrument of monetary policy (the country sells or accumulates foreign exchange assets, depending on the desired effect on its own currency rate).

As of March 2018, China holds the world's largest foreign exchange reserves. Statistics on foreign exchange reserves are published every three months. The influence of this indicator on yuan quotes depends in accompanying factors.