China Foreign Exchange Reserves

China By Numbers Ep.13: Foreign Exchange Reserves

https://www.youtube.com/watch?v=Rfl1levc_KM

Foreign exchange reserves are one way to evaluate the country's economy.

100 years ago when the concept of foreign exchange reserve was first introduced into the world, China was suffering from heavy foreign debt as it was forced to pay under a number of unequal treaties imposed by major colonial powers.

And by the time the People's Republic of China was founded in 1949, the country's forum reserve was at an all-time low.

From 1950 to 1960, China's foreign exchange reserves averaged at around 100 million US dollars.

And when China began opening up its economy in 1978, it had some 160 million dollars in foreign reserves. Reserves collapsed in the 1980s due to trade deficits, as the country sought to balance imports and exports.

The number slowly picked up over the years.

By the 1990s, a slew of economic reform initiatives triggered a steadier accumulation of foreign reserves, which skyrocketed when China joined the World Trade Organization in 2001. From 1994 to 2014, China's forex reserves grew at an average rate of over 30% per year. It even overtook Japan in the top spot in 2006, hitting the trillion dollar mark for the first time.

By 2009, China's foreign reserves accounted for about a third of the world's total. It has maintained the world's largest foreign exchange reserves for 15 consecutive years.

Meanwhile, the Chinese yuan is making deeper inroads as a currency of choice for cross-border payments.

According to Global Financial Messaging Network Swift, which releases data in its monthly RMB Tracker on its progress toward becoming an international currency, the Chinese currency growth from 35th most used currency for international payments in 2010 to sixth in 2014. And a year later, the yuan had risen again to fifth. A position it still holds, although the dollar and euro still dominate.

In 2016, the International Monetary Fund included it in the basket of major currencies that determine the value of special drawing rights, which is the IMF's global reserve asset.

This reflected the integration of the Chinese economy into the global financial system and China's expanding role in global trade.