Summary of Key Points Core Viewpoint - As of May 2025, China's foreign exchange reserves reached $328.53 billion, marking a $3.6 billion increase from April, indicating a stable trend in reserves over the past 18 months and a recovery over the last five months [1][3]. Foreign Exchange Reserves - The increase in foreign exchange reserves is attributed to various factors including fiscal and monetary policies of major economies, as well as economic growth prospects, leading to a slight fluctuation in the US dollar index [1][3]. - The current level of foreign reserves is considered adequate, providing support for maintaining the RMB exchange rate at a reasonable equilibrium and acting as a buffer against external shocks [1][4]. - The foreign reserves' valuation effects were nearly balanced due to fluctuations in exchange rates and asset prices, with the dollar index showing a minor decline of 0.2% in May [4][5]. Gold Reserves - The People's Bank of China (PBOC) has increased its gold reserves for seven consecutive months, reaching 7.383 million ounces (approximately 2296.37 tons) by the end of May, with a month-on-month increase of 6,000 ounces [3][6]. - The gold reserves accounted for 7.0% of total international reserves, which is significantly lower than the global average of around 15%, indicating room for further accumulation [6][7]. - The ongoing geopolitical tensions and the rise of protectionism have enhanced the role of gold as a safe-haven asset, suggesting a continued demand for gold accumulation by the central bank [6][7]. Market Dynamics - The recent easing of trade tensions between China and the US has led to a recovery in direct exports to the US, which is expected to support stable cross-border capital flows [5][6]. - The average daily trading volume in the domestic foreign exchange market reached a record high of $47.8 billion in May, reflecting increased market activity and expectations [6][7]. - A survey indicated that 69% of central banks expect the share of gold in global reserves to increase over the next five years, while 62% anticipate a decline in the share of US dollar reserves [7][8].