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China US relations continued to tense in May, with the RMB depreciating significantly against the US dollar at the spot, but the foreign exchange reserve of China increased by US $10.2 billion in the same month, achieving two consecutive rises. Analysts believe that capital inflows and exchange rate translation have contributed to the increase of external reserves, and the data also show that the central bank has withdrawn from normal intervention and will not easily intervene in the foreign exchange market in the future.
They also said that in the near future, the global economy has been gradually restarted and major economies have successively launched stimulus plans. The dollar index has continued to weaken, and the external pressure on the RMB has been greatly eased, but it is about to enter the mid year dividend buying period for Chinese enterprises, which may cause some disturbance to foreign reserves. However, the situation in China and the United States has not been upgraded yet, and the RMB assets still have strong attraction to foreign investment It can help to maintain the scale of external storage.
"In May, the U.S. dollar index fell nearly 0.7%, and the exchange rate conversion factor can generally explain the rise of foreign reserves... Although there were some waves in the foreign exchange market in May, the RMB exchange rate fell, but from the data of foreign reserves, the central bank completely withdrew from normal intervention," said Xie Yaxuan, chief Macro Analyst of China Merchants Securities.
He also pointed out that in the future, it is expected that the central bank will not easily intervene in the foreign exchange market, especially by buying and selling foreign exchange directly; in addition, from the performance of the U.S. index and capital flow, the RMB may stabilize and recover, and the possibility of the central bank's intervention in the market leading to the reduction of foreign reserves will be smaller and smaller.

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