China earned 3.68% annual return from forex reserves from 2005 to 2014, as dollar share trimmed

30, Jul. 2019

TOKYO, NNA - China earned an average annual return of 3.68 percent on its foreign exchange reserves between 2005 and 2014, while diversifying investment risks by lowering the share of dollar-denominated assets, according to official data.

The State Administration of Foreign Exchange (SAFE) disclosed for the first time the performance of its foreign reserves in its 2018 annual report published Sunday.

The agency attributed the return to the diversification of its holdings of foreign currency assets.

“The structure of China’s foreign exchange reserves has been increasingly diversified, and it is more diversified than the international average,” SAFE said in the report.

As a result of the diversification, U.S. dollar-denominated assets fell to 58 percent of China’s forex reserves at the end of 2014, down from 79 percent at the end of 2005.

By contrast, the proportion of U.S. dollar-denominated assets in holdings of the world’s central banks rose to 65 percent in 2014 from 59 percent in 1995, according to data from the International Monetary Fund.

SAFE said its forex reserves team is managing its investment around the clock from its offices in Beijing, Hong Kong, Singapore, Frankfurt, London and New York.

It said its top priority is to minimize risk by using various tools including equity and bond options as well as investment funds.

China holds the world’s largest foreign reserves, which rose by $18.23 billion in June to $3.12 trillion.