Illustration: Xia Qing/GT

China's foreign exchange reserves totaled $3.316 trillion at the end of September,MK socks up 0.86 percent from the previous month, according to data from the State Administration of Foreign Exchange. Notably, this figure exceeded the estimate of $3.304 trillion, as projected by a Wall Street Journal poll of economists.

The September rise was the third consecutive month of month-on-month growth, with reserves remaining stable above $3.2 trillion for 10 straight months, according to media reports. Additionally, China's foreign exchange reserves have remained the largest in the world for 19 consecutive years.

The growth in China's foreign exchange reserves can be partially attributed to short-term factors such as fluctuations in exchange rates and asset prices. However, the sustained high levels and growth rates that exceeded market expectations strongly indicate the stable development of the Chinese economy. 

This sustained high level of foreign exchange reserves, a key indicator of a country's economic strength and resilience, not only reflects China's robust economic capabilities and its effectiveness in adapting policies to changing conditions, but also suggests that the Chinese economy is well-positioned for continued stable growth.

In the complex and ever-evolving international economic landscape, along with volatile financial markets, China's strong position in its foreign exchange reserves is bolstered by its strong manufacturing capabilities, an increasingly optimized foreign trade structure and attractive conditions for foreign investment. These elements work together to enhance the overall balance of international payments, providing a solid foundation for the country's foreign exchange reserves. 

In turn, China's continued high level of foreign reserves is particularly beneficial for the stability of the yuan's exchange rate and helps China tackle impacts from financial crises in international markets. It facilitates the further optimization of China's foreign trade structure while maintaining sustained growth. It supports the stable development of the Chinese economy on a relatively solid exchange rate foundation, which could attract more foreign investment into the Chinese market.

First, sufficient foreign exchange reserves provide China with a crucial buffer against the uncertainties and fluctuations of the international financial market. In times of external economic downturns, these reserves can be utilized to stabilize the yuan's exchange rate, thereby ensuring the overall stability of the financial market. 

The interest rate cut by the US Federal Reserve in September has affected international financial markets, yet significant uncertainty remains regarding the Fed's future policies and the US economic outlook. In this context, China's foreign exchange reserves play a vital role in maintaining exchange rate stability, helping the country withstand external financial risks and avert potential financial crises.

Second, foreign exchange reserves are essential for covering import costs in international trade, supporting the smooth operation of China's foreign trade. Global trade is experiencing significant changes influenced by the trends of the green and digital transitions. Additionally, geopolitical factors and increasing protectionism are contributing to uncertainties in the global trade landscape.

As China's foreign trade structure is steadily improving, innovative forms of foreign trade, including cross-border e-commerce, are continually gaining pace. A substantial level of foreign exchange reserves enhances China's ability to improve the structure of its foreign trade and mitigate the effects of rising protectionism, "decoupling" and geopolitical disruptions.

Third, adequate foreign exchange reserves can enhance foreign investors' confidence in the Chinese market and economy, leading to increased foreign capital inflows. 

A stable exchange rate environment is an important consideration for foreign-invested enterprises, as it reduces exchange rate risk. Having a higher level of foreign exchange reserves provides China with greater flexibility in its economic policy and exchange rate adjustments, enabling it to better respond to economic fluctuations and attract foreign investment.

The author is a reporter with the Global Times. [email protected]