Goldman Sachs: China's FX flows remained in net inflow in June, but slowed from May

Overview

This report interprets data related to the State Administration of Foreign Exchange and concludes that China still recorded some net FX inflows in June 2026. Goldman Sachs' preferred FX flow indicator showed net inflows of US$34bn, down from US$50bn in May. Structurally, current account inflows strengthened noticeably, portfolio investment channels turned into outflows, and official FX reserves were broadly stable after adjusting for exchange-rate valuation effects.

Core views

The core views are: first, FX inflows continued in June but with weaker momentum than in May; second, the current account was the main support, with goods trade-related inflows rising from US$53bn in May to US$81bn in June, and the monthly FX settlement ratio rising to 65%; third, pressure increased in portfolio investment channels, with Northbound Bond Connect seeing US$2bn of outflows and portfolio investment-related outflows under the net overseas receipts and payments measure reaching US$36bn; fourth, the headline decline in FX reserves can mainly be explained by valuation effects, while commercial banks' net foreign assets continued to increase.

Analysis framework

The report cross-checks the direction of FX flows using data including SAFE foreign exchange settlement and sales, cross-border RMB flows, the current account, portfolio investment, official FX reserves, and commercial banks' net foreign assets. Goldman Sachs combines onshore spot FX transactions, forward transactions, and cross-border RMB flows to form its preferred FX flow indicator.

Methodology notes

• Macro FX FlowsGoldman Sachs' Preferred FX Flow Indicator

  A composite measure of onshore spot FX net inflows, forward transaction net inflows, and cross-border RMB flows

  In June, onshore spot transactions recorded net inflows of US$47bn, new and canceled forward transactions generated US$7bn of inflows, and cross-border RMB flows showed US$20bn of outflows, resulting in total net FX inflows of US$34bn.

• Balance of Payments ComponentsBreakdown of Current Account and Portfolio Investment Channels

  Observing fund flows by channels such as the current account, goods trade, services trade, income and transfers, and portfolio investment

  The current account recorded net inflows of US$65bn in June, while portfolio investment channels showed outflows under different measures, indicating that support for FX inflows mainly came from trade and the current account.

• Foreign Exchange Reserve AnalysisFX Reserve Assessment After Valuation Adjustment

  Excluding the impact of exchange-rate valuation changes on the headline size of official FX reserves

  Official FX reserves fell from US$3,442bn to US$3,416bn in June; Goldman Sachs estimates that exchange-rate valuation effects reduced reserves by about US$26bn, so reserves were roughly flat after adjustment.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• RMB Exchange Rate

  Net FX inflows and stable reserves provide some support to the RMB

  Strengths

  There were still net FX inflows of US$34bn in June, current account inflows strengthened, and reserves were broadly stable after valuation adjustment.

  Weaknesses

  The scale of net inflows was lower than in May, and portfolio investment channels saw outflows.

  Comparison

  Compared with May, overall inflows fell from US$50bn to US$34bn, but current account inflows rose from US$37bn to US$65bn.

  Risks

  If portfolio investment outflows widen or the FX settlement ratio declines, support for the RMB may weaken.

• RMB Bonds

  Foreign investor flow data show pressure in June

  Strengths

  The report does not show a structural positive catalyst for RMB bonds.

  Weaknesses

  Northbound Bond Connect saw US$2bn of outflows in June, versus US$13bn of inflows in May, mainly due to the sale of negotiable certificates of deposit.

  Comparison

  Shifted from clear inflows in May to slight outflows in June.

  Risks

  If foreign investors continue reducing holdings of RMB bonds, it may affect cross-border flows into the bond market and exchange-rate expectations.

• China's Foreign Exchange Reserves

  Headline decline but stable after valuation adjustment

  Strengths

  After valuation adjustment, reserves were broadly flat, and commercial banks' net foreign assets increased.

  Weaknesses

  Under the official measure, reserves fell from US$3,442bn to US$3,416bn.

  Comparison

  The headline decline in June was about US$26bn, close to Goldman Sachs' estimate of the negative valuation impact.

  Risks

  Future valuation fluctuations and capital flows may continue to affect the headline size of reserves.

Key data

• June Preferred FX Flow IndicatorNet inflow of US$34bnMay recorded a net inflow of US$50bn; June remained in inflow but at a smaller scale.
• Onshore Spot FX TransactionsNet inflow of US$47bnThe main positive contributor to Goldman Sachs' preferred FX flow indicator.
• Forward TransactionsInflow of US$7bnFrom newly initiated and canceled forward transactions.
• Cross-border RMB FlowsOutflow of US$20bnOffsetting spot and forward inflows in the preferred FX flow indicator.
• Current Account ChannelNet inflow of US$65bnMay recorded a net inflow of US$37bn.
• Goods Trade-related InflowsNet inflow of US$81bnMay recorded a net inflow of US$53bn.
• Goods Trade FX Settlement Ratio65%Higher than 51% in May and 58% in the second quarter.
• Services Trade Deficit-related FX OutflowsAbout US$11bnBroadly stable versus May.
• Income and Transfer AccountOutflow of US$5bnSimilar to the May level.
• Portfolio Investment Channel FX FlowsOutflow of US$4bnMay recorded an inflow of US$7bn.
• Northbound Bond ConnectOutflow of US$2bnMay recorded an inflow of US$13bn, mainly affected by the sale of negotiable certificates of deposit.
• Portfolio Investment-related Net Overseas Receipts and PaymentsOutflow of US$36bnMay recorded an inflow of US$18bn; this measure covers both foreign currency- and RMB-denominated flows.
• Official Foreign Exchange ReservesUS$3,416bnUS$3,442bn in May; roughly flat after adjusting for valuation effects.
• Increase in Commercial Banks' Net Foreign AssetsIncrease of US$26bnIncreased by US$15bn in May.
• Balance of Commercial Banks' Net Foreign AssetsUS$1,532bnOutstanding level as of June.

Impact & implications

The data are slightly supportive for the RMB and sentiment in China's FX market, because strong current account inflows and stable reserves after adjustment indicate that FX supply remains resilient. However, portfolio investment channels turned into outflows, especially with foreign investors selling some RMB bonds, suggesting that capital account flows may still create volatility in sentiment toward RMB assets.

Risks

• An expansion of outflows through portfolio investment channels could weaken the sustainability of FX inflows.
• Continued foreign selling of RMB bonds could affect sentiment toward RMB asset allocation.
• If the goods trade FX settlement ratio falls back from its elevated June level, current account support for FX supply may weaken.
• The headline size of FX reserves remains affected by fluctuations in major currency exchange rates and asset valuations.

What to watch

• SAFE's subsequent data on foreign exchange settlement and sales and cross-border RMB flows.
• Whether goods trade inflows and the FX settlement ratio within the current account remain elevated.
• The direction of portfolio investment-related net overseas receipts and payments and Northbound Bond Connect flows.
• Official FX reserves and the underlying changes after adjusting for valuation effects.
• Subsequent increases or decreases in commercial banks' net foreign assets.