Untangling the role Chinese state banks play in the Chinese economy or foreign policy is tricky. State owned directly under the Ministry of Finance and answering through multiple channels to senior CCP leadership, distinguishing between state policy objectives and market motivated behavior can be challenging to understand in the most straight forward of scenarios.
Enjoying multiple years of enormous trade surpluses nearing $1 trillion USD, analysts began to question why the official reserves remained effectively flat given the enormity of the official surplus numbers. Some analysts posit that Chinese state banks play a defacto reserve accumulation role holding US dollars that normally would be accumulated by the official People’s Bank of China (PBOC) or State Administration of Foreign Exchange (SAFE) sterilizing large inflows.
There are many underlying data issues needed to address this question with the depth required. In Part I of this series on Chinese surpluses, we are going to focus on the question on whether we see direct evidence of Chinese banks benefiting from the large official surpluses.
From 2022 through 2025 China enjoyed a total aggregate current account surplus of $1.8 trillion USD peaking annually in 2025 at $735 billion. During that same time, official foreign exchange reserves in China went from $3.13 trillion USD to $3.36 trillion USD increasing by $229 billion. This may sound like a lot but in relative terms official reserves grew by only 12.6% of the total current account surplus.
Given this discrepancy, it has been suggested that to avoid criticisms of China’s burgeoning surplus by expanding the official reserves, Chinese state owned banks received marching orders to expand their US dollar holdings. The only problem with this theory? The data does not support significant accumulation of US dollars in China’s state owned banks.
China’s foreign exchange transactions and non-RMB asset holdings among state commercial banks are heavily concentrated in a couple of banks. The Bank of China (BoC) and the Industrial and Commercial Bank of China (ICBC) dominate China’s foreign exchange market handling most clearing and settlement globally for China through officially sanctioned licenses. Though China has thousands of smaller provincial, county, and city banks very few of them have international operations and instead work through one of the big four state banks.
Looking at the Big Four State banks of BoC, ICBC, Agricultural Bank of China (ABC), and the China Construction Bank (CCB) these four cumulatively list $2.25 trillion in non-RMB assets at the end of 2025. Non-RMB assets are comprised of USD, HKD, EUR, JPY, GBP, and other currencies which comprised 16.3% of non-RMB assets.
This $2.25 trillion non-RMB assets held by the Big Four Chinese banking groups may sound substantial until we account for their non-RMB asset growth. From 2022 to 2025, the non-RMB assets of the Big Four Chinese banks grew by $202 billion from $2.05 trillion USD to $2.25 trillion USD. In relative terms that amounts to total non-RMB asset growth of 10.5% in four years and comprised only 11% of the current account surplus during that same time frame.
If we add in the China Development Bank, as the Chinese Import Export Bank does not break out assets and liabilities by currency, total non-RMB are a little higher at $2.38 trillion USD but growth was even slower over the 2022 to 2025 time from in total at 9.2%. If Chinese state owned banks are where China is sticking all the surplus USD, it certainly is not appearing on their balance sheets.
There is another notable point in how we answer the question if Chinese banks are hoarding USD as a type of quasi foreign exchange reserve similar to official policy institutions like the PBOC. Non-RMB liabilities of Big Four Chinese state banks grew in line with asset growth through slightly slower. From 2022 to 2025 Big Four State Banks non-RMB liabilities grew from $1.83 trillion to $1.95 trillion or by $118 billion growing in total 7.7%.
Notably liability growth remained sluggish this time across most segments with the exception of Placements from Banks and Other Financial Institutions at both the BoC and CCB which saw that line item grow 58. 7% and 49. 4% respectively or 53% for those two banks from $84. 3 billion to $129 billion.
That is notable because while we cannot say with certainty, it is possible or even probable BoC and CCB are acting as US dollar banks for the assets of other smaller Chinese banks. In other words, it would be an asset to another Chinese bank but appears on the BoC or CCB balance sheet as a liability.
So even if we add that liability growth back as asset growth, we still are not witnessing USD asset growth needed to support the narrative that China has simply outsourced US dollar reserve holdings to state owned banks.
Finally it is important to note that these non-RMB currencies are not unencumbered. In other words, as a bank the $2.25 trillion USD in assets are mostly held against offsetting liabilities like customer deposits and other liabilities (something we will explore in more detail in the future). From 2022 to 2025 total net non-RMB assets grew from $218 billion to $302 billion or by $84 billion. However, these USD assets are not unencumbered but in the form of customer deposits, non-RMB borrowing, and placements from banks. So even if Beijing wanted the banks to act as a quasi-policy arm of the PBOC or SAFE to defend the RMB, this could only happen by cannibalizing customer accounts, other banks capital, and renouncing its non-RMB debts.
None of this means that China’s state owned banks play no role in executing official foreign exchange policy. However, looking at China’s banks, there simply is not the evidence that they are enjoying the bounty of China’s current account surplus and stock piling massive unofficial foreign exchange reserves to support Beijing.
Note: This is Part I of what will be a series breaking down the empirical questions surrounding China’s foreign exchange reserves and financial position