It was a relatively quiet overnight session on the news front, although you wouldn’t know it from the number of Bloomberg e-mails in my inbox.

China’s FX reserves “unexpectedly” rose in February although I’m not entirely sure why everyone is using the term “unexpectedly” here. Have you heard much lately about the yuan? No? Exactly.

Of course you shouldn’t discount the Politburo’s penchant for making sure the data (any data) looks firm during the NPC, so there very well might be some… hmmm… let’s call it “smoothing” going on here.

Whatever the case, FX reserves rose $6.9 billion to $3.005 trillion, compared with a medium estimate of $2.969 trillion in a Bloomberg survey. Here’s the full breakdown:

As regular readers will recall, Goldman likes to take a wait and see approach to the first read on China’s reserves. Around mid-month the bank will analyze the “PBOC’s FX position” and put out a new estimate. You might say Goldman likes to “reserve” judgment. Here’s the bank’s take:

The PBOC’s FX reserves unexpectedly increased in Feb, by US$7bn, to just above US$3tn again. We estimate currency valuation effects at about -US$13bn (assuming the currency composition of China’s reserves is similar to that of the global average). Excluding such effects, reported FX reserves would possibly have increased by US$19bn (vs. -US$37bn in Jan). However, estimates of overall valuation effects can be noisy—indeed, SAFE indicated that the market value of the reserve portfolio increased in Feb, which counteracted the negative currency valuation effect. That said, it is unclear exactly how large these effects were in Feb (and it has not always been obvious how the portfolio valuation effects are recorded). Therefore, another dataset, the “PBOC’s FX position” (usually released in the middle of the month), should give us a much better sense of the PBOC’s FX sales net of valuation effects, as this dataset shows the PBOC’s FX assets recorded at book value. On several occasions in the past year this dataset has suggested a meaningfully different amount of FX sales by the PBOC than implied by the reserve data. For reference, in January the PBOC’s FX position dataset showed a decline of US$30bn, even after a strong trade surplus of US$33bn (including merchandise and service trade). The trade surplus was likely not nearly as strong in Feb due to Chinese new year seasonality—in other words, the capital account dynamics would have needed to undergo a significant reversal for the PBOC to accumulate (rather than de-accumulate) FX assets in Feb. In general, reserve data provide only partial information on the FX flow situation, and we will await further SAFE and PBOC data to assess the underlying trend.