Cross-border capital flows in China have remained stable and orderly in the first half of 2023, according to data released by the State Administration of Foreign Exchange. The supply and demand in the foreign exchange market have also been balanced. Despite a complicated and severe external environment, China’s foreign exchange market has displayed strong stability and resilience.
Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, highlighted this positive trend at a recent press conference held by the State Council Information Office. She stated that both capital flow and market trading behavior have remained stable, reflecting the robustness of the foreign exchange market.
During the first half of 2023, banks’ foreign-related income on behalf of customers reached US$3,025.9 billion, while external payments amounted to US$2,979.2 billion. This resulted in a surplus of US$46.7 billion in foreign-related receipts and payments. Moreover, banks’ foreign exchange settlement stood at US$1,132.5 billion, with foreign exchange sales amounting to US$1.1307 billion. The surplus in foreign exchange settlement and sales reached US$1.8 billion. Overall, both foreign-related receipts and payments by banks and foreign exchange settlement and sales displayed a surplus pattern.
Wang Chunying further noted that banks’ total foreign-related income and expenditure surpassed US$6 trillion in the first half of the year, the second-highest level in history for the same period. In terms of balance, foreign-related receipts and expenditures maintained a surplus scale. Although there was a seasonally high surplus in foreign-related receipts and payments in January due to factors such as the concentration of foreign exchange collection before the Spring Festival, the amount of foreign-related income and expenditures from February to May remained stable.
The second quarter witnessed a deficit turning into a surplus in bank foreign exchange settlement and sales. Notably, despite the more complex external environment, June recorded a significant surplus of US$8.2 billion in foreign exchange settlement and sales, exceeding the previous monthly average scale.
Despite the fluctuating international financial market and the general weakening of the RMB exchange rate, China’s foreign exchange market has displayed resilience and stability. Wang Chunying attributed this to the increasing adaptability of business entities to the two-way fluctuations of the RMB exchange rate. Such entities choose the appropriate time to settle and purchase foreign exchange based on international trade and investment activities. Rational transaction behavior from these entities has effectively maintained the stability of the exchange rate.
The market’s expectations regarding the RMB exchange rate have also remained rational and objective. The risk reversal index of the RMB foreign exchange option market, which reflects the market’s sentiment towards bearish or bullish trading on the RMB, has generally shown a downward trend. This indicates that the market has not formed a consistent and sustained depreciation expectation for the RMB exchange rate.
Wang Chunying concluded by emphasizing that the RMB exchange rate has the conditions to remain stable at a reasonable and balanced level in the future. Cross-border capital flows, foreign exchange settlement and sales data, balance of payments, and the maturity of the foreign exchange market all support this outlook.
The original article was sourced from the Economic Information Daily.