Original title: Foreign capital will continue to steadily increase their holdings of RMB bonds! The foreign exchange bureau’s press conference is full of information, including the RMB exchange rate, foreign profit remittance, and the impact of the Fed’s interest rate hike.
On July 22, the State Council Information Office held a press conference on foreign exchange receipts and payments data in the first half of the year. Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, said at the meeting that since the beginning of this year, facing more complex and severe external shocks and challenges, no matter from the price indicators related to the RMB exchange rate, or from the balance of payments, foreign-related receipts and payments, etc. From the perspective of quantitative indicators, we can clearly see the characteristics of my country’s foreign exchange market’s enhanced resilience.
Looking forward to the second half of the year, Wang Chunying said that at present, my country is more confident and more qualified to effectively resolve the impact of the Fed’s monetary policy adjustment on China’s cross-border capital flows. China’s foreign exchange market is expected to continue its stable operation.
She said that the trend of the RMB will be affected by multiple factors such as foreign exchange supply and demand and the international financial market. It may fluctuate to a certain extent in the short term, rising and falling, but the RMB exchange rate will remain flexible and float in both directions. Basically stable at a reasonable and balanced level.
Wang Chunying also pointed out that Chinese bonds not only have the value of diversified investment, but also have actual capital allocation needs, and are more fundamentally supported. There is room for improvement in the absorption of foreign capital in my country’s bond market. In the long run, foreign capital will continue to steadily increase their holdings of RMB bonds.
A surplus of US$85.2 billion in foreign exchange settlement and sales in the first half of the year
Wang Chunying pointed out that in the face of more complex and severe external shocks and challenges since the beginning of this year, we can clearly see my country’s foreign exchange market in terms of price indicators related to the RMB exchange rate, as well as quantitative indicators such as the balance of payments and foreign-related receipts and payments. Enhanced toughness characteristics.
Judging from the data on foreign exchange settlement and sales by banks, in the first half of 2022, in terms of US dollars, banks settled foreign exchange of USD 1,328.9 billion and sold foreign exchange of USD 1,243.6 billion, with a surplus of USD 85.2 billion in foreign exchange settlement and sales. In RMB terms, banks settled 8.6 trillion yuan in foreign exchange and sold 8.1 trillion yuan in foreign exchange, with a surplus of 545.2 billion yuan in foreign exchange settlement and sales.
Judging from the data on foreign-related receipts and payments by banks on behalf of customers, in terms of US dollars, the foreign-related income of banks on behalf of customers was US$3,160 billion, and foreign payments were US$3,076.6 billion, with a surplus of US$83.4 billion in foreign-related receipts and payments. In RMB terms, the foreign-related income of banks on behalf of customers was 20.5 trillion yuan, and the external payment was 20 trillion yuan, with a surplus of 533 billion yuan in foreign-related receipts and payments.
“Banks’ foreign exchange settlement and sales and cross-border receipts and payments have generally continued to be in surplus.” Wang Chunying said that in the first half of the year, banks’ foreign exchange settlement and sales and foreign-related receipts and payments both showed a surplus of more than 80 billion US dollars, mainly due to the basic surplus of trade in goods and direct investment. higher scale. Among them, in the first quarter, the surpluses of foreign exchange settlement and sales and foreign-related receipts and payments remained high, at US$58.7 billion and US$62.2 billion respectively; in the second quarter, under the more complicated internal and external environment, the surpluses of foreign exchange settlements and sales and foreign-related receipts and payments were 26.5 billion and 211 million respectively. One hundred million U.S. dollars.
The scale of foreign reserves is basically stable, and the foreign exchange market is more resilient
At the end of June, my country’s foreign exchange reserves stood at US$3,071.3 billion, and the scale of foreign exchange reserves was basically stable. Wang Chunying pointed out that since the beginning of this year, the U.S. dollar index has risen significantly, and the prices of financial assets in major countries have fallen sharply. Foreign exchange reserves are denominated in U.S. dollars, and the amount will decrease when converted into U.S. dollars. Together with changes in asset prices, it leads to changes in the book value of foreign exchange reserves. an important reason.
Specifically:
First of all, the RMB exchange rate has become more flexible and has performed steadily globally. Judging from the recent performance, although the US dollar has further strengthened, the stability of the RMB exchange rate among the world‘s major currencies has become more prominent as the domestic economy stabilizes and rebounds.
Secondly, my country’s cross-border capital flow is generally stable, showing a relatively balanced development trend. In the first half of this year, both foreign-related receipts and payments on behalf of customers and banks’ foreign exchange settlement and sales showed a certain scale surplus. Recently, there have been short-term fluctuations and seasonal changes in individual channels, but the overall pattern of cross-border capital flows is basically balanced, reflecting my country’s international income The robustness of the branch structure.
Third, the current account surplus and long-term capital inflows are still the fundamentals for stabilizing my country’s cross-border capital flows. On the one hand, the current account maintains a reasonable surplus. On the other hand, direct investment under the capital account and medium- and long-term asset allocation funds are still playing a leading role.
Foreign investment will continue to steadily increase their holdings of RMB bonds
Recently, the international financial market has undergone major changes. The exchange rate and interest rates of the US dollar have risen rapidly, and international capital has shown a trend of outflow from emerging economies. Wang Chunying said that after years of development, China has become one of the main destinations for global cross-border bond investment, and this pattern has not changed due to recent short-term market fluctuations.
Wang Chunying pointed out that from a global perspective, China’s absorption of bond investment is relatively stable. Bond market volatility is a natural phenomenon and a natural manifestation. It is normal for bond investments to fluctuate across countries, whether in advanced or emerging economies. By comparing the volatility of bond investment absorbed by major countries, it is found that China’s volatility is much lower than that of many developed and emerging economies.
Wang Chunying also pointed out that the further opening of the bond market will help improve the resilience of the foreign exchange market. In recent years, cross-border funds such as trade in goods and direct investment have steadily flowed in, and these funds have played a fundamental surplus role. The opening of the bond market has also enriched the participants and sources of funds in the foreign exchange market, which is conducive to expanding the depth and breadth of my country’s foreign exchange market, and improving my country’s foreign exchange market’s ability to absorb and digest various impacts.
She finally said that, in general, Chinese bonds not only have the value of diversified investment, but also have actual capital allocation needs, and are more fundamentally supported. The total size of my country’s bond market is 21 trillion US dollars, and foreign capital accounts for about 3% of my country’s bond market. Therefore, there is room for improvement in the absorption of foreign capital in China’s bond market.
“In the long run, foreign capital will continue to steadily increase their holdings of RMB bonds, and we are confident about this,” Wang Chunying said.
The RMB exchange rate will remain basically stable at a reasonable and balanced level
In the first half of the year, the RMB exchange rate was generally stable, and the performance was relatively stable. Regarding the prospect of the RMB exchange rate in the second half of the year, Wang Chunying said that the RMB exchange rate will remain basically stable at a reasonable and balanced level. Specifically:
First, China’s economy has stabilized and recovered, major economic indicators have improved, and the industrial chain and supply chain have remained stable, which will continue to play a fundamental role in supporting the RMB exchange rate.
Second, China’s foreign trade and foreign investment are resilient, and funds from the real economy, such as trade and investment, will still be the base for inflows, which will help maintain a basic balance between supply and demand in the foreign exchange market.
Third, the exchange rate expectations of market players are basically stable, and the rational trading model of “purchasing foreign exchange on dips and settlement on highs” is maintained.
In addition, Wang Chunying also pointed out that China’s external asset-liability structure has been continuously optimized, and the scale of foreign exchange reserves has remained generally stable, ranking first in the world.
She said that the trend of the renminbi will be affected by multiple factors such as foreign exchange supply and demand and the international financial market. It may also fluctuate to a certain extent in the short term. It may rise and fall. The RMB exchange rate will remain flexible and float in both directions. Basically stable at a reasonable and balanced level.
Repatriation of foreign profits does not mean divestment
Regarding the outflow of foreign profits that the market is concerned about, Wang Chunying responded that the second and third quarters of each year are the peak season for foreign companies to remit profits. Judging from the recent situation, the profit remittance of foreign-funded enterprises this year has maintained a reasonable, orderly and generally stable development trend. The impact of profit remittance on my country’s cross-border capital flow and foreign exchange supply and demand is controllable.
She said that the current remittance of profits of foreign-funded enterprises matches the stock size of my country’s absorption of direct investment. At the same time, the impact of profit remittance on my country’s balance of payments and foreign exchange market supply and demand is within a reasonable range. In addition, benefiting from the improvement of the internationalization level of the RMB and the stability of the value of the RMB, a considerable proportion of the profits of foreign-funded enterprises are currently remitted in RMB, which has little direct impact on the supply and demand in the domestic foreign exchange market.
Wang Chunying emphasized that the repatriation of profits does not mean divestment, but a virtuous circle with the inflow of foreign direct investment. Since China’s good economic development prospects can bring relatively sustainable and stable returns to international investors, the willingness of foreign businessmen to invest in China for a long time continues to be strong. In addition to the inflow of new investment capital and shareholder loans, many foreign-invested enterprises reinvest a considerable part of their profits in China. Compared with other major economies, China’s foreign-funded enterprises’ profits are reinvested at a relatively high level.
More confidence to resolve the impact of the Fed’s monetary policy adjustment on China’s cross-border capital flows
The impact of the Fed’s rate hike on China’s cross-border capital flows has attracted market attention. Wang Chunying pointed out that the unconventional monetary policy adjustment of the Federal Reserve is a very important external variable for the cross-border capital flow of other economies outside the United States, so it is highly valued.
Wang Chunying said that at present, my country is more confident and more qualified to effectively resolve the impact of the Fed’s monetary policy adjustment on China’s cross-border capital flows. China’s foreign exchange market is expected to continue its stable operation.
First, my country’s comprehensive strength is stronger, and it can better exert its ability to absorb external shocks. With the implementation of various policies to stabilize growth, China’s economy will gradually recover and maintain steady growth in the future.
Second, my country’s balance of payments structure is more stable, which can better ensure the stability and security of cross-border capital flows.
Third, China’s promotion of a higher level of opening up can better expand the depth and breadth of the foreign exchange market. It is more capable of absorbing or smoothing fluctuations in cross-border capital flows, which is conducive to promoting the overall balance of cross-border capital flows.
Fourth, the foreign exchange market adjustment mechanism is more mature, which can better play the role of the RMB exchange rate as an automatic stabilizer for adjusting the balance of payments.