China.org.cn | December 10, 2024
CCTV:
How have China's foreign exchange market and the international balance of payments performed so far this year? What characteristics do you think they have demonstrated? Thank you.
Li Hongyan:
Thank you for your questions. Regarding the current foreign exchange situation, I would like to share more information with you. As I mentioned earlier, the external environment has been complex and volatile so far this year. Monetary policy expectations of major developed economies have been repeatedly adjusted. The international financial market has continued to fluctuate. China's economic growth has shown a stable growth trend. The country's foreign exchange market has generally withstood the test of changes in the external environment and has shown stronger resilience, keeping a good momentum of steady growth. This can be observed from the following three aspects:
First, the RMB exchange rate remains basically stable amid two-way fluctuations. The RMB exchange rate is mainly determined by the market. Under the market-oriented formation mechanism, it is normal for the RMB to rise and fall in two-way volatility. I just mentioned that since the beginning of this year, the spot exchange rate of RMB against the US dollar has depreciated slightly by 0.3 percent, with a certain degree of decline and rise in some periods, but this is in line with changes in the internal and external environments. At the same time, compared with other currencies, the performance of the RMB in the global foreign exchange market is relatively stable. So far this year, the US dollar index has risen by 2.3%, the exchange rates of the euro and the Japanese yen against the US dollar have depreciated by 1.7% and 5.9%, respectively, and the emerging market currency index has fallen by 6.3%. It is thus clear that RMB fluctuations are normal and moderate.
Second, foreign exchange market expectations and transactions have remained rational and orderly. Relevant indicators in the foreign exchange forward and options markets show that there have not been any obvious expectations of appreciation or depreciation for the RMB exchange rate this year, and market transactions have been generally rational and orderly. As you all have seen, the RMB exchange rate has seen spikes and falls recently, with increased flexibility. Enterprises and other entities have seized the opportune timing to settle and sell foreign exchange based on cross-border trade, investment and financing needs. The total scale of foreign exchange settlement and sales in September increased by 14% compared with that in August. At the same time, in recent years, enterprises' awareness of exchange rate risk neutrality has been continuously enhanced, and the contract size of forward exchange settlements in August and September increased month by month, indicating that enterprises actively adapt to market fluctuations through exchange rate risk management.
Third, a basic equilibrium has been maintained in the balance of international payments. It demonstrated a surplus in the current account within a reasonable size. In the first half of this year, the surplus in the current account was $93.7 billion, accounting for 1.1% of the gross domestic product (GDP) in the same period, which was within a reasonable and balanced range. With this, trade in goods maintained a certain size of surplus and continued to play a fundamental role in stabilizing cross-border capital flows, and the deficit in trade in services basically returned to pre-epidemic levels. Preliminary statistics show that the current account surplus in the third quarter remained at a reasonable level. In the capital account, cross-border capital flows have recently become more balanced. Foreign investment in China has increased and foreign investment in domestic bonds has continued to rise steadily, with a cumulative net increase of more than $80 billion in the first three quarters. Recently, foreign investment in domestic stocks has also improved significantly, and holdings in foreign debt have remained stable. Outward investment by domestic entities has been carried out in an orderly manner and both direct investments and security investments have maintained a steady growth trend. Overall, the maturity and inherent resilience of China's foreign exchange market have both continued to increase, and its ability to adapt to changes in the external environment has also increased significantly, providing strong support for the overall stability of the foreign exchange receipts and payments this year.
That is all from me. Thank you.