Tide News under Zhejiang Daily:

What changes have there been this year in the way enterprises manage foreign exchange risk? How is SAFE supporting enterprises in strengthening that management, and what policy measures and services does it provide? Thank you.

Li Bin:

Thank you for your questions. Let me take them. The external environment has been complex and volatile this year, but China's foreign exchange market has run smoothly overall, and the RMB exchange rate has shown greater two-way movement. We have observed that enterprises are more conscious of the need to proactively manage exchange risks, and that they are using a range of methods to do so. Some, for example, have both foreign exchange income and expenditure. By netting inflows against outflows, or foreign currency assets against liabilities, they achieve a degree of hedging that softens the impact of exchange rate swings. Some price and settle in RMB to avoid the exposure created by currency mismatches. Some use foreign exchange derivatives to lock in rates ahead of time, thereby reducing the effect of exchange rate movements on their operations.

SAFE has consistently treated exchange rate hedging services for enterprises as a priority, helping them adapt to two-way exchange rate movement. This year, we have continued to improve the policies and services on offer.

First, we have kept promoting the concept of exchange rate risk neutrality. Exchange rates are set by market supply and demand. As a result, they're very hard to predict. With the RMB exchange rate moving more in both directions in recent years, enterprises need to keep this concept in mind, focus on their core business, take the initiative in managing exchange rate risk, and limit as far as possible the effect of exchange rate swings on their operations and finances. Working with relevant departments and financial institutions, SAFE has promoted awareness through guidelines, specialist training sessions, research seminars, and on-site advice. The emphasis is on getting enterprises to watch changes in market conditions, think harder about hedging and improve independent decision-making.

Second, we have built a bridge between banks and enterprises. Some 130 major Chinese and foreign-funded banks can now handle foreign exchange derivatives services for enterprises. Companies, of course, need time to get to know what banks offer in hedging, and banks also need to get to know each company's foreign exchange business situation and hedging needs. To open up the flow of information between the two, SAFE has built and steadily improved a database of enterprises with foreign-related business. It now covers 290,000 foreign trade enterprises and is shared with banks, helping them provide targeted and efficient services.

Third, we have encouraged banks to raise their standard of service. Exchange rate hedging is a fairly specialized field, and enterprises have long looked to banks for better hedging services. SAFE has therefore simplified the documentation banks must check when handling foreign exchange derivatives transactions for enterprises, making those transactions quicker and easier. We have pushed banks to keep working on new derivatives products, wider online trading channels and stronger service capacity at the branch level, so that enterprises find hedging more convenient. Foreign exchange trading platforms and clearing institutions have also cut costs and improved efficiency, and have continued to reduce or waive the fees banks pay when providing hedging services to micro-, small- and medium-sized enterprises. We have guided banks to refine credit approval and margin management mechanisms for foreign exchange derivatives, making it easier for smaller firms to hedge.

In the first half of this year, enterprises signed close to $1.4 trillion in foreign exchange derivatives contracts to manage exchange rate risk, up 40% year on year. The corporate hedging ratio reached 35.3%, 5.3 percentage points higher than for 2025 as a whole. Looking ahead, SAFE will press ahead with its work on exchange rate risk management services, promote awareness through multiple channels, improve its product range and service mechanisms, and support banks in matching the varied risk management needs of enterprises. Thank you.