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Speaker:

Wang Chunying, deputy administrator and spokesperson of the State Administration of Foreign Exchange (SAFE)

Chairperson:

Shou Xiaoli, deputy director general of the Press Bureau of the State Council Information Office (SCIO) and spokesperson of the SCIO

Date:

July 22, 2022

Shou Xiaoli:

Ladies and gentlemen, good morning. Welcome to this press conference held by the SCIO. This is a regular briefing on China's economic data. Today, we are delighted to be joined by Ms. Wang Chunying, deputy administrator and spokesperson of the SAFE, who will introduce China's foreign-exchange receipts and payments data in the first half of 2022 and take your questions. 

Now, let's give the floor to Ms. Wang for her introduction.

Wang Chunying:

Good morning. Welcome to today's press conference. I'll begin by introducing China's foreign-exchange receipts and payments data in the first half of 2022, and then answer your questions.

Since 2022, the international landscape has been complex and challenging, with continued COVID-19 outbreaks and the prospect of global economic growth weakening. Under the strong leadership of the Central Committee of the Communist Party of China (CPC) with Comrade Xi Jinping at its core, China has effectively coordinated pandemic prevention and control with socio-economic development. Recently, major macroeconomic indicators have stabilized and picked up, and the economy has shown a general trend of recovery and development. Against this backdrop, China's foreign exchange market has become more resilient, the RMB exchange rate has been relatively stable and sound, and cross-border capital flow has been generally steady. In the first half of 2022, foreign exchange settlement and sales by banks registered $1.33 trillion (or 8.6 trillion yuan denominated in RMB) and $1.24 trillion (8.1 trillion yuan), respectively, creating a surplus of $85.2 billion (545.2 billion yuan). The cross-border receipts and payments by non-banking sectors stood at $3.16 trillion (or 20.5 trillion yuan denominated in RMB) and $3.08 trillion (20 trillion yuan), respectively, resulting in a surplus of $83.4 billion (533 billion yuan). In the first half of this year, China's forex receipts and payments showed the following main features:

First, forex settlement and sales by banks as well as cross-border receipts and payments by non-banking sectors continued to create surpluses, with both recording a surplus of over $80 billion in the first half of this year as I said just now. This is mainly because the basic surpluses in trade in goods, direct investment and other fields were kept at a high level. Specifically, in the first quarter, forex settlement and sales by banks as well as cross-border receipts and payments by non-banking sectors maintained high-level surpluses of $58.7 billion and $62.2 billion, respectively. In the second quarter, when the domestic situation and external environment were more complicated, the two indicators created surpluses of $26.5 billion and $21.1 billion, respectively.

Second, forex selling rate edged up and cross-border financing of enterprises remained stable. In the first half of this year, the forex selling rate measuring the willingness to buy forex, which is the ratio of forex customers buying from banks to their foreign-related forex expenditure, reached 66%, up by 2 percentage points over the same period last year. In terms of foreign investment financing, by the end of June this year, the forex loans of Chinese enterprises and other market entities at home amounted to $351 billion, which was basically the same as that at the end of 2021. Cross-border trade financing, including import payments by overseas agents and forward letters of credit, registered $116.4 billion, slightly lower than that at the end of 2021. This is the second feature. 

Third, forex settlement rate increased steadily and enterprises' forex deposits were basically stable. In the first half of this year, the forex settlement rate measuring the willingness to settle forex, which is the ratio of forex customers selling to banks to their foreign-related forex income, was 67%, up by 0.4 percentage point from the same period in 2021. By the end of June this year, the forex deposits of Chinese enterprises and other market entities at home amounted to $695.1 billion, basically in line with that at the end of 2021. 

Fourth, forex derivative transactions maintained growth and market players' awareness of exchange rate risk management steadily increased. In the first half of this year, to manage exchange rate risks, enterprises employed forward derivatives, options and other derivatives of more than $750 billion, an increase of 29% year on year, which was significantly higher than the growth rate of forex settlement and sales in the same period. As a result, the hedge ratio of enterprises rose to 26%, 4.1 percentage points higher than that of last year. This shows that market entities are more aware of averting exchange rate risks and are better able to adapt to fluctuations in the RMB exchange rate.

Fifth, the amount of forex reserves remained basically stable. At the end of June, China's forex reserves registered $3.07 trillion. Since the beginning of this year, the U.S. dollar index has risen remarkably and the prices of financial assets in major countries have fallen sharply. Forex reserves will drop in amount when denominated in dollars. This, coupled with changes in asset prices, constitutes a vital reason for the changes in the book value of forex reserves. 

Going forward, the State Administration of Foreign Exchange (SAFE) will conscientiously implement the decisions and arrangements of the Party Central Committee and the State Council. We will act on the general principle of pursuing progress while ensuring stability, continue to deepen the reform and opening up in the field of foreign exchange, further facilitate cross-border trade and investment and financing, and serve the development of the real economy. Meanwhile, we will strengthen the study and judgment of the situation of foreign exchange revenue and expenditure. We will improve the regulatory framework underpinned by both macro-prudential governance and micro-prudential supervision for the foreign exchange market, and maintain the steady operation of the foreign exchange market and national economic and financial security. These efforts will enable us to pave the way for a successful 20th CPC National Congress.

The above is the main statistical data for foreign exchange revenue and expenditure in the first half of 2022. You are now welcome to ask questions about foreign exchange revenue and expenditure.

Shou Xiaoli:

The floor is now open for questions. Please identify the media outlet you represent before raising questions.

CCTV:

Since the beginning of this year, the external environment has become more challenging and complicated. How do you evaluate the performance of China's foreign exchange market in the first half of this year?

Wang Chunying:

Since the beginning of this year, although we have faced more complicated and severe external shocks and challenges, we can see the enhanced resilience of China's foreign exchange market. It is evident both from the price indicators related to the RMB exchange rate and the quantitative indicators such as the balance of payments and receipts and payments with foreign involvement. To be specific:

First, the RMB exchange rate has become more resilient and performed steadily worldwide. This year, affected by the interest rate hike of the U.S. Federal Reserve, the geopolitical conflict, and multiple other factors, the main change in the international foreign exchange market is the strengthening of the U.S. dollar and the weakening of major non-U.S.-dollar currencies. Against such a backdrop, the RMB exchange rate against the U.S. dollar has depreciated. However, compared with other major international currencies, the value of the RMB has been stable. Judging from the rise of the U.S. dollar index and the decline of other major currencies, the U.S. dollar index has increased by more than 11% since the beginning of this year. The depreciation of the euro, sterling, and yen against the U.S. dollar has been kept between 10% and 17%, and the depreciation of the RMB against the U.S. dollar has stood at 5.8%. From the multilateral exchange rate perspective, the RMB exchange rate index has seen an appreciation of 0.1%, indicating that the RMB is stable against a basket of currencies. Regarding exchange rate expectations, the relevant indicators of foreign exchange forwards and options have shown that there are no notable appreciation and depreciation expectations for the RMB exchange rate. In general, market entities have maintained a rational and orderly trading mode. Viewing the recent performance, although faced with a strong U.S. dollar, as the domestic economy has become stable and been recovering, the stability of the RMB exchange rate has become more prominent among the major global currencies. Since July, the multilateral exchange rate has risen steadily.

Second, China's cross-border capital flows are generally stable, demonstrating a relatively balanced development trend. At the beginning of this press conference, we introduced that in the first half of this year, there was a certain amount of surplus in the international receipts and payments via banks and in the foreign exchange settlement and sales by banks. Recently, short-term fluctuations and seasonal changes were seen in several channels. However, the basic equilibrium of cross-border capital flows was maintained, reflecting the robust performance of China's balance of payments structure.

Third, the current account surplus and long-term capital inflows are the fundamentals to stabilize China's cross-border capital flows. On the one hand, the current account maintains a reasonable surplus. In the first quarter of this year, the current account surplus reached $88.9 billion, the highest compared with the same period throughout history, and an increase of 25% over the same period last year. The ratio to GDP stood at 2.1%, which was within a reasonable range. In the second quarter, the trade surplus of goods was relatively high, and the deficit of cross-border travel and other service trade was low. It was estimated that the current account would continue the pattern with 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. China's economy has maintained long-term growth, and China has been continuing to improve its market environment. Our efforts have helped attract capital inflows for direct investment and medium - and long-term asset allocation. From January to May this year, the utilized foreign investment was $87.8 billion, registering an increase of 23% year on year. Investment from overseas central banks and allocated funds tracking international indexes were stable in China's bond market, counterweighing the short-term fluctuations of cross-border capital.

Generally speaking, China has efficiently coordinated epidemic prevention and control with economic and social development. The strong resilience, ample potential, and vast room for maneuver of the Chinese economy have all laid a good foundation for the smooth operation of China's foreign exchange market and provided more support for China to cope with changes in the external environment. Thank you.

China Economic Information Service:

The tightening of monetary policy in major developed economies has been accelerating, significantly impacting global cross-border investment and financing. Against this background, what's your opinion on the changes and trends of the foreign holdings of China's bonds? Thank you.

Wang Chunying:

We have touched upon several issues related to your question, but I'll give more explanation. Recently, we have seen major changes in the international financial market. The exchange rate and interest rates of the U.S. dollar have risen rapidly, coupled with capital outflows from emerging economies. From a global perspective, we have made observation and analysis on a longer-term basis, and we have several ideas to share with you.

First, China's bond market has gradually become an important global cross-border investment destination. In recent years, China's bond market has been opening steadily, and cross-border transactions have become more convenient. China's bonds have been included in the three major international indexes, and the impact and attractiveness of the domestic bond market have improved dramatically. Under this background, at the end of 2021, China attracted nearly $820 billion in cross-border bond investment, accounting for about one third of emerging economies' total external bond investment. It includes the bonds purchased by overseas investors within China and the bonds that domestic entities issued overseas. Both of them have significantly increased or remained active. This is for the stock of the bond. In terms of flow, we expanded the opening up of the securities market in 2017. From 2017 to 2021, the amount of cross-border bond investment funds introduced by China ranked the fourth in the world, following the U.S., Britain, and Japan. After years of development, China has become one of the major destinations for global cross-border bond investment. The recent market fluctuations have not changed this.

Second, from a global perspective, China has been attracting bond investment on a solid footing. The bond market fluctuation is normal. It is normal to have fluctuations in bond investments in countries, whether in developed or emerging economies. For example, there are often fluctuations in the U.S. Treasury market, which is the world's largest treasury market, when some countries reduce their holdings. We have also observed the fluctuations of bond investments in major countries. By comparison, we found that China's fluctuation is much lower than that of many developed and emerging economies. Judging from the composition of foreign investors and the scale of their bonds, institutions like central banks have always held more than half of China's bonds. Meanwhile, a large part of the rest has been the allocation funds tracking international indexes, which have also been relatively stable.

Third, further opening up the bond market will help improve the foreign exchange market's resilience. In recent years, there has been a steady inflow of cross-border capital, such as trade in goods and direct investment. Such capital has contributed to basic surpluses. The opening up of China's bond market has also diversified the participants and capital resources of the foreign exchange market, which helps to improve China's foreign exchange market and strengthen its capacity to withstand various influences.

We have shared some of our analyses and observations in response to your question. In general, China's bonds not only maintained investment diversification, but also serve the need for capital allocation and are supported by the fundamentals. The total size of China's bond market is $21 trillion, and foreign capital accounts for only about 3% of China's bond market. That means there will be more foreign investment in China's bond market. In the long run, we are confident that foreign investors will steadily increase their holdings of RMB bonds. Thank you.

Jiemian News:

How do you evaluate the profit outflow of foreign companies since the beginning of this year? Compared with previous years, will the pressure of profit outflows increase this year? Thank you. 

Wang Chunying:

Each year, the second and third quarters are the peak seasons for profit remittance of foreign companies. Based on the current situation, profit remittance of foreign companies this year has maintained a reasonable, orderly, and generally stable momentum. Its impact on China's cross-border capital flow and supply and demand for foreign exchange has been controllable. I would like to share with you the following respects in this regard. 

First, the current profit remittance of foreign companies matches the scale of China's investment stock. China's business environment has continued to improve in recent years. Foreign investors are confident in the long-term prospects of the Chinese market. More and more multinational companies invest and do business in China and share the benefits of China's economic growth, reform, and opening up. Furthermore, their profits have been growing steadily, so their profit remittance has been increasing accordingly. From 2020 to 2021, the direct investment stock absorbed by Chinese enterprises increased by an average of 14% annually, and the profit remittance went up by an average of 13% annually.

Second, the impact of profit remittance on the country's international balance of payment and foreign exchange market supply and demand is within a reasonable range. Return on investment (ROI) is part of the current account. There are capital inflows and outflows under the categories of trade in goods, trade in service, and ROI, which have jointly ensured the reasonable and balanced surplus pattern of the current account. Meanwhile, the proper and orderly profit remittance has not influenced the overall balance of foreign exchange market supply and demand at home. In addition, benefitting from the growing internationalization of the RMB and its stable value, a considerable proportion of foreign companies' profits are remitted in RMB, which has a relatively small direct impact on the supply and demand of the domestic foreign exchange market. 

Third, profit remittance does not mean withdrawing the investment but has formed a virtuous cycle with the inflow of direct foreign investment. International investors' willingness to invest long-term in China continues to be strong because China's prosperous economic outlook can bring sustainable and stable returns. Besides the newly added investment capital and the inflow of shareholder loans, many foreign companies have reinvested a considerable proportion of their profits in China. Compared with other major economies, the proportion of profits reinvested by foreign companies in China is high.  

I would like to take this opportunity to stress that the SAFE's policies on profit remittance are consistent and continuous. There are policy guarantees for profit remittance of foreign companies as long as they are conducted in accordance with laws and regulations. Thank you. 

China News Service:

Given the global liquidity tightening, the cost for external financing is on the rise. China's outstanding foreign debt fell in the first quarter. How do you see the risk of deleveraging of China's foreign debt? Thank you. 

Wang Chunying:

According to the latest statistics, China's outstanding foreign debt stood at about $2.71 trillion at the end of the first quarter, down $36.4 billion or 1% from the end of the previous year, which is considered to be a mild change. Due to the impact of the Fed faster tightening of monetary policy and various complex external factors, China's foreign debt will maintain a reasonable and orderly development trend for a period in the future. We believe the risk of deleveraging you are concerned about is controllable in general. I'll provide the following aspects to support my judgment.

First, the growth rate of foreign debt is relatively stable. In recent years, the proportion of China's foreign debt in GDP stood at 14%-16%. The growth rate of foreign debt is in line with economic development, and there is no excessive accumulation. During the current round of the Fed's loose monetary policy, there was no continuous and intensive cross-border funding, which means that there was no excessive leverage of foreign debt. So, the risk of deleveraging is controllable in general. As the external environment is being adjusted, the RMB exchange rate has become more flexible with two-way fluctuation. The exchange rate expectation is relatively stable, so the risk of deleveraging foreign debt is low. 

Secondly, China's foreign debt structure has been continuously optimized. The growth of China's foreign debt has been largely attributed to overseas institutions' investment in domestic RMB bonds, most of which require long-term investment demand. The growth of traditional financing foreign debt is relatively slow. All structures of China's foreign debt types, currency, and debt maturity have been improved. Meanwhile, the balance between external assets and liabilities has improved structurally and continuously. Generally speaking, China remains to be a net foreign creditor with all types of external assets exceeding external liabilities by $2 trillion, which means that the net external claims shown on the International Investment Position for the first quarter of this year was $2 trillion. The combined outstanding external debt of banks, companies, and private sectors had reached $2.1 trillion by the end of the first quarter of this year, accounting for 79 percent of China's full-scale outstanding external debt. Private sectors' external credit assets reached $3 trillion, higher than the external debt taken on by them. The credit assets mainly refer to highly liquid assets such as bonds, deposits, and loans. We believe that with the effective adjustments of the foreign exchange market, the private sector including banks and companies will be able to meet debt obligations and strike a balance between external assets and debts. 

Thirdly, the safety indicators of China's external debt remain sound. As a net-saving country, China's current account has maintained a certain scale of surplus. Being the indicators measuring a country's solvency, the external debt ratio, debt ratio, and debt serving ratio were within the safe zone in accordance with international standards in 2021, and much lower than the overall level of developed countries and emerging market economies. Regarding short-term liquidity, China's foreign exchange reserve ranks first in the world at present, with the ratio of short-term external debt to foreign exchange reserve being 45 percent, much lower than the international warning line of 100 percent.

That's all my response to your questions. For the next step, we will strengthen monitoring and analysis of the external debt situation, effectively preventing possible risks. Thank you. 

Bloomberg:

As the Fed tightens monetary policy, both the yen and the euro have devalued. Against such a backdrop, how do you perceive the outlook of the RMB exchange rate in the second half of this year? Thank you.

Wang Chunying: 

As I just mentioned, the RMB exchange rate was generally stable for the first half of this year, with steady development. Regarding the next half year that you inquired about, the RMB exchange rate will stay basically stable on an appropriate and balanced level. Here are the factors that support this conclusion. 

First, China's economic recovery continues to gather steam with major economic indicators improving. Industrial and supply chains remain stable and will continue playing a fundamental role in the consolidation of the RMB exchange rate.

Second, China's foreign trade and foreign investment show resilience. Trade and investment in the real economy will continue to see net inflows of funds, contributing to the basic balance of supply and demand in the foreign exchange market.

Third, market entities' expectations for the exchange rate remain basically stable. They have kept the rational trading model of "Buy low, sell high."

Moreover, China's structure of external assets and liabilities has been continuously optimized. The scale of foreign exchange reserve remains generally stable, continues to be the first in the world, and remains a stabilizer and cornerstone of the national economic and financial security. It's true that the future tendency of the RMB exchange rate will be partly affected by multiple factors, such as foreign exchange supply and demand and international financial markets. And there could be upward or downward fluctuations in the short term. However, the RMB exchange rate will maintain flexibility and two-way fluctuations while staying basically stable on an appropriate and balanced level. Thank you.

CRI:

What efforts has the SAFE made to better manage foreign exchange risks in the first half of this year? How well did they work? What's the next step? Thank you.

Wang Chunying:

The SAFE has actively supported enterprises to manage foreign exchange risks and served the development of the real economy. As part of our efforts to advance stability on the six fronts and security in the six areas, especially keeping foreign trade and market entities stable, we have adopted a set of measures to cut the cost of exchange rate hedging and enhance enterprises' ability to deal with foreign exchange risks with a focus on the micro, small, and medium-sized enterprises. Next, I would like to briefly introduce some of our key tasks.

First, in April, the People's Bank of China (PBC) and the SAFE jointly issued a document encouraging qualified regions to strengthen cooperation between governments, banks, and enterprises. It encouraged exploring and improving the sharing mechanism for exchange rate hedging costs, expanding the government financing guarantee system, and providing guarantees for enterprises in terms of trade financing and exchange rate hedging business. It also instructed the China Foreign Exchange Trade System to waive inter-bank foreign exchange market transaction fees related to foreign exchange derivatives transactions of micro, small and medium-sized enterprises.

Second, in May, the SAFE issued the "Circular on Measures to Further Promote the Foreign Exchange Market to Serve the Real Economy." We introduced innovative foreign exchange options, launched two types of options products, expanded the business scope of jointly handling RMB and foreign exchange derivatives, and supported qualified small and medium-sized financial institutions to better provide exchange rate hedging services for micro, small and medium-sized enterprises. The Ministry of Commerce, the PBC, and the SAFE jointly issued a document requesting all localities to use the special funds for foreign trade development to provide enterprises with public services such as business training and information services in exchange rate hedging.

Third, we continue to increase publicity and training efforts. To make the relatively specialist issue of foreign exchange hedging more understandable and popular, we compiled the 50,000-word "Guidelines on Enterprise Exchange Rate Risk Management," published on our official website on July 1. You can read it on our official website. The guidelines provide a detailed introduction to the neutral connotation of exchange rate risks, the institutional framework of exchange rate risk management for enterprises, the adaptation scenarios of foreign exchange derivatives, and the use of hedging accounting. At the same time, the document provides targeted guidance on the difficulties existing in the hedging of state-owned enterprises and micro and small enterprises. A number of outstanding enterprise cases are included in the guidelines, based on their practices in exchange rate risk management in recent years. While compiling the guidelines, we paid particular attention to using easy-to-understand words. As a result, the readability is excellent. We hope to provide a valuable reference for foreign-related enterprises' exchange rate risk management.

Thanks to the efforts of all parties, in the first half of this year, the foreign exchange derivatives such as forward options, used by enterprises to manage exchange rate risks, reached $755.8 billion, up 29% year on year. The foreign exchange hedging ratio hit 26%, 4.1 percentage points higher than last year. Nearly 17,000 enterprises registered accounts for exchange rate hedging for the first time. Most of these new accounts are micro, small and medium-sized enterprises, especially the micro and small. These "first-time accounts" are of great significance. Only when enterprises get to know exchange rate hedging, and recognize and understand its benefits will they use it further. Therefore, we support the work to push for "first-time accounts."

Next, we will continue to do targeted work. First, we will release the dividends of the exchange rate risk management policy, break through the existing blockages in implementing the policy, and strengthen the policy transmission to financial institutions. We will urge financial institutions to enhance their initiative and professional level of helping enterprises better hedge exchange rate risks. Second, we will continue to support localities where conditions permit to replicate and promote the successful practices of micro, small and medium-sized enterprises in exchange rate risk management. We will use relevant special funds well and implement the policy of fee reductions and interest concessions. Third, we will take the release of the guidelines as an opportunity to continue to increase cooperation, publicity, and training with state-owned assets, commerce, and other departments. We will use our knowledge to enhance enterprises' awareness of exchange rate risk neutrality. We will assist them in establishing effective exchange rate risk management mechanisms.

Just mentioned are the results of our work in the first half of this year and the key direction for our efforts for the second half. Thank you.

Tianmu News:

In recent years, the deficit of China's cross-border trade in services has continued to narrow. How are you responding to this? Will this deficit increase again in the future?

Wang Chunying:

Trade in services covers many aspects, such as logistics, tourism, intellectual property rights, product processing, financial services, computer information services, and other commercial services. Each kind of trade in services is affected by different factors and projects different growth trends. Since the outbreak of the COVID-19 pandemic, China's cross-border tourism has been primarily affected, but other forms of trade in services have recovered quickly. The prominent features are as follows.

First, the volume of China's cross-border trade in services has surpassed the pre-pandemic level. According to the balance of international payments, China's cross-border services trade balance in 2021 recovered to the 2019 level, and the figure climbed 26% year on year in the first quarter of 2022. Recently, the trade balance of tourism has rebounded due to the demand for overseas study and other factors. Other forms of services trade have also seen steady growth. The trade balance surpassed the 2019 level in 2020, registered a year-on-year increase of 41% in 2021, and continued to rise in the first quarter of this year.

Second, the services trade deficit has narrowed. In the first quarter of this year, the trade deficit of China's tourism sector amounted to $29.4 billion, up by 53% compared with the low level of the same period in 2021, but still lower than the $57.6 billion figure in the same period in 2019. Other services trade has reported a surplus for two consecutive quarters, with the figure in the first quarter of 2022 amounting to $12.8 billion. This is the main reason for the country's narrowing services trade deficit.

Third, China's services trade revenue has increased in recent years, reflecting relevant sectors' improved global competitiveness. China's logistics, computer information, and other commercial services have reported increased export revenue. Specifically, the revenue of logistic services started to grow rapidly in the second half of 2020. This is partly due to the high price of international logistic services. Meanwhile, it also showcases the achievements made by China's logistic sector, which has seized the development opportunities. In the meantime, with the integration of China's manufacturing and service sectors and the digital transformation of its service industry, emerging producer services such as those involved in the commerce and computer information sector is adding new momentum to China's services trade.

In general, the revenue and expense of China's services trade have shown a growing trend since the beginning of this year, with revenue increasing faster, further narrowing the services trade deficit. The development pattern of China's services trade will keep upgrading and changing in the next step. As China's services export competitiveness continues to improve, its services trade revenue will keep growing. Gradually, this will further affect China's services trade deficit.

That concludes my answer. Thank you.

Yicai:

How do you view the future trend of China's foreign exchange settlement in the context of the substantial rate hike by the Fed? What impact will it have on China's cross-border capital flows? Thank you.

Wang Chunying:

Thank you for your questions. This is an issue of common concern. For the cross-border capital flows of economies other than the U.S., the unconventional monetary policy adjustment of the Fed is an essential external variable and has received much attention. The last time the Fed released signals about tightening its monetary policy was in 2013, almost a decade ago. During this time, China's economy has made historic achievements and realized a higher level of development and opening up. Currently, we are more confident and prepared to mitigate the impact of such monetary policy adjustment on China's cross-border capital flows. China's foreign exchange market is likely to maintain a stable operation. Let's look at our development in this regard over the past decade.

First, China has a greater comprehensive national strength, which can help it better respond to external shocks. In recent years, China's economic development has become more balanced, coordinated, and sustainable. China's GDP in 2021 was 2.1 times that of 2012, and its proportion in the global economy increased from 11% in 2012 to more than 18%. The country's economic power, science and technology prowess and comprehensive national strength have all reached new levels. Recently, China has effectively coordinated epidemic prevention and control while striving for economic and social development, major macroeconomic indicators have rebounded relatively quickly, and the economy has generally maintained a momentum of recovery and development. In June, the manufacturing purchasing managers' index (PMI) was above the 50-point mark that separates contraction from growth, consumption and investment have continued to rebound, and economic growth momentum has increased. With the implementation of various pro-growth policies, China's economy will gradually recover and maintain steady growth in the future.

Second, China's balance of payments is more stable, which can better ensure the stability and security of cross-border capital flows. In recent years, the ratio of China's current account surplus to GDP has been around 2%, and always within a balanced and reasonable range. China stands out among major economies in the world in the balance and stability of its international payments. In addition, China's external asset-liability structure has been gradually optimized and the scale of foreign exchange reserves ranks first in the world; the private sector holds nearly 6 trillion dollars in external assets, and the resources to resist external shocks are more diverse and abundant; foreign debt growth matches economic growth, and the stability has been improved. All the foreign debt indicators are within the internationally recognized safety limit, and the risks are generally controllable.

Third, China has promoted a higher level of opening up, which can better expand the depth and breadth of the foreign exchange market. China's business environment has gradually improved, the negative list for foreign investment has been implemented, and more foreign companies have come to invest and start business in China. Meanwhile, the two-way opening-up of China's financial market has increased the types of entities in the foreign exchange market and the types of sources of funds. The depth and breadth of the foreign exchange market have continued to expand, and it is more capable of absorbing or smoothing out the fluctuations in cross-border capital flows, which is conducive to promoting the overall equilibrium of cross-border capital flows.

Fourth, the foreign exchange market adjustment mechanism becomes more mature, which can better play the role of the RMB exchange rate as an automatic stabilizer for adjusting the balance of payments. In recent years, China has pushed ahead with its market-based RMB exchange rate formation mechanism. The RMB exchange rate has been floated both ways, and its flexibility has been enhanced, which can release external pressures in a timely and effective manner. Moreover, as mentioned just now, the transactions of market entities remain rational and orderly, and expectations are generally stable. Enterprises are also becoming more risk-neutral in exchange rates and can better adapt to two-way fluctuations in exchange rates. Therefore, at present, we are more capable of preventing and defusing the risk of cross-border capital flow through market-oriented means.

In addition, we will follow the impact of the Fed's monetary policy adjustment on the US dollar interest rate, exchange rate, and the international financial market. In fact, the Fed is faced with a dilemma between controlling inflation and stabilizing the economy. We will keep up with how the Fed adjusts the monetary policy in the future. We will further coordinate development and security, pay close attention to external changes, assess the impact in a timely manner, and at the same time promote reform and opening up in foreign exchange in an orderly manner to prepare for effective prevention and mitigation of external shocks. Thank you.

Shou Xiaoli:

Thank you, Ms. Wang and friends from the press. That's all for today's press conference.

Translated and edited by Yang Xi, Li Huiru, Qin Qi, Liu Sitong, Zhang Rui, Wang Wei, Zhu Bochen, Zhang Junmian, Wang Yiming, He Shan, Yan Xiaoqing, Ma Yujia, Zhou Jing, Wang Qian, Xu Xiaoxuan, David Ball, Tom Arnsten, and Jay Birbeck. In case of any discrepancy between the English and Chinese texts, the Chinese version is deemed to prevail.