By tf-lawyer.com On October 22, the State Council Information Office held a press conference to discuss China’s foreign exchange income and expenditure data for the first three quarters of 2024. Li Hongyan, the Deputy Director of the State Administration of Foreign Exchange, emphasized the resilience of China’s foreign exchange market in the face of changing external conditions, noting that recent trends have shown signs of stabilization and improvement.
Li pointed out that the external environment has been complex and fluctuating this year, with major developed economies making repeated adjustments to their monetary policy expectations, leading to ongoing volatility in international financial markets. Meanwhile, China’s domestic economy has remained stable and has shown progressive growth. She highlighted three key observations regarding the foreign exchange market:
First, the renminbi (RMB) exchange rate has remained generally stable amidst two-way fluctuations. The exchange rate is primarily determined by the market, and fluctuations—both upward and downward—are normal within a market-driven framework. Since the beginning of the year, the RMB exchange rate against the U.S. dollar has seen a slight depreciation of 0.3%. There have been periods of both declines and increases, all aligning with changes in the domestic and international environments. Importantly, in comparison to other currencies, the RMB’s performance in the global foreign exchange market has been relatively strong. For instance, while the U.S. dollar index has risen by 2.3%, the euro and yen have depreciated against the dollar by 1.7% and 5.9%, respectively, and the emerging market currency index has dropped by 6.3%, indicating that the RMB’s fluctuations are both normal and moderate.
Second, market expectations and trading have remained rational and orderly. Indicators from the foreign exchange forward and options markets show that there have been no significant expectations for either appreciation or depreciation of the RMB this year, and overall market trading remains measured. Recently, the RMB’s exchange rate has shown both upward and downward movements with increased elasticity. Based on their cross-border trade and investment financing needs, entities such as businesses have taken advantage of favorable market conditions for foreign exchange transactions, resulting in a 14% increase in the total volume of foreign exchange transactions in September compared to August. Moreover, there has been a growing awareness among enterprises regarding exchange rate risk neutrality; the signing of forward contracts in August and September showed month-over-month increases, indicating businesses are proactively managing currency risk to adapt to market fluctuations.
Third, the international balance of payments has largely maintained a basic equilibrium. The current account continues to show a reasonable-sized surplus. In the first half of this year, China’s current account surplus reached $93.7 billion, accounting for 1.1% of the GDP, which remains within a reasonable range. Notably, the goods trade continued to maintain a significant surplus, playing a vital role in stabilizing cross-border capital flow; the services trade deficit has largely returned to pre-pandemic levels. Preliminary statistics indicate that the current account surplus remained at a reasonable level in the third quarter as well. Under the capital account, cross-border capital flows have become more balanced recently. There has been an increase in foreign investment in China, with stable inflows into domestic bonds amounting to over $80 billion in net holdings in the first three quarters; the situation for foreign investment in domestic stocks has improved notably, and changes in foreign debt have remained stable. Meanwhile, domestic entities are conducting foreign investments in an orderly manner, with steady growth in both direct and securities investments.
Li stressed that, overall, the maturity and intrinsic resilience of China’s foreign exchange market have been continually increasing, significantly enhancing its capacity to withstand changes in the external environment, thereby providing strong support for the overall stability of foreign exchange income and expenditure this year.
