Pan Gongsheng: Confident, Conditional, and Capable of Maintaining the Stable Operation of China's Foreign Exchange Market Cross border | Foreign Exchange Market | China
At the 14th Lujiazui Forum held today, Pan Gongsheng, Vice President of the People's Bank of China and Director of the State Administration of Foreign Exchange, said, "Over the years, we have accumulated a lot of experience in responding to external shocks, and the macroeconomic prudential policy tools in the foreign exchange market have become more abundant. We have the confidence, conditions, and ability to maintain the stable operation of China's foreign exchange market."
He introduced that since 2023, China's foreign exchange market has remained generally stable, with cross-border fund flows shifting from a high surplus at the beginning of the year to basic equilibrium. Foreign exchange reserves have steadily increased, and the RMB exchange rate has remained basically stable at a reasonable equilibrium level. Since the middle of April, influenced by various internal and external factors, especially the US dollar index, driven by the US debt ceiling problem, the risk problem of small and medium-sized banks, and the expectation of the Federal Reserve to raise interest rates, has strengthened since the middle of April. At the same time, coupled with the unstable foundation of domestic economic recovery, there have been some fluctuations in the RMB exchange rate, but the overall operation of the foreign exchange market is stable. The expected exchange rate of the RMB and the relative stability of cross-border capital flows in China.
Pan Gongsheng believes that looking forward, the stable operation of China's foreign exchange market still has a good foundation. One is that the overall operation of the Chinese economy remains stable with an upward trend, while the US economy may face a mild recession, and the economy is basically supported by the RMB exchange rate. Secondly, as the Federal Reserve's interest rate hike cycle approaches its end, it is difficult for the US dollar to sustain its strength, and the spillover effects are expected to weaken. Overall, China's foreign exchange market will have the conditions to maintain a relatively stable operating state.
He stated that after years of reform and development, the operation of China's foreign exchange market has gradually shown new characteristics in recent years: the market has shown strong resilience, market entities have become more mature, trading behavior has become more rational, and the level of cross-border use of the renminbi as a hedging tool has significantly increased, which has also greatly reduced exchange rate risk exposure. Moreover, foreign exchange market regulators are more calm, composed, mature, and experienced when facing market changes.
