State Administration of Foreign Exchange: There are foundations and conditions to adapt to this round of Fed policy adjustments

　　China News Service, April 22nd. On the afternoon of the 21st, at the press conference on the foreign exchange receipts and payments data for the first quarter held by the State Council Information Office, Wang Chunying, deputy director of the State Administration of Foreign Exchange and spokesperson, said that an economy’s balance of payments is not a problem. In terms of cross-border capital flows, the Fed's interest rate hike is indeed an important external variable, but the fundamental factor is its own macro fundamentals and market fundamentals.

As far as China is concerned, the resilience of China's foreign exchange market has been increasing in recent years, and it has the foundation and conditions to adapt to the current round of Fed policy adjustments.

　　Wang Chunying mentioned that the Fed's monetary policy tightening is accelerating, and the domestic and foreign interest rate differentials have also changed. We have been concerned about this issue.

From historical experience, the Fed's monetary policy adjustments, especially interest rate hikes, usually have spillover effects on cross-border capital flows across countries.

However, it is mainly some economies with weak fundamentals and weaknesses that have been hit hard.

　　She cited, for example, that since the 1980s, some economies have experienced domestic recessions, with relatively high inflation levels, relatively simple economic structures, and relatively weak anti-risk capabilities; some economies have deteriorated in their balance of payments, with large current account deficits. , the foreign exchange reserves are insufficient; there is another situation, the economic development is particularly dependent on external financing, the scale of external debt is high, and the debt repayment pressure is great.

These economies whose domestic fundamentals are not sound enough, even if they follow the Fed to raise interest rates and raise their domestic interest rates significantly, it will be difficult to absorb more capital inflows or prevent capital outflows.

　　Wang Chunying believes that in recent years, the resilience of China's foreign exchange market has continued to increase, and it has the foundation and conditions to adapt to the current round of Fed policy adjustments.

First of all, the domestic economic operation is generally maintained within a reasonable range, and the economy is relatively resilient.

Since the beginning of this year, my country has adhered to the general principle of seeking progress while maintaining stability, continued to exert efforts in the policy of stabilizing growth, and increased efforts to support the real economy, all of which have helped stabilize the fundamentals of the economy.

At the same time, my country's economic structure is also continuously optimized, and the driving trend of innovation is very obvious. The fundamentals of the economy will not change in the medium and long term, which will continue to attract various types of funds to invest in the domestic market.

　　Second, the basic surplus in the balance of payments, such as the current account and direct investment, will still maintain a certain scale, which will play a role in stabilizing cross-border capital flows.

Let's start with the current account. China is the only country in the world that has all the industrial categories recognized by the United Nations. The transformation and upgrading of the manufacturing industry is also continuing to advance, and the diversification of trading partners has also made positive progress.

Therefore, there is a solid support for the trade in goods to maintain a surplus.

As we all know, due to the impact of the epidemic, the trade in services, which is mainly based on travel expenditure, has also maintained a low level of deficit.

Our preliminary estimate is that the current account surplus in the balance of payments increased year-on-year in the first quarter of this year, and the surplus pattern will remain throughout the year.

　　Regarding direct investment, in the context of adhering to a high level of domestic opening up and continuously optimizing the business environment, my country will rank second in the world in attracting foreign investment in 2021, and foreign capital will have a relatively strong willingness to invest in China.

Coupled with the steady and orderly foreign investment of domestic entities in recent years, we expect that there will be a net inflow of funds under direct investment.

Therefore, the basic surplus of the current account, direct investment and other basic balance of payments will maintain a certain scale, and will continue to play a role in stabilizing cross-border capital flows.

　　Third, the structure of my country's external assets and liabilities has been optimized, and the risk of external debt repayment is relatively low.

As of the end of last year, the ratio of China's full-scale external debt to GDP was 16%, lower than that of major developed and emerging economies in the world, indicating that my country's external debt level is not high.

Moreover, the structure of foreign debt is also being continuously optimized.

As of the end of last year, the proportion of financing foreign debts such as deposits and loans, trade financing, etc., dropped by 13 percentage points compared with the end of 2016, when the previous round of foreign debt deleveraging was relatively strong.

In recent years, the growth of my country's external debt has mainly come from the increase in foreign investment in Chinese bonds.

At the same time, China has maintained its net foreign assets for a long time.

You can see from the data released by us that at the end of last year, China's foreign net assets were close to 2 trillion US dollars, which was at a relatively high level.

my country's foreign exchange reserve assets ranks first in the world, and the scale of private sector assets is also increasing, which can well adapt to changes in external liquidity.

　　Fourth, the exchange rate plays the role of an automatic stabilizer for adjusting the balance of payments, and the maturity of the foreign exchange market continues to improve.

In recent years, the flexibility of the RMB exchange rate has been continuously enhanced, and external pressures have been released in a timely and effective manner, market expectations have remained stable, and transactions in the foreign exchange market have been rational and orderly.

, which is also a historical high.

Enterprises usually choose to settle foreign exchange, and the rational trading behavior of "settlement at highs and buying foreign exchange at lows" can effectively suppress some exchange rate adjustments and contribute to the overall stability of the RMB exchange rate and the smooth operation of the foreign exchange market.

　　In general, despite the complex and changeable factors of the Fed's monetary policy adjustment in the future, under the support of the above-mentioned basic, stable and fundamental factors, China's foreign exchange market is expected to continue its stable operation, and cross-border capital flows will show a reasonable and balanced development. pattern.

Of course, the foreign exchange management department will also adhere to the bottom-line thinking,

, evaluate the operation of China's foreign exchange market in real time, and effectively maintain the stability of the foreign exchange market.

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