China’s First-Half Forex Stayed Steady as Market Opened, Matured, SAFE Says
Xu Wei
DATE:  Jul 17 2020
/ SOURCE:  Yicai
China’s First-Half Forex Stayed Steady as Market Opened, Matured, SAFE Says China’s First-Half Forex Stayed Steady as Market Opened, Matured, SAFE Says

(Yicai Global) July 17 -- China's foreign exchange balance stayed generally stable in the first half, Wang Chunying, a spokesperson for the State Administration of Foreign Exchange, said at a news conference today, The forex market showed quite high resilience and anti-risk abilities as its openness and maturity grew, she added.

Effective Covid-19 prevention and control measures, the resumption of production, a policy of expanded opening-up and maturity of the foreign exchange market will continue to play a role, Wang said, and cross-border capital flows should thus maintain a fairly stable development trend in the second half, she stated.

China’s overseas currency reserves stood at USD3.11 trillion at the end of last month in a USD4.4 billion rise on last year’s end. Their balance swelled by USD10.6 billion in June in the third monthly jump in a row. Supply and demand were basically balanced in the half, and changes mainly stemmed from exchange rate and asset price changes, she noted.

China's pandemic prevention and control has swiftly curbed the coronavirus’ spread and been key in stabilizing and enhancing market confidence. The resumption of production has sped up, and the support of monetary and fiscal policies has steadily risen. China’s economic growth flipped from negative to positive in the second quarter, main indicators returned to growth, and domestic fundamentals had clear advantages that laid the foundation for a sustained second-half recovery.

China has constantly enhanced its business environment and opened wider in recent years, which has well paved the way to lure foreign investment. Greater flexibility of the yuan exchange rate benefits overall expectations of stability and promotes rational trading and the balance of supply and demand in the forex market. The exchange rate has been instrumental in this regard.

Global direct investment has generally lagged this year under the coronavirus cloud, but China’s use of foreign capital in the second quarter rose 8.4 percent yearly. The opening of the domestic capital market has eased foreign investment. Overseas investors raised their net holdings of domestic securities by USD72.9 billion in the first half, of which their local bond holdings jumped by USD59.6 billion, while their China stock portfolios climbed by USD13.3 billion, SAFE statistics show.

Editor: Ben Armour

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Keywords:   Forex Exchange,SAFE,Foreign exchange reserve