(Yicai Global) Nov. 23 -- Developing countries need to manage cross-border capital flows to create a more fair and equitable international environment, according to the deputy administrator general of China's State Administration of Foreign Exchange.
"This is to address the exogenous problems of capital flows to developing countries," Lu Lei said at the 2022 Financial Street Forum yesterday. "The international community should respect the degree and mode of opening-up chosen by countries according to their conditions and pay attention to the policy spillover from major developed economies."
China's foreign exchange management authorities are striving to improve the foreign exchange management system and mechanism to adapt to the current development pattern, Lu noted, adding that they have also been "prudent in macro aspects and supervisory in micro aspects" in the foreign exchange market. The goal is to maintain the sound operation of the foreign exchange market and national economic and financial security, he said.
Macro regulations focus on expectation management and fine-tuning, while micro regulations focus on compliance and to ensure that those who have fulfilled their duties are not held accountable. In the framework that integrates the two, China has maintained the proper operation of the foreign exchange market in many challenges, proving the market's resilience, Lu pointed out.
The enhanced market resilience also provides a good foundation for strong and effective cross-border capital flow management, Lu added.
Despite the volatility in global financial markets, Chinese yuan-denominated financial assets still have strong international attractiveness and relatively independent earnings performance globally thanks to China's stable and recovering economy and sound balance of payments structure, Lu said.
With less than 5 percent of foreign investment in China's stock and bond markets, there is still potential for global capital to increase its allocation to China's financial assets, he noted.
Editors: Tang Shihua, Futura Costaglione