(Yicai Global) Nov. 22 -- Future changes in the external macro environment will only make it easier for China’s foreign exchange market to run steadily, the director of the State Administration of Foreign Exchange said.

Major developed countries are at greater risk of an economic recession and inflation is still higher than the target level, so their monetary policies will generally remain tight, Pan Gongsheng, who is also vice governor of the People’s Bank of China, said yesterday at the Financial Street Forum 2022 in Beijing.

Although the US dollar is likely to stay high in the short term, the driving forces behind the appreciation are no longer as strong and the cycle of a rising greenback is likely to come to an end, he said.

The fundamentals for the long-term, good prospects of the Chinese economy will not change, he said. Improvements in Covid-19 policies will balance epidemic control with economic and social development more efficiently so as to further fuel growth, he added.

Financial authorities are issuing a number of policies to support real estate regulators and local governments in improving housing demand, keeping financing in the property market stable and orderly, reducing risks as well as stabilizing market expectations and boosting confidence. These policies are bringing about positive results, Pan said.

China’s interest rates and foreign exchange rates are independent from each other, which enables yuan-denominated bonds to effectively diversify risks in global assets allocation, Pan said. As bonds in other major countries see rising yields and dropping prices, yuan bonds are one of the few financial assets in the world with stable prices.

Yuan assets have increasingly become a safe haven in recent years, Pan said. Unlike bonds in other emerging market, yuan bonds are a quasi-safe asset and are more like bonds in developed countries in terms of risks and returns.

Editor: Kim Taylor