Big Foreign Exchange Alliance: China's State Administration of Foreign Exchange does not follow the old path of capital controls

According to reports, the countryforeign exchangeWang Chunying, spokesperson for the State Administration and Director of the International Balance of Payments Department, stated that overall, the pressure of cross-border capital outflows from China has significantly eased in the first quarter of this year, and the supply and demand of foreign exchange are tending towards a basic balance.
　　
Wang Chunying pointed out that in the first quarter of this year, China's foreign exchange balance mainly showed a significant decrease in the deficit of bank settlement and sales of foreign exchange and foreign-related payments;The supply and demand of foreign exchange are gradually approaching a basic balance;The year-on-year foreign exchange sales rate has significantly decreased, and the scale of foreign exchange financing for enterprises has rebounded;The foreign exchange settlement rate has increased year-on-year, and personal domestic foreign exchange deposits have shifted from rising to falling;Characteristics such as a decrease in the bank's forward foreign exchange settlement and sales deficit.
Wang Chunying stated that the improvement in cross-border capital flows in the first quarter is closely related to changes in the market environment. Recently, in China, the stabilization of the economy has boosted market confidence, reflecting the fundamental role of economic fundamentals, while the external environment, especially the US dollar exchange rate, is relatively stable.
In addition, China will continue to be one of the most competitive and attractive destinations for long-term capital overseas. The opening up of the financial market to the outside world will be further deepened, China's current account will continue to have a surplus, and foreign exchange reserves will remain abundant, with the ability to maintain stable foreign exchange operations. With the steady promotion of the market-oriented formation mechanism of the RMB exchange rate, the elasticity of the RMB exchange rate will be further enhanced, which is conducive to promoting the inflow and outflow of cross-border capital flows and two-way fluctuations in China. These are also reasons for the improvement of the cross-border capital flow situation.
In terms of foreign exchange management, Wang Chunying stated that there are several basic connotations of foreign exchange management policies: firstly, the "open window" will not be closed again. China's foreign exchange management will not go back to the old path of capital control. Secondly, we will prudently and orderly promote the opening of China's capital account. Thirdly, establish a macro prudential management and micro market supervision system for cross-border capital flows, and maintain a healthy, stable, and benign foreign exchange market order. Fourth, further improve the exchange rate formation mechanism and enhance exchange rate flexibility.
In terms of the trend of the RMB/USD exchange rate, Wang Chunying also stated that in the long run, the exchange rate is essentially determined by economic fundamentals, and China's economic fundamentals continue to support the RMB exchange rate to maintain basic stability at a reasonable and balanced level. But the short-term trend may be affected by expectations, financial market emergencies, etc. It is normal for it to appreciate or depreciate in a relatively short period of time.
Regarding the impact of the Federal Reserve's interest rate hikes on cross-border capital flows in China, Wang Chunying believes that the effects of the Fed's three interest rate hikes will gradually weaken because2015Compared to the first interest rate hike by the Federal Reserve at the end of the year, the current domestic economic operation is more stable, the supply and demand situation in the foreign exchange market has significantly improved, and the expectation of RMB depreciation against the US dollar has greatly weakened. Recently, this indicator has been relatively high in both domestic and international markets2015End of year and2016At the end of the year, there was a significant decline, indicating that the current expectation for the RMB exchange rate is trending towards stability.
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