China’s foreign exchange market got off to a good start in the first quarter of 2023, with a stable exchange rate of the renminbi, steady market expectations, and balanced supply and demand, an official said Friday.
The yuan’s exchange rate has seen two-way fluctuations within a reasonable range and a slight appreciation since the beginning of the year, Wang Chunying, deputy head of the State Administration of Foreign Exchange, told a press conference.
Since mid-March, China’s major economic indicators have shown an upward trend, and the tightened monetary policies of developed economies have been softened, which rendered the yuan stable and strong against a basket of currencies, Wang said.
As of Thursday, the Chinese yuan had strengthened by 1 percent against the U.S. dollar since the end of 2022, she added.
Indicators in the forex market also showed that expectations from market entities were steady with more rational trading, Wang said.
Chinese banks saw a net forex settlement deficit of 15.3 billion U.S. dollars in the first quarter, data from the administration showed.
Wang noted that the deficit is mild and in accordance with the appreciation of the RMB, adding that the balance between supply and demand in the forex market has been further consolidated.
Concluding that China’s forex market has solid foundations to maintain steady operations with the support of sound long-term economic fundamentals, Wang said the bright prospect of the country’s growth is also an appeal for foreign capital.
China’s current account saw steady capital flows in the first quarter, Wang said, adding that trade in goods posted a relatively high inflow, and trade in services saw an increasing outflow as expenditure in cross-border tourism gradually recovered.
The improvement in the quality and efficiency of trade in goods and services has contributed to keeping the current account surplus within a reasonable range, ensuring the smooth functioning of the forex market, Wang said.
Foreign direct investment into the Chinese mainland in actual use expanded 4.9 percent year on year to 408.45 billion yuan (about 59 billion U.S. dollars) in the January-March period, according to the Ministry of Commerce.
China has a complete infrastructure, stable system of industrial and supply chains, world-leading manufacturing capacity, high-quality labor force and vast consumption potential, providing a good foundation for the development of multinationals, while new growth points such as scientific innovation and wider opening-up in the service sector continue to emerge, Wang said.
As China’s economic recovery gains momentum and market expectations rise, foreign investors are increasingly viewing yuan-denominated assets as more investment-worthy. In January, net overseas capital inflow into shares traded on the Shenzhen and Shanghai bourses hit a single-month record of 131.146 billion yuan, more than the whole of 2022.
RMB assets remain highly attractive as they have stable investment returns and help diversify investment portfolios, Wang said. As per her predictions, overseas investors will increase their holdings in China’s securities market steadily in the future.
Wang said the country will stick to high-level opening-up by optimizing the business environment, reducing restrictions on foreign investment access and improving services offered to foreign-invested enterprises. She added that the administration will facilitate cross-border investment and financing.
There is still large room for foreign capital inflow with the economic recovery and the promotion of financial opening-up, Wang said.