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China's SAFE: RMB exchange rate is expected to be basically stable

July 25, 2023

The yuan's exchange rate is expected to be 'basically stable,' Wang Chunying, deputy director of China's State Administration of Foreign Exchange and spokeswoman, said at a briefing in Beijing on July 21. "Recently, we have conducted relevant research among banks, enterprises and market players, and in the research, people's views on the exchange rate are relatively rational and objective, and they generally believe that the RMB has a long-term stable foundation." She further said that since the beginning of this year, the one-year risk reversal index of the options market has generally shown a downward trend and remained relatively low, indicating that the market has not formed a consistent and sustained depreciation expectation of the RMB exchange rate.

China's official recently announced an increase in cross-border financing macro-prudential adjustment parameters, Wang Chunying said that after the increase, the expansion of overseas financing space will increase cross-border financing sources, expand capital inflows, help increase domestic liquidity, especially the liquidity of foreign currency, balance the supply and demand of the foreign exchange market, and play a role in stabilizing the expectations of the foreign exchange market. "This is also a policy that the market welcomes, and I see that many companies are very concerned about it and are very happy to see the coefficient increase."

Wang Chunying stressed that in the past, we have coped with multiple rounds of external shocks, accumulated experience and improved regulation tools and measures. Tools are meant to be used, and we will adhere to comprehensive policies, with stable expectations as the core, and take different measures according to the actual situation, so as to provide a stable environment and expectations for the market, and facilitate foreign-related economic entities to carry out business activities and investment activities.