General

Since the beginning of this year, due to the adjustment of monetary policies in developed economies, the situation of global cross-border capital flows has undergone major changes. Compared with the large-scale capital outflows in some economies, my country's cross-border capital flows still maintain good stability and security in the context of a severe and complex external environment. In particular, with the implementation of various current growth stabilizing policies, China's economy continues to recover, and it is more capable of absorbing or smoothing fluctuations in cross-border capital flows, and promoting the overall balance of cross-border capital flows.

The domestic market is attractive to foreign capital

"In the first half of the year, my country's cross-border capital flow was generally stable, showing a relatively balanced development trend." Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, said at a press conference held by the State Council Information Office recently. Statistics from the State Administration of Foreign Exchange show that in the first half of 2022, from the data of foreign exchange settlement and sales by banks, in terms of US dollars, banks settled foreign exchange of USD 1,328.9 billion and sold foreign exchange of USD 1,243.6 billion, with a surplus of USD 85.2 billion in foreign exchange settlement and sales; In terms of payment data, denominated in US dollars, the foreign-related income of banks on behalf of customers was US$3,160 billion, and the external payment was US$3,076.6 billion, with a surplus of US$83.4 billion in foreign-related receipts and payments. Both of them showed a certain size of surplus. Recently, there have been short-term fluctuations and seasonal changes in individual channels, but the overall pattern of cross-border capital flows is basically balanced.

Bai Ming, deputy director of the International Market Research Institute of the Academy of Commerce of the Ministry of Commerce, said that at present, my country's cross-border capital flow is stable. On the one hand, my country's management of cross-border capital is gradually in place. Affected by factors such as the new crown pneumonia epidemic, the Russian-Ukrainian conflict, and commodity price fluctuations, the prices of many investment products have been unstable and the market conditions have changed greatly. This further shows China's advantage as a "safe haven" for global funds, and the risk premium is relatively small. .

Relevant experts said that since the beginning of this year, my country has adhered to the general principle of seeking progress while maintaining stability. The policy of stabilizing growth has continued to exert force, and the support for the real economy has also increased, which will help stabilize the fundamentals of the economy and improve the long-term development prospects of my country's economy. , coupled with my country's continuous improvement of the market environment, these have continued to attract direct investment and capital inflows for the purpose of medium and long-term asset allocation. The latest data released by the Ministry of Commerce shows that from January to June, my country's actual use of foreign capital was 723.31 billion yuan, a year-on-year increase of 17.4% on a comparable basis.

"Long-term capital inflows and the current account surplus are still the fundamentals for stabilizing my country's cross-border capital flows." Wang Chunying said that in the first quarter of this year, the current account surplus was 88.9 billion US dollars, the highest in history, an increase of 25% over the same period last year, and the same as GDP. The ratio is 2.1%, which is in the reasonable range. In the second quarter, the surplus in trade in goods was relatively high, and the deficit in trade in services such as cross-border travel was running at a low level. It is preliminarily judged that the current account will continue to maintain a reasonable surplus.

In addition, the reporter learned that in recent years, my country has been insisting on promoting the reform of the market-oriented formation mechanism of the RMB exchange rate. The RMB exchange rate has a two-way floating and enhanced flexibility, which can release external pressures in a timely and effective manner. Moreover, the transactions of market players remained rational and orderly, and expectations were generally stable. Enterprises are also becoming more risk-neutral in exchange rates and can better adapt to two-way fluctuations in exchange rates. Therefore, at present, there are more conditions to prevent and resolve the risk of cross-border capital flow through market-oriented means.

Maintain the stability of cross-border capital flows from various aspects

At the end of July, the Federal Reserve announced another 75 basis points of interest rate hikes. This is the fourth time the Fed has raised interest rates this year, with a cumulative rate hike of 225 basis points. The sharp rise in interest rates prompted the dollar index to continue to rise, recently hitting a 20-year high. Affected by this, non-US currencies such as the euro, the yen, the pound, and the Australian dollar continued to depreciate to low levels during the year.

What impact does the Fed's sharp interest rate hike have on the stability of my country's cross-border capital flows? Industry insiders generally say that the Fed's rate hike has limited impact on China's cross-border capital flows. In recent years, my country's financial market has been steadily opened to the outside world, and the foreign exchange market has continued to expand in depth and breadth. For example, the number of entities has continued to increase, which has enriched the types of sources of funds, and is more capable of absorbing or smoothing the fluctuations of cross-border capital flows, which is conducive to promoting cross-border capital flows. The overall balance of external capital flows can better cope with changes in the external environment.

Bai Ming said that the Fed's continuous and substantial interest rate hikes will have a certain impact on the world and China, but relatively speaking, my country's market volatility is small, and the overall stability is stable. The international market is optimistic about China's economic prospects, and it will not be because of This spread gives up such a good investment market in China.

"China's economy has led the global recovery and has attracted foreign capital inflows, which will partially offset the pressure of domestic capital outflows. At the same time, benefiting from the strong export performance, China's foreign exchange reserves have grown steadily, and the capital market's stable expectations for the RMB exchange rate have been formed, which is also conducive to Hedge the impact of the Fed's interest rate hike on China's foreign exchange holdings," said Cheng Shi, chief economist at ICBC International.

Wang Chunying said that the impact of the Fed's monetary policy adjustment on the US dollar interest rate and exchange rate, as well as the impact on the international financial market, still requires further attention. In fact, the Fed is also faced with a dilemma between controlling inflation and stabilizing the economy. The strength and rhythm of the Fed's monetary policy adjustment will need to be closely watched in the future. "We will further coordinate development and security, pay close attention to external changes, assess the impact in a timely manner, and at the same time promote the reform and opening up in the field of foreign exchange in an orderly manner to prepare for effective prevention and mitigation of external shocks," Wang Chunying said.

In the future, in order to better maintain the stability of my country's cross-border capital flow, Bai Ming suggested that first, my country should launch more investment products, so that foreign investors' funds in China have more places and reasonable returns; The third is to speed up a series of reforms to improve China's business environment and increase my country's attractiveness to overseas funds.