Source: China Business News Network
From April to early May, the RMB exchange rate adjusted rapidly. However, judging from the latest data released by the State Administration of Foreign Exchange, as a measure of China's total cross-border capital flow, banks' foreign exchange settlement and sales and banks' foreign-related receipts and payments on behalf of customers continued to have a surplus pattern, with a surplus of US$19 billion in April respectively. And 16.23 billion US dollars, the overall situation of cross-border capital flow is stable.
Wu Dan, a researcher at the Bank of China Research Institute, believes that in terms of details, cross-border capital flows under China's current account and direct investment continue to be in surplus, and the balance of payments pattern remains stable and balanced. First, the current account surplus increased year-on-year, mainly contributed by the surplus in foreign exchange settlement and sales of trade in goods. The surplus of foreign exchange settlement and sales by banks under the current account item for the month was US$15.489 billion, much higher than that of the same period last year; the cumulative surplus from January to April was US$75.643 billion, an increase of 8.02% year-on-year; the surplus of foreign exchange settlement and sales under trade in goods for the month was US$21.479 billion, From January to April, the cumulative surplus was US$99.076 billion, a year-on-year increase of 5.45%. Second, foreign exchange settlement and sales and foreign-related receipts and payments under direct investment continued to have a surplus, and foreign direct investment was still showing a net inflow. In recent years, the inflow of foreign direct investment into China has continued to increase. In 2021, the annual net inflow of direct investment under the balance of payments will reach US$205.9 billion, and the foreign exchange settlement and sales of direct investment will have a surplus of US$75.724 billion. The surplus in direct investment was US$75.724 billion, the highest in the past seven years. From January to April this year, the cumulative surplus of foreign exchange settlement and sales of direct investment was US$15.698 billion, and the cumulative surplus of foreign-related receipts and payments was US$35.88 billion, both of which exceeded the level in 2017, showing a net inflow trend. At the same time, the fluctuation of foreign exchange settlement and sale of short-term cross-border securities investment has increased, but it has not affected the general direction of foreign investors to increase their holdings of RMB assets.
In recent years, with the steady progress of China's financial market opening to the outside world, short-term cross-border investment and financing activities such as securities investment have become more active. Affected by the conflict between Russia and Ukraine, the deficit in foreign exchange settlement and sales by banks under securities investment in March was US$10.08 billion. In April, it recovered to a value of US$332 million, but there was still a deficit of US$22.95 billion in foreign-related receipts and payments by banks on behalf of customers. The depreciation trend constitutes a certain degree of influence. However, judging from the changes in RMB financial assets held by overseas institutions, there has been no major adjustment in the holding structure of RMB assets by foreign institutional investors.
It is worth noting that the reduction of foreign holdings of domestic stock assets this year mainly occurred in March after the escalation of the situation in Russia and Ukraine, but the holdings are still at a high level compared with before 2020. At present, China's foreign exchange market is becoming more standardized and mature, and there are sufficient conditions and foundations to adapt to changes in the external environment. The international situation is complex and changeable. The US dollar index continues to strengthen under the Fed's monetary tightening policy, the Sino-US interest rate gap is inverted, and major currencies such as the euro and the yen have depreciated against the US dollar, and the RMB exchange rate has also adjusted accordingly. As China's foreign exchange market becomes increasingly standardized and mature, the two-way volatility of the RMB exchange rate has become more flexible, and market expectations have become more rational.
Moreover, the International Monetary Fund (IMF) recently further increased the weight of the renminbi in the Special Drawing Rights (SDR) basket, from 10.92% to 12.28%, which is second only to the US dollar and the euro. Guan Tao, Global Chief Economist of BOCI Securities, believes that as long as China continues to effectively control the epidemic, coupled with the advance of macroeconomic policies and timely reinforcement, the prospects for economic recovery are bright, market confidence is restored, and the attractiveness to foreign capital can remain at a high level. level, the RMB exchange rate will also regain strong support.
