(—eighth part of the “China in the past decade” series)
Since the 18th National Congress of the Communist Party of China (CPC), China has moved further toward high-quality development, and its economy has opened further to the outside world, as a result, much progress has been made in the country’s work to reform, develop and stabilize the foreign exchange market.
The international balance of payments has maintained its basic equilibrium and become more stable, demonstrating the progress in China’s efforts to foster a new development paradigm. China’s economic development is more balanced, with the surplus of its current account to the GDP within a proper range. Cross-border trade and investment are more dynamic, cross-border balance of payments enjoys relatively rapid growth, and the RMB exchange rate is more flexible, which has served as an automatic stabilizer in adjusting the international balance of payments.
China’s capital account is steadily opening and enjoys relatively high convertibility. Specifically, direct investment is basically convertible, and businesses can independently finance across borders within the framework of macro-management; securities are now open for multi-channel and multi-level investment across borders; residents in China’s mainland now enjoy wider channels to invest foreign assets; the RMB’s appeal has grown notably; the volume of overseas investment in China’s securities has exceeded $2 trillion; and the IMF also increased the weighting of the RMB in the SDR currency basket.
China facilitates cross-border trade, investment, and financing, and notable progress has been made in the reforms to streamline administration, delegate powers, improve regulation, and strengthen services. Specifically, current account transactions that are real and meet regulatory requirements have been fully supported; procedures in capital account transactions like cross-border investment and finance have been constantly streamlined; technology is empowering the administration of foreign exchange through digitalization; and the diversified needs of businesses and individuals have been better satisfied.
China continues to improve the unified and open foreign exchange market that features orderly competition and effective regulation, creating a sound environment to effectively allocate foreign exchange resources and control foreign exchange risks. Over 40 currencies, a three-fold increase since the 18th National Congress of the CPC, can be traded in the foreign exchange market, covering all the international mainstream products. The total trade volume hit $ 36.9 trillion in 2021.
China has ensured the safety of the country’s foreign exchange reserve, made sure it flows, and kept protecting and increasing its values. The operation and management system of the foreign exchange reserve with Chinese characteristics has constantly improved. In recent years, China’s foreign exchange reserves have stayed above $3 trillion. By the end of May, the reserve hit $3.1 trillion, securing its first place in the world for 17 consecutive years. It has played its due role in stabilizing China’s economic and financial security.
In the next step, China will accelerate the building of a foreign exchange management system that is commensurate with the modern governance system and capacity.
Copyright Business Recorder, 2022