SCIO briefing on China's foreign exchange receipts and payments data for H1 2025

China Securities Journal:

Mr. Li just mentioned that the performance of China's foreign exchange market in the first half of the year was better than expected. Could you please provide more details on this, and what measures has SAFE taken to prevent cross-border capital flow risks? Thank you.

Li Bin:

Thank you for your interest in the foreign exchange situation. I will answer this question. Since the beginning of this year, the foreign exchange situation has been complex and volatile, with a significant increase in risks and challenges. Facing external shocks, China's foreign exchange market withstood the pressure and maintained stable operation, demonstrating strong resilience. Just now, I introduced five characteristics of foreign exchange receipts and payments. Next, I will add three more aspects.

First, the RMB exchange rate has remained basically stable. In the first half of the year, the renminbi appreciated by 1.9% against the U.S. dollar. The exchange rate fluctuated between 7.15 and 7.35, remaining stable at a reasonable and balanced level, while also playing a role in adjusting the macroeconomy and acting as an automatic stabilizer for the international balance of payments.

Second, the foreign exchange market expectations have remained stable. From the perspective of foreign exchange market indicators such as forwards and options, there is no significant unilateral expectation of RMB appreciation or depreciation in the current market. Market transactions are rational and orderly. When the RMB weakens, corporate entities increase their foreign exchange settlements; and when the RMB strengthens, companies increase their foreign exchange purchases. Overall, there has been no irrational trading behavior, such as chasing highs and selling lows.

Third, the international balance of payments has remained balanced. Since the beginning of this year, China's current account surplus has increased steadily and is generally at a reasonable and balanced level. Corresponding to the current account surplus, the non-reserve financial account has shown a deficit, roughly equivalent to the size of the surplus. The overall balance of payments is characterized by self-balancing. All types of investments in China are generally improving. From January to May, direct equity investment into China increased by 16% year on year, with net inflows of $31.1 billion. Securities investment into China also saw net inflows of about $33 billion, reversing the net outflow trend observed in the second half of last year. Overseas investment is progressing in an orderly manner. From January to May, direct equity investment abroad remained stable at $51.9 billion, while outward securities investment has remained active.

The foreign exchange management department has taken proactive measures to prevent and mitigate external risks, with a consistent focus on maintaining the stable and healthy operation of the foreign exchange market. We adhere to a managed floating exchange rate system based on market supply and demand, maintain the flexibility of the RMB exchange rate, and promote market supply and demand balance through price mechanisms. We continue to optimize the supply of foreign exchange policies, deepen reforms and opening up in the foreign exchange field, and enhance the level of facilitation of cross-border trade and investment and financing. At the same time, we have also strengthened the monitoring and early warning systems for cross-border capital flows, taken firm measures to prevent the market from unilateral divergence of expectations and cracked down severely on illegal and irregular activities in foreign exchange markets. In the first half of this year, over 400 foreign exchange violations were investigated and handled, and we cooperated with public security organs to punish more than 180 underground bank counterparties, effectively maintaining orderly foreign exchange market conditions. Overall, policies to stabilize the market and expectations have achieved positive results. Thank you.