CCTV:

What do you think of the performance of the country's forex market amid the COVID-19 pandemic？What do you make of the development trend? Thanks!

Wang Chunying:

This year, the whole world faces a new situation: the COVID-19 pandemic. Both the global economic and trade activities and the international monetary market have recently been hit hard by the pandemic. Under these extreme circumstances, China's forex market has maintained overall stability, which I think is incredible. This attests to the increasing maturity of China's forex market and the growing rationality of market entities. This also attests to the market entities' confidence in China's pandemic prevention and control and the fundamentals of the Chinese economy.

In 2020, China's forex market has achieved "three keeps." First, we have kept supply and demand in balance in the forex market. Second, we have kept the yuan exchange rate relatively stable against a basket of major currencies in the world. Third, we have maintained cross-border investment and financing and forex trading in a basically sound and orderly manner. On top of that, China's foreign exchange reserves have stayed stable overall.

Let's look at the first "keep": we have kept forex supply and demand in balance. The above-mentioned data show that Chinese banks reported a relatively large forex settlement surplus of $39.1 billion, laying the basis for the balanced supply and demand in the forex market. A data breakdown shows that there is a cross-border forex surplus of $1.7 billion, and there is a net forex settlement surplus of $20.5 billion. In a word, either from the overall perspective or from the perspective of the clients, we have kept in balance the Q1 supply and demand in the forex market. The second "keep" is that we have kept the yuan exchange rate relatively stable against an array of major currencies in the world. In the first quarter, the U.S. Dollar Index rose by 2.8%. Under such a circumstance, the spot exchange rate of RMB/USD dropped slightly by 1.8%. In terms of other currencies, the currency index of the emerging markets dropped by 12.9% during the same period. The pound dropped by 6.3% against the dollar; the EUR/USD dropped by 1.6%. In the first quarter, the CFETS RMB Index rose by 2.9%. Therefore, we can conclude from the data that we have kept the yuan exchange rate relatively stable against the major currencies of the world.

Third, the behavior of market entities has remained rational and orderly, which can be seen from two perspectives. First, foreign investors' enthusiasm remains high when it comes to investing in China. According to statistics from the Ministry of Commerce, China's actual use of foreign capital in the first quarter was $31.2 billion, with a 15.5% increase in the high-tech service sector. According to statistics from the SAFE, the net increase of foreign investors' holdings of domestic bonds in the first quarter increased by 48% year-on-year, reaching $16.7 billion. Second, Chinese enterprises' outbound direct investment has been stable. According to data provided by the Ministry of Commerce, the outbound direct investment of non-financial sectors between January and February was $15.5 billion, which shows stability. Moreover, according to the SAFE data, net purchases of foreign exchange from individuals in the first quarter dropped by 25% year-on-year, reflecting individuals' rational willingness to purchase foreign exchange. Therefore, foreign exchange reserves have remained basically stable. 

The fundamentals of China's sound economic growth in the long term will ensure the stable operation of the foreign exchange market. First, the positive development of China's pandemic prevention and control measures will continue to leverage the role of stabilizing expectations and boosting market confidence. The pandemic and its implications for economic growth and societal development have been the major uncertainties for the world economy and financial markets. China is consolidating its progress in pandemic prevention and control, and resumption of production and work is ongoing. The restoration of economic and social orders has been accelerating as well, which will not only shore up confidence in the domestic market but also boost world economic development. Second, the fundamental trends of China's sound economic growth in the long term and deepened opening-up remain unchanged, which will continue to attract foreign mediums and long-term capital to invest in the domestic market. Third, the foreign exchange market is becoming more mature, and foreign exchange rates are getting more flexible. More and more "two-way volatility" of foreign exchange rates have been seen, and the performance of foreign exchange rates in regulating the macro economy and serving as an automatic stabilizer for the balance of international payments is becoming better and better. Consequently, China's foreign exchange market is mature enough to absorb and address short-term impacts, and it is capable of maintaining stable operation in the future.

Of course, in this process, we will continue to strengthen monitoring and analysis to prepare for different scenarios. We always take preventive measures, which is actually a guarantee for the smooth operation of the market. This is my response to your question. Thank you.