Yicai: 

Since the beginning of this year, we have observed that the US Fed's monetary policy adjustment is an important factor affecting the international financial market and China's foreign exchange market. We have also seen that, in recent years, the external environment has always been complex and volatile. Faced with such risks and challenges, how do you evaluate the operation of the foreign exchange market and cross-border capital flows over the past decade? Thank you.

Wang Chunying:

In recent years, the external environment has been quite complicated, which has brought great challenges to the operation of China's foreign exchange market. Since the 18th CPC National Congress, China's economy has achieved high-quality development, laying a solid foundation for the stable operation of the foreign exchange market. During this process, the forex market has continuously strengthened its resilience and successfully responded to multiple rounds of external shocks. The scale of cross-border transactions increased significantly, foreign exchange reserves were generally stable, and the RMB exchange rate remained basically stable at a reasonable and balanced level. In general, in the past decade, China's forex market has shown more mature development characteristics. I would like to elaborate on it from the following five aspects.

First, the balance of international payments has a more stable structure. The current account surplus has always been in a reasonable and balanced range. The structure of China's external financial assets and liabilities has been gradually optimized, and the scale of assets held by the private sector has continued to increase. Foreign direct investment continues to increase, and foreign debt growth is mainly due to the long-term overseas funds' allocation to Chinese bonds. The external debt structure has been optimized, and risks are controllable.

Second, the financial market is more open. Cross-border securities investment channels are further expanded, and convenience is further improved. Domestic stocks and bonds are gradually included in mainstream international indices, and the scale of cross-border investment and financing transactions has increased. The depth and breadth of the forex market continue to expand.

Third, the automatic stabilizer function of the exchange rate to adjust the balance of payments is more visible. The two-way volatility and enhanced flexibility of the RMB exchange rate can release external pressure in a timely and effective manner and help stabilize market expectations. At the same time, the proportion of RMB in global foreign exchange reserves and international payments and settlements continue to increase, which helps reduce risks such as currency mismatches in China's cross-border transactions.

Fourth, forex market participants are more rational. We have seen that market players have gradually adapted to the two-way exchange rate fluctuations and have generally maintained a rational trading model. Enterprises' exchange rate risk neutrality awareness is increasing, and their ability to manage exchange rate risk is constantly improving.

Fifth, the forex market management framework of "macroprudential approach plus micro-regulation" has been improved. Cross-border capital flow monitoring, early warning, and response mechanisms continue to improve. Macroprudential tools are more substantial, and micro-regulatory enforcement standards remain consistent, stable, and predictable across cycles.

Looking ahead, the fundamentals of China's long-term sound economic growth have remained unchanged. With the reform and opening-up going further, China's cross-border trade, investment, and financing activities will remain active, and the stable operation of the forex market will have a more solid foundation.

Thank you!