China’s State Foreign Exchange Administration will strengthen macro-prudence management of capital flows to ensure greater resistance to any external shocks that could hit the economy of the world’s most populous country.
The renminbi‘s elasticity and the stability of the foreign exchange market are meant to be a guarantee of preventing any external shocks that could hit China’s economy, disrupting its balance. That is the message from the State Administration for the Foreign Exchange, part of the monetary policy of China’s central bank.
Outflow of foreign capital
The Authority thus responded to the first greater outflow of foreign (especially short-term) capital as a result of the Russian invasion of Ukraine. Indeed, investors initially regarded the conflict as a clear ally of Russia, so they withdrawn their money from the foreign exchange markets there.
The US central bank tightened monetary policy
The Chinese authorities assure that “the financial market there is very much an opening, and Chinese bonds and stocks are of unquestionable value.” According to the State Foreign Exchange Market Administration, there is still a lot of scope for foreign investors in China, and the allocation of capital to the assets there “makes sense in the long term.” Investors reacted, among other things, to the tightening monetary policy of the US central bank, which raised its base interest rate for the first time in a long time ago.
