The State Administration of Foreign Exchange (SAFE) has recently released data on foreign exchange purchases and sales by banks and cross-border receipts and payments by non-banking sectors in March 2025. SAFE Deputy Administrator and press spokesperson Li Bin answered media questions on foreign exchange receipts and payments for the first quarter of 2025.
Q: How has China’s foreign exchange market been operating since the beginning of this year?
A: Since the beginning of this year, the external environment has undergone profound changes, with heightened volatility and increased risks and challenges in international financial markets. China has stepped up building a new development paradigm, solidly advanced high-quality development, and implemented more proactive and effective macro policies, effectively responding to external challenges. As a result, China’s economy has sustained its recovery and growth, and its foreign exchange market has been running smoothly on the whole, presenting three key characteristics:
First, the RMB exchange rate remained relatively stable in two-way floating. As of April 21, the spot exchange rate of CNY against the US dollar stood at 7.288, appreciating by 0.1 percent compared to the end of 2024. Since April, as unilateralist and protectionist actions by the United States have triggered sharp fluctuations in global financial markets, the RMB exchange rate against the US dollar first depreciated and then rebounded to a level roughly equivalent to that before April 3, when the United States imposed so-called “reciprocal tariffs” on trade partners. The two-way floating of the RMB exchange rate is a normal market change and reflects the supportive role of economic fundamentals in exchange rate stability.
Second, foreign exchange market transactions remained rational and orderly, with net inflows of cross-border capital. The balance of foreign exchange purchases and sales by banks gradually trended toward equilibrium, with a modest deficit of USD 2 billion in March. The willingness of enterprises and other entities to purchase foreign exchange declined. In March, the foreign exchange purchase rate (the ratio of foreign exchange purchases by non-banking sectors to foreign-related payments by non-banking sectors), a measure of the willingness to purchase foreign exchange, was 64.4 percent, nearly 11 percentage points lower than the high in January. The market willingness to settle foreign exchange was stable overall, with the banking purchase rate in March basically unchanged from January. In the first quarter, enterprises, individuals and other non-banking sectors recorded net cross-border capital inflows of USD 51.7 billion, a relatively high level compared to the same period in history. Since April, foreign exchange market transactions have remained stable, with continued net inflows of cross-border capital and a slight surplus in foreign exchange purchases and sales by banks.
Third, cross-border capital flows from main channels were stable and orderly. Firstly, net inflows of capital under trade in goods increased rapidly. In the first quarter, China’s foreign trade demonstrated strong resilience in overcoming external pressures, with cross-border capital under trade in goods registering a net inflow of USD 206.3 billion, a 1.2-fold increase year-on-year. Secondly, foreign investment in RMB bonds grew. From February to March, foreign holdings of Chinese bonds presented a net increase of USD 26.9 billion, up by 84 percent year-on-year, and from April 1 to 18, the net purchases of Chinese bonds by foreign investors were USD 33.2 billion, remaining at a relatively high level.Thirdly, cross-border outflows under trade in services and profit repatriation by foreign-invested enterprises remained generally stable. In the first quarter, net outflows of cross-border capital under trade in services rose by 25 percent year-on-year, with net outflows under travel increasing by 12 percent. Profit repatriation by foreign-invested enterprises was at a seasonally low level, down by 7 percent year-on-year.
Q: What is your judgment on the future trends in China’s foreign exchange market?
A: Looking ahead, in spite of the increasingly unstable and uncertain factors in the external environment, China is accelerating the implementation of more proactive and effective macro policies, and front-loading policies to ensure their full effectiveness. With multiple advantages, strong resilience, and vast potential, China’s economy will continue to support the stable operation of the foreign exchange market.
Firstly, China’s economy has gotten off to a good start, significantly boosting market confidence. Since the beginning of this year, China has intensified macro regulation, deploying more proactive fiscal policies and appropriately accommodative monetary policies, while formulating and implementing special action plans to boost consumption. The economy has started the year on a stable footing, maintaining its upward recovery trend. In the first quarter, China’s economy grew by 5.4 percent year-on-year and 1.2 percent quarter-on-quarter. Domestic demand expanded, with the year-on-year growth rates of total revenue from retail sales of consumer goods and fixed asset investment accelerating by 1.1 and 1.0 percentage points, respectively, compared to the full-year 2024 figures. In March, China’s Manufacturing Purchasing Managers’ Index (PMI) stood at 50.5 percent, remaining in expansion territory for two consecutive months. Going forward, China will introduce new incremental policies in a timely manner according to the needs of the situation, take the expansion of domestic demand as a long-term strategy, and promote the integrated development of technological and industrial innovation, thereby supporting the stability of the RMB exchange rate and the stable operation of the foreign exchange market.
Secondly, China continues to expand opening-up and actively stabilizes foreign trade and investment, which will help maintain a basic equilibrium in the balance of payments. In terms of foreign trade, in recent years, Chinese foreign trade enterprises have proactively diversified their markets and steadily advanced regional economic and trade cooperation. In 2024, the shares of China’s trade with ASEAN and Belt and Road partner countries reached 15.9 percent and 50.3 percent, respectively, up by 3.4 and 23.8 percentage points from 2017. Chinese enterprises have swiftly responded to the diverse demands of global markets. They accelerated the cultivation of new trade models, promoted the transformation and upgrading of the manufacturing sector, and made continuous breakthroughs in core technologies, enhancing the competitiveness of foreign trade and further strengthening industrial and supply chains. In terms of foreign investment, in February this year, China issued the 2025 Action Plan for Stabilizing Foreign Investment, providing a favorable business environment for foreign investors to operate and expand in China. At the same time, China is steadily expanding the opening-up of its financial market and broadening channels for cross-border investment and financing. The role of RMB in diversified asset allocation is becoming prominent. The attractiveness of China’s domestic securities market to foreign investors is expected to continue growing. The SAFE will further deepen reform and opening-up in the foreign exchange sector, and will continue to issue policies and measures to support cross-border trade development and facilitate cross-border investment and financing, thereby better stabilizing foreign trade and foreign investment.
Third, the resilience of China’s foreign exchange market has improved, enhancing its ability to withstand external shocks. In recent years, the market-based RMB exchange rate regime has been continuously refined, and exchange rate flexibility has increased. Meanwhile, enterprises have actively used foreign exchange derivatives to manage exchange rate risks and increasingly adopted cross-border RMB settlement to reduce the risk of currency mismatch. In the first quarter of 2025, the share of RMB cross-border receipts and payments in trade in goods and the ratio of foreign exchange hedging by enterprises both increased compared to the previous year. The capacity of enterprises to cope with exchange rate fluctuations was enhanced and market expectations and transactions were more rational and orderly.
In the next step, the foreign exchange administrative authorities will continue to strengthen monitoring of the foreign exchange situation, maintain exchange rate flexibility, and effectively leverage the role of the exchange rate as an automatic stabilizer for adjustment of the macroeconomy and balance of payments. At the same time, they will further enrich the macroprudential management toolkit for cross-border capital flows, firmly correct pro-cyclical market behaviors, guard against the risks of exchange rate overshooting and abnormal cross-border capital flows, and safeguard the economic and financial security of the nation.
