Distinguished Party Secretary Yin Li, Mayor Yin Yong, Deputy Director Wang Jiang, Governor Pan Gongsheng, Minister Li Yunze, Chairman Wu Qing, President Fu Hua, and dear guests,
Good morning! It’s my great pleasure to attend the annual conference of Financial Street Forum. Today, I would like to share some thoughts on implementing the guidelines of the third plenary session of the 20th Communist Party of China (CPC) Central Committee to deepen reforms in the foreign exchange sector and better serve China’s modernization in light of the current situation in the foreign exchange market.
Since the beginning of this year, our foreign exchange market has faced increasing risks and challenges. Global economic growth momentum has weakened, trade protectionism has intensified, and expectations regarding monetary policies in major advanced economics have been frequently adjusted. Meanwhile, international financial markets have been remarkably volatile, geopolitical risks have risen, and uncertainties and instabilities have increased.
In the face of these risks and challenges, our foreign exchange market has generally withstood the test and demonstrated strong resilience. The RMB exchange rate has remained basically stable as it moves in both directions, and trading in the foreign exchange market has been rational and orderly. China’s balance of payments has maintained a basic equilibrium, with the ratio of current account surplus to GDP staying within a reasonable and balanced range. Notably, since H2 this year, with improvements in both internal and external environments, our foreign exchange market has gradually stabilized and improved. The RMB exchange rate against the US dollar has stabilized and rebounded, foreign direct investment (FDI) has seen some improvement, foreign capital has been more active in allocating RMB assets, and enterprises’ foreign investment activities have become more stable and orderly.
Looking ahead, the sound operation of China’s foreign exchange market and the basic equilibrium of the balance of payments will remain the underlying principle of future developments. The recent meeting of the Political Bureau of the CPC Central Committee has made important arrangements for economic work, and multiple departments have launched a series of incremental policies accordingly to boost market confidence and promote economic rebound. The foundation for the stable development of our foreign exchange market has become more solid, and the structure of the balance of payments will continue to improve through reform and opening-up. First, the current account will continue to play a fundamental role in maintaining the balance of payments. By accelerating the development of new quality productive forces, enhancing the resilience of industrial and supply chains, and supporting global trading partners in sharing China’s development opportunities, we will promote balanced growth in cross-border trade. Second, the stability of cross-border capital flows is expected to strengthen. Ongoing reforms in the management of foreign and outbound investments and the two-way opening-up of financial markets will facilitate balanced two-way flows of cross-border capital. Third, the resilience of the foreign exchange market will continue to improve. The RMB exchange rate will move in both directions with enhanced flexibility, playing its role as an auto stabilizer in macroeconomic management and for the balance of payments. Enterprises are enhancing their awareness and ability to manage exchange rate risks, increasingly using RMB for cross-border receipts and payments to better adapt to changes in the external environment. Fourth, foreign exchange reserves will continue to serve as a “stabilizer” for maintaining national economic and financial stability. Our foreign exchange reserves remain basically stable in size, and we make diversified investments based on market-oriented principles. In the future, we will further promote capacity building in specialized investment, technological operations, and market-based institutional governance so as to ensure the safety and liquidity of foreign exchange reserve assets as well as to maintain and increase their value.
Ladies and gentlemen,
The current environment of China’s foreign exchange market is undergoing marginal changes, creating favorable conditions for us to promote reform and development through opening-up. We will earnestly implement the guidelines of the third plenary session of the 20th CPC Central Committee, actively carry out the decisions and arrangements made at the meeting of the Political Bureau of the CPC Central Committee, coordinate development and security, and effectively advance in-depth reforms and high-level opening-up. We will improve the foreign exchange management system to align with a new system for higher-level open economy, and facilitate Chinese’s path to modernization with “four focuses” of foreign exchange management.
First, we will focus on promoting economic recovery and high-quality development while advancing reform and innovation in foreign exchange management.
On the one hand, we will place greater emphasis on system integration and intensify efforts to improve the quality and coverage of banks’ foreign exchange operations reforms. In recent years, we have explored the reengineering of commercial banks’ foreign exchange business processes. The efforts have not only mitigated risks but also boosted productivity, as the average time required for pilot banks to handle foreign exchange services for premium clients has been reduced by over 50 percent. Moving forward, adhering to the principle of being both flexible and well-regulated, we will leverage operational reforms to comprehensively optimize the management framework, which consists of ex-ante due diligence, differentiated reviews during transactions, and ex-post monitoring and reporting. We will enable more banks to benefit from the improvement and create a foreign exchange policy environment where “the more trustworthy you are, the more convenient services will be”.
On the other hand, we will put greater emphasis on highlighting key priorities and improving the incentive and constraint mechanisms for foreign exchange services that support the real economy. Focusing on developing new quality productive forces, we aim to make significant efforts in the areas of technology finance, green finance, inclusive finance, old-age finance and digital finance by prioritizing financial support for sci-tech enterprises as well as micro, small and medium-sized enterprises, enhancing the full chain of foreign exchange services for major strategies, key areas, and weak links. By upgrading the foreign exchange facilitation policy system in an iterative and integrated way, we seek to improve the quality and efficiency of such policies as facilitating trade-related foreign exchange payments and receipts and cash pooling for multinational companies. By expanding pilot programs like streamlined foreign debt registration and Facilitation of Foreign Exchange for Research Funding, we will support the healthy development of new trade models and explore more facilitation measures to stimulate the vitality of business entities. Additionally, we will advance the diversified use of foreign exchange reserves, and adhere to commercial principles to coordinate the support for major landmark projects and “small yet beautiful” projects related to people’s well-being, thereby contributing to the deep and substantial progress of high-quality Belt and Road Initiative cooperation.
Second, we will focus on high-level opening-up and strive to improve the quality of capital account liberalization.
To begin with, we will develop a mid-term reform plan to facilitate foreign exchange for FDI. Efforts will be made to improve the convenience of FDI currency exchange, optimize the management requirements for foreign exchange registration, accounts, and fund usage, simplify business processes, and streamline management procedures. The aim of these efforts is to create a favorable environment for foreign-funded enterprises to start and expand business in China.
Additionally, we will steadily advance the connectivity among financial markets. The qualified foreign institutional investor (QFII) program will be optimized to increase patient capital investment. We will make joint efforts with relevant agencies to advance the high-level opening-up of the bond market.
Lastly, we will deepen reforms in cross-border financing management. We will serve well the national strategies by managing foreign debt in a differentiated manner. The cross-border financing facilitation policies will be optimized to include more asset-light start-ups and micro and small businesses, thereby broadening financing channels for enterprises.
Third, we will focus on the effectiveness of policies and genuine feelings of the people about the policies to strengthen policy evaluation and market communication.
Using criteria such as the alignment with national strategic positioning, relevance to local development realities, and actual benefits to enterprises and the public, we will comprehensively assess the implementation of key foreign exchange policies in major regions like Beijing, Shanghai, and Guangzhou, as well as in pilot free trade zones. The policies should be optimized and upgraded in a targeted manner, and be replicated and promoted at proper time. At the same time, we will enhance market communication and actively seek advice, thus identifying key points of the reform to achieve breakthroughs, so as to continually improve the sense of gain among business entities from these reforms.
Fourth, we will focus on enhancing regulatory capabilities and risk management mechanisms along with the opening-up progress by strengthening the integrated regulation of the foreign exchange market from the perspectives of macro prudential management and micro regulation.
On the macro level, we will improve the monitoring, early warning and response mechanism for cross-border capital flows, strengthen the macro-prudential management, and attach importance to guiding expectations, so as to keep the RMB exchange rate basically stable at an adaptive and equilibrium level.
On the micro level, we will implement the requirements that regulation must be “sharp and thorny” with defined boundaries, make full use of regulatory technology, ensure all kinds of financial activities on the foreign exchange market are brought under regulation, and strictly crack down on illegal and irregular activities to uphold the sound order in the foreign exchange market.
Ladies and gentlemen,
As the capital, Beijing plays a pivotal role in further deepening reforms and advancing Chinese modernization. In recent years, the CPC Beijing Municipal Committee and the People’s Government of Beijing Municipality have achieved fruitful outcomes by promoting reforms across various sectors, elevating its governance systems and capabilities to a new level. Several pioneering foreign exchange reform measures have been implemented in Beijing, with the city’s total trade value in goods exceeding RMB3 trillion for three consecutive years. Additionally, its scale of trade in services ranks among the top three in China. Over the past four years, more than 7,000 foreign-funded enterprises have been attracted to the city.
Moving forward, the State Administration of Foreign Exchange will intensify its support for the development of Beijing as the “political center, cultural center, international exchange center and technological innovation center” and the “national comprehensive demonstration zone for expanding the opening-up in service sector and (pilot) free trade zone”. It will continue to initiate pioneering foreign exchange reform measures in Beijing, facilitate cross-border trade and investment, and make significant efforts in the areas of technology finance, green finance, inclusive finance, old-age finance and digital finance, thereby contributing further to Beijing taking the lead in achieving socialist modernization.
Finally, I wish this annual conference of Financial Street Forum a complete success.
Thank you!
