Chinese yuan Photo:VCG

Chinese Central Bank Governor Pan Gongsheng said on Monday that the country's foreign exchange market regulators have confidence,MK sport conditions and capability to maintain the stability of the foreign exchange market, vowing efforts to maintain the basic stability of the yuan exchange rate within a reasonable and balanced range.

Due to high US Dollar Index in a recent period, non-dollar currencies generally are depreciated. Though the Chinese yuan also depreciated, it displayed overall resilience. After years' efforts, China's foreign exchange market has made substantial progress, with market participants more mature and transactions more reasonable, Pan said in a speech at 18th Asian Financial Forum in Hong Kong on Monday.

As regulators of the foreign exchange market, the People's Bank of China (PBC) and the State Administration of Foreign Exchange (SAFE) are more comfortable and experienced faced with market changes, and we have confidence, conditions and capability to maintain the stability of the foreign exchange market, Pan said.

We will continue to insist on market's decisive role in the formation of the exchange rate, so as to let the exchange rate play its role as an automatic stabilizer in adjusting the macro economy and the balance of payments, Pan said.

Pan stressed the need to correct pro-cyclical behaviors, firmly deal with behaviors disrupting market order, and guard against the risk of exchange rate overshooting.

China on Monday raised a key parameter in its macro-prudential management to expand cross-border funding sources for companies and financial institutions, according to an official statement.

The macro-prudential adjustment parameter, a multiplier that decides the upper limit of outstanding cross-border financing available to an institution, has been revised from 1.5 to 1.75, according to the statement jointly issued by the PBC and the SAFE.

The upward revision aims to further improve the macro-prudential management of cross-border financing and guide enterprises and financial institutions to optimize their asset-liability structure, the statement added. 

The upward revision will help increase domestic enterprises and financial institutions' cross-border financing quota, facilitate the inflow of cross-border capitals and optimize their asset-liability structure, Wen Bin, chief economist of China Minsheng Bank, told the Global Times on Monday.

The increase in foreign exchange funds domestically will drive demand for foreign exchange settlement, and thereby help stabilize the yuan's exchange rate, Wen said.

The China Foreign Exchange Committee recently held a meeting in Beijing, stressing that China will unswervingly keep the RMB exchange rate basically stable at a reasonable and balanced level, according to a statement on the PBC website on Monday.

The PBC and the SAFE will continue to take comprehensive measures to stabilize expectations, enhance resilience and strengthen management of the foreign exchange market, according to the meeting.

The financial regulator previously adjusted the parameter from 1.25 to 1.5 in July 2023.

The central parity rate of the yuan, strengthened 6 pips to 7.1885 against the US dollar Monday, according to the China Foreign Exchange Trade System.

"The current fluctuations in the yuan exchange rate do not alter the medium- to long-term trend of maintaining basic stability," Guan Tao, global chief economist at BOC International under the Bank of China, told the Global Times.

When observing the yuan exchange rate, the key factors to consider are domestic conditions, he said.

In the third quarter of 2024, the rebound of the yuan exchange rate was driven by the domestic policies, which promoted economic recovery and boosted market confidence. The Central Economic Work Conference held in December 2024 released policy signals that exceeded expectations, indicating that in 2025, a more proactive fiscal policy and a moderately loose monetary policy will be implemented, which is expected to provide strong support for the yuan exchange rate, according to Guan.