No change to 'two-way' yuan fluctuations due to outbreak

The outbreak of novel coronavirus pneumonia did not change the "two-way" fluctuations of Chinese yuan, and the balanced supply and demand in the foreign exchange market will help maintain stable cross-border capital flows, said a senior official from the country's foreign exchange regulatory body on Saturday.

"China's current account is likely to maintain moderate surplus," supported by the upgrading of the manufacturing industry, high-level competitive products, stable trade in service and relatively higher deposit rate (more than 40 percent), said XuanChangneng, deputy chief of the State Administration of Foreign Exchange.

As the impact of the novel coronavirus outbreak is temporary and limited, "the nation's international balance of payments will still have foundation and conditions to remain balanced," he said.

China's current account surplus reached $177.5 billion in 2019, accountingfor 1.2 percent of the GDP, up from 0.4 percent in 2018, the SAFE reported on Friday.

China and the United States have signed the phase one trade deal, which will help to facilitate the Sino-US economic and trade relationship and strengthen people's confidence in global trade. The agreement will also stabilize imports and exports, said the SAFE official.

The country's opening-up policy and stable economic growth will continue to attract foreign capital inflows in the medium to long term, maintaining basic balance of cross-border capital flows, according to Xuan.

The short-term impact of the epidemic is unlikely to change the high-quality economic development, and the business environment will continually improve, which will lead to stable medium and long-term capital inflows, including the direct investment, analysts said.

The further opening-up of China's financial system will increase net capital inflows of securities investment. The opening of the bond market will encourage foreign central banks to increase the holding of yuan-denominated assets.

"The rise of foreign debt in recent years was mainly because of overseas investors purchasing more bonds in the domestic market, leading to a reduction of currency and term mismatch," Xuan added.

China is able to achieve a basic balance of international payments in the future, indicating the resilience of the financial system as well as the solid economic growth momentum, despite the temporary disruptions at home or from abroad, he said.