China Keeps Yuan Flexibility, Wary Of External Shocks

Beijing said on Friday it will maintain yuan flexibility and foreign exchange market stability, vowing to actively prevent and defuse risks from external shocks.

The trend of foreigners investing in China, and allocating yuan assets, will not change, the country’s foreign exchange regulator said. Meanwhile, Beijing expects a reasonable current account surplus this year, despite an expected slowdown in exports.

The comments come amid signs of foreign outflows from Chinese markets since Russia launched its military campaign in Ukraine last month. Growing policy divergence between a hawkish US Federal Reserve and a dovish People's Bank of China could also add to the outflows.

The State Administration of Foreign Exchange (SAFE) said on Friday it will strengthen macro-prudential management of cross-border capital flows, and ward off risks of external shocks.

China will continue to maintain yuan flexibility, step up monitoring of cross-border capital flows, enrich its policy toolbox, and guide expectations, it said.

"China's financial market is increasingly open, and Chinese bonds and stocks have sound investment value," SAFE said. "There's still big room for foreign investors to increase allocation (to China assets), which is good for long-term, steady capital inflows." (Reuters)