China has not accumulated excessive foreign debt under the US Federal Reserve’s monetary easing, while expectations of one-way movements in the yuan have been avoided thanks to greater currency flexibility, said Friday the foreign exchange regulator.
Wang Chunying, spokesperson for the State Administration of Foreign Exchange, told a press conference that in the medium and long term, the foreign exchange market’s foundation for stable operations is still strong.
“These are the bright spots that we see, of course, we also noticed some risks. For example, the outbreak of the global pandemic and geopolitical factors will have some impact on our external economy and our international balances, ”said Wang.
Attracted by cheap credit in the aftermath of the 2008 global financial crisis when the Fed launched quantitative easing to inject money into the economy, Chinese companies recovered assets abroad, attracting the attention from Chinese regulators.
Chinese conglomerate HNA Group was placed in bankruptcy and restructuring earlier this year due to its liquidity crunch resulting from years of aggressive overseas acquisitions.
Wang said that increased flexibility in the Chinese yuan’s exchange rate can ease market pressure and prevent expectations that it will only move one way.
The yuan briefly strengthened to its highest level against the US dollar in nearly six weeks on Thursday as the greenback weakened.
China is expected to have a current account surplus in the first quarter, although it will be lower than in the fourth quarter of last year, Wang added.
Source: Reuters (Reporting by Tina Qiao, Lusha Zhang and Ryan Woo; written by Stella Qiu; edited by Kim Coghill and Jacqueline Wong)