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Impact Wanes of US Monetary Policy on China’s Cross-Border Capital

Impact Wanes of US Monetary Policy on China’s Cross-Border Capital

Xu Wei

Date: Thu, 01/18/2018 - 20:31 / source:Yicai
Impact Wanes of US Monetary Policy on China’s Cross-Border Capital
Impact Wanes of US Monetary Policy on China’s Cross-Border Capital

(Yicai Global) Jan. 18 -- The external environment for China’s cross-border capital flows is relatively stable and the influence of external factors such as the US Federal Reserve’s normalization of monetary policy is gradually ebbing.

In other words, the market's digestion of these factors  is relatively smooth and the foundation for stabilizing the domestic economy is increasingly consolidated, and thus the general stability of China’s cross-border capital flows is expected to be maintained, said Wang Chunying, spokesman for the State Administration of Foreign Exchange (SAFE).

Wang Chunying made these comments at a news conference today.

The Fed raised interest rates three times and reduced its balance sheet last year. The Trump administration also passed its tax reform legislation. The cross-border capital flow situation in China has clearly improved and supply and demand in the foreign exchange market has recently tended to be better balanced. This shows that a combination of many factors affects the development of and changes in China’s cross-border capital flows, with both external and internal factors at work, but the external factors are manifold, Wang noted.

More market entities are tending to settle their foreign exchange income nowadays and their willingness to hold foreign exchange is fading. The settlement rate -- which is used to measure clients’ willingness to settle foreign exchange -- namely, the ratio of the foreign exchange clients sold to banks against their foreign exchange income was 63 percent last year, up 3 percent from 2016. In terms of individual domestic foreign exchange deposits, the total dropped by USD700 million last year while, compared with 2016, it rose USD36.3 billion, Wang said.

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Keywords: Foreign exchange, SAFE