Why China'S Foreign Reserves Have Shrunk And Keep Rising Renminbi

Craig Chan and WeeChoon Teo, an analyst at Nomura, reported on Thursday (October 16th) that the sharp decline in foreign exchange reserves in the third quarter was not a cause for concern, mainly because of the sharp decline of the euro and yen against the US dollar in the quarter, leading to fluctuations in foreign exchange prices.

The report points out that the data reveal that the Chinese authorities may avoid the risk of RMB depreciation.

Nomura believes that there will be appreciating pressure on the renminbi in the coming quarter, including:

A. basically expects global economic growth; B. China's business cycle rebound; C. revenue and expenditure strong, and the RMB has continued structural needs, such as RQFII, Shanghai and Hong Kong through.

Nomura reports that the above situation will drive

The Renminbi should go up unless the central bank intervenes.

China's central bank (PBOC) released official data on Thursday. As of September 30th, China's foreign exchange reserves stood at 3 trillion and 890 billion US dollars, down 103 billion US dollars from the previous quarter.

China's foreign exchange reserves increased by US $172 billion in the first half of this year.

Analysts pointed out that China

A record drop in foreign exchange reserves suggests that speculative capital is withdrawing from China as the economic slowdown has intensified.

(DBS Group) economist in Hongkong, Nathan Chow, said the data revealed signs of hot money outflow because some investors were worried about the poor economic data in August.

It is not necessarily bad news for China because the authorities want to see the two-way flow of funds.

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"At present, China's economic and financial system is still undergoing reform, and the world economic and financial structure is also undergoing pformation. This determines that China's foreign exchange market will still be in a new stage of development in the coming period or for a longer period."

Wang Xiaoyi said so.

Since the foreign exchange market is international, its reform has attracted worldwide attention.

After the financial crisis in 2008, people saw challenges in the operation mechanism and supervision mode of the international financial market, and reform became a common issue faced by developed and developing countries.

Wang Xiaoyi said that China's interbank foreign exchange market has the nature of organized trading platform since its inception, and its existing trading and liquidation organization methods are highly consistent with the latest changes in international regulation after the crisis.

Because of the diversity of financial market structure in different countries, there are differences and differences in the understanding of regulatory reform. Therefore, the formation of a broader consensus reform is very important for the sustainable development of the global financial system.

In the future reform of China's foreign exchange market, the internationalization of RMB is undoubtedly an important protagonist.

Wang Xiaoyi said that along with the gradual globalization process of China's economy, the acceleration of reform and pformation, and the improvement of the level of opening up, especially the further acceleration of the RMB exchange process, will push the scale of China's balance of payments pactions to grow steadily.

At the same time, with the deepening reform of the RMB exchange rate market, the market awareness and management level of the economic entities such as banks and enterprises have been constantly improving. How to effectively distribute the assets and liabilities of the foreign currency and prevent exchange rate risks has put forward higher requirements for the development of the foreign exchange market.

It is unavoidable that there are common problems and problems in emerging markets in China's foreign exchange market, such as the inflexible trading mechanism, the single type of market players, the degree of opening up to the outside world, and the lack of infrastructure.

Trading tools improve the market function of forwards, swaps and options foreign exchange derivatives, better meet the diversified trading needs of various trading entities; two, gradually increase the main body of the paction, expand the opening of the foreign exchange market, and guide institutions with different foreign exchange demand to participate in the foreign exchange market in an orderly manner, allowing the eligible foreign and domestic institutions to participate in the offshore and offshore RMB foreign exchange market and promote the formation of the global RMB market; three, improve the infrastructure, ensure effective operation of the market, co-ordinate the interbank foreign exchange market bidding and inquiry trading mode, establish a hierarchical and inclusive exchange platform, continue to promote the central rival's liquidation business and improve market pparency; four, change the mode of regulation, enhance market innovation ability, decentralization and decentralization, and standardize the professional ethics of the foreign exchange market. Wang Xiaoyi said that the State Administration of foreign exchange will continue to adhere to market-oriented reform of the foreign exchange market, and there will be new changes in the following aspects: the first step is to gradually relax trade control and enrich the foreign exchange market.