China takes decisive steps to stabilize yuan and boost cross-border financing
In a concerted effort to strengthen its currency and support economic growth, China’s financial regulators have announced plans to keep the yuan’s exchange rate stable at a reasonable and balanced level. The decision emerged from a recent meeting of the China Foreign Exchange Committee, a mechanism that includes regulators from the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE), alongside industry participants.
The PBOC and SAFE have outlined comprehensive measures aimed at stabilizing market expectations, enhancing resilience, and strengthening the management of the foreign exchange market. The regulators emphasized their commitment to rectifying pro-cyclical market behaviors, addressing actions that disrupt market order, and guarding against the risk of exchange rate overshooting.
“China has the confidence, conditions, and ability to maintain stable operation of the foreign exchange market,” affirmed Pan Gongsheng, Governor of the PBOC, during the 18th Asian Financial Forum held in Hong Kong on Monday.
Expanding cross-border financing
Complementing efforts to stabilize the yuan, China has also increased a key parameter in its macro-prudential management framework to broaden cross-border funding sources for enterprises and financial institutions. The macro-prudential adjustment parameter—a multiplier that determines the upper limit of outstanding cross-border financing—has been raised from 1.5 to 1.75, according to a joint statement issued by the PBOC and SAFE on Monday.
This move aims to improve macro-prudential management and guide companies and financial institutions in optimizing their asset-liability structures. The regulators previously adjusted this parameter in July 2023, signaling ongoing efforts to support the economy through enhanced access to foreign capital.
By expanding cross-border financing options and reinforcing the stability of the yuan, China seeks to bolster market confidence and promote sustainable economic development amid global financial uncertainties.
Reference(s):
China moves to stabilize yuan, expands cross-border financing
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