Adapt to the New “Dual Circulation” Development Pattern...

Title: Adapt to the New ¡°Dual Circulation¡± Development Pattern And Push Forward Balance of Payments Statistics and Foreign Exchange Market Construction

China Forex: In 2020,with the COVID-19 pandemic spreading around the world and seriously impacting the world economy,the global trade and investment activities were obviously slowed down. What was the performance of China’s foreign exchange market under this situation? What is your prediction on the foreign exchange market in 2021?

Jia Ning: The COVID-19 pandemic is a black swan,but it is also a touchstone - it has revealed the stability and resilience of the fundamentals of China’s foreign exchange market. On the whole,the foreign exchange market in China showed the following characteristics in 2020: First,the international receipts and payments remained basically balanced. The ratio of the current account surplus to GDP was 1.6% in the first three quarters. Despite some increase,it was still at a reasonable equilibrium level. Second,the renminbi exchange rate remained relatively stable and more elastic. By the end of 2020,the six-month volatility of the US dollar to Chinese yuan exchange rate had been 4.2%,which was close to those of international currencies such as Euro and Japanese Yen. Third,the cross-border investment and financing activities and foreign exchange trading by market entities remained rational and orderly. In 2020,the foreign exchange trading alternated between surplus and deficit in different quarters,but on the whole,it exhibited a slight surplus. These three results benefited from the long-term positive fundamentals in China. First,the pandemic has been effectively controlled in China,stabilizing people’s expectations for and confidence in domestic market and global economy. Second,China’s economy is still on the long-term improvement and is further opening to the outside world,and in the future,more medium- and long-term foreign capital will be attracted to the domestic market. Third,the foreign exchange market is continuously maturing,with the exchange rate becoming steadily elastic,so it is capable of resisting various short-term impacts.

Granted,there will still be many uncertainties and unstable factors in the external environment in 2021 and the derivative risks caused by the impact of the pandemic cannot be ignored,including the risks of turmoil in the international financial market. Nevertheless,the foreign exchange market in China still has what it takes to maintain basic equilibrium. First of all,China is accelerating the establishment of a new development pattern,where domestic circulation plays the main role,and international and domestic circulations (“dual circulation”) support each other. This will push the opening-up to a high level and further improve the quality of cross-border two-way investments. Second,China will continue to promote the two-way opening-up of the financial market,take measures for liberalization and facilitation of trade and investment and optimize the infrastructures of the domestic foreign exchange market so as to create a favorable policy environment for the two-way and balanced flow of cross-border capital. Third,the renminbi exchange rate will become more elastic,and will work as an “automatic stabilizer” to adjust the macro-economy and international balance of payments; and the two-in-one management framework of “macro prudence and micro regulation” for the foreign exchange market will be continuously improved,which will help the market better absorb the external impacts.

China Forex: The year of 2021 is the first year of the “14th Five-Year Plan” period. What will the SAFE do to further improve the balance of payments statistics?

Jia Ning: In 2021,according to the requirement of “advancing the reform of statistical modernization” put forward at the 5th Plenary Session of the 19th CPC Central Committee,we will broaden the scope of statistical data,increase the statistical awareness of market players,participate more in the formulation of international statistical rules and promote the reform of the statistical modernization .

First,we will continuously improve the balance of payments statistics system and consolidate the basis for balance of payments statistics. This will take four steps: the first is to revise and issue normative documents on balance of payments statistics,and continue to promote the policies; the second is to strengthen the verification of balance of payments statistics and improve the verification function of the system; the third is to continue to pay attention to the frontier issues of international statistics,learn from international experience and improve the theoretical and practical level of balance of payments statistics from different perspectives; and the fourth is to actively participate in the formulation of international statistical systems,enhance our ability in the governance of international statistical rules,and share our Chinese wisdom and experience.

Second,we will continuously expand the data sources for balance of payments statistics and increase the scope and improve the quality of direct foreign