A More Mature Foreign Exchange Market is Ready

 China’s foreign exchange market has successfully withstood great challenges of complicated and severe external shocks. The external environment we are facing has undergone significant changes during recent years. With the outbreak of COVID-19，disaster of a kind unseen in a century，the global economy suffers the worst recession since the World War II. The ultra-loose monetary policy of major developed economies is unprecedentedly aggressive，while the volatility and vulnerability of international financial markets are intensifying with the time being. The international trade and investment order is confronting with major challenges from unilateralism，protectionism and bullying. In this context，China’s foreign exchange market shows strong resilience and presents more mature development features. Renminbi exchange rate remains stable amid two-way fluctuations，and is expected to maintain stable in the future. There has been no constant accumulation of unilateral upward or downward pressures. Cross-border transactions are largely in line with actual trading needs，market entities keep a rational trading model of “purchasing when the price drops and settling when the price goes up”，which promotes a positive interaction between the balance of foreign exchange supply and demand and the stability of exchange rate. Basic equilibrium has been achieved in international balance of payments，current account remains among an appropriate and balanced range for long，two-way cross-border investments and financing are becoming more active，cross-border capital flows are relatively balanced，and foreign exchange reserves have remained at around $3.1 trillion.

The increasingly mature foreign exchange market has substantially improved its risk mitigation capabilities. First，the market-oriented reform of the renminbi exchange rate has been steadily promoted，market supply and demand plays a decisive role in the formation of exchange rates，exchange rate flexibility is much stable than the currency of emerging markets，and gradually approaches that of developed markets. Next，with the automatic stabilizer function of foreign exchange in adjusting balance of payments continues to strengthen，pressure on foreign exchange market were effectively released. Next，reforms on two-way financial market opening up and facilitation continue to advance. The “Shanghai-Shenzhen-Hong Kong Stock Connect”，“Bond Connect” and direct investment in the inter-bank bond market have been implemented one after another，qualified investor system has been constantly improving，and domestic stocks and bonds have been included into the international mainstream indexes successively. As a result，our cros