Steady flow

China Daily (USA) - - FRONT PAGE - By WANG YANFEI wangyan­fei@chi­nadaily.com.cn

China’s cross-bor­der cap­i­tal flows are ex­pected to sta­bi­lize in the fourth quar­ter.

China’s cross-bor­der cap­i­tal flows are ex­pected to sta­bi­lize in the fourth quar­ter, and ma­jor cap­i­tal flight is un­likely, be­cause the coun­try’s eco­nomic fun­da­men­tals are strong, the na­tion’s for­eign ex­change reg­u­la­tor said on Fri­day.

Chi­nese banks sawa net for­eign ex­change of $28.4 bil­lion in Septem­ber, up by $18.9 bil­lion from Au­gust, ac­cord­ing to the State Ad­min­is­tra­tion of For­eign Ex­change. Net forex sales stood at $243.4 bil­lion in the first three quar­ters.

Wang Chun­y­ing, spokes­woman for the ad­min­is­tra­tion, said sea­sonal fac­tors play ma­jor roles.

“Res­i­dents have higher de­mand for for­eign cur­rency for travel dur­ing the sum­mer va­ca­tion and Na­tional Day hol­i­day,” she said.

Net sales specif­i­cally for travel in­creased by $13.2 bil­lion in the third quar­ter over the se­cond quar­ter, she said, which is “rel­a­tively the same level of in­crease of the last few years”. The level of cross-bor­der flows is “un­der­stand­able and bear­able”, she added.

Al­though some ex­ter­nal fac­tors— mainly the ris­ing ex­pec­ta­tion of an in­ter­est rate hike by the United States Fed­eral Re­serve by year’s end— would have a short-term im­pact, an in­crease would not lead to a ma­jor fluc­tu­a­tion in cross-bor­der cap­i­tal flows, Wang said.

Xu Gao, chief econ­o­mist at China Ever­bright Se­cu­ri­ties Co, held sim­i­lar views, say­ing cur­rent cap­i­tal out­flow pressure is man­age­able and ac­tu­ally lower than in De­cem­ber. He played down the pos­si­bil­ity of mas­sive cap­i­tal out­flows trig­gered by wor­ries about the na­tion’s eco­nomic re­silience and the ex­change rate of the yuan.

“Eco­nomic fun­da­men­tals re­main strong,” he said af­ter of­fi­cial data re­leased on Wed­nes­day showed over­all eco­nomic growth at 6.7 per­cent, with some signs of an uptick ap­pear­ing in in­dus­trial sec­tors.

Xu said the re­cent de­pre­ci­a­tion of the yuan is nat­u­ral in light of the re­cent strength­en­ing of the US dol­lar, not­ing that the dol­lar in­dex, which is the trade-weighted value of the dol­lar against a bas­ket of ma­jor cur­ren­cies, rose by 2.99 per­cent since the be­gin­ning of the month.

The Peo­ple’s Bank of China set the cen­tral par­ity rate at 6.7558 on Fri­day, hit­ting a sixyear low.

Zhao Xue­qing, an econ­o­mist with the In­sti­tute of In­ter­na­tional Fi­nance, said al­though the yuan is un­likely to strengthen in the near fu­ture, con­sid­er­ing the head­winds and fi­nan­cial risks, the ex­tent of yuan de­pre­ci­a­tion is man­age­able.

“Fluc­tu­a­tions in the yuan are quite nat­u­ral, as the na­tion is on track with its mar­ket-ori­ented re­forms,” she said.

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