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The ‘painful winter’ is over for the yuan

Analysts on Thursday declared that a painful winter for the exchange rate of the yuan against the US dollar has passed as improving fundamentals and a weakening dollar propelled the Chinese currency in an upward motion over the past few months.

With the yuan increasingly firm against the greenback, earlier market expectations for persistent yuan depreciation have been reversed and a consensus is in the making that the yuan will continue to stabilize, analysts said.

On Thursday, currency traders responded decisively after the People’s Bank of China set the central parity for trading at the strongest level in ten and half months, lifting the yuan both in onshore and offshore trading.

The Chinese central bank set the central parity rate at 6.6770 to the dollar prior to market opening, the strongest level since September 29, 2016. The yuan is allowed to fluctuate within 2 percent above or below the central parity rate.

Following the stronger official guide, the exchange rate for onshore yuan trading gained 166 bips from Wednesday’s closing to close at 6.6610 per dollar on Thursday, the firmest level since August 25, 2016, according to financial website wallstreetcn.com.

In the offshore market, the yuan was trading at 6.6699 per dollar at 10:00 pm Beijing time on Thursday, strengthening 0.32 percent from the previous day’s closing, according to financial information provider Marketwatch.

Thursday’s gain adds to a months-long surge of the yuan against the dollar. The Chinese currency has gained 4 percent against the dollar so far this year, according a report on domestic financial news site eastmoney.com on Thursday.

That led analysts to declare that the yuan has moved past its dark days.

Chen Shi, head of International Research at Industrial and Commercial Bank of China, wrote in a note: “The yuan’s exchange rate has got out of the painful, cold winter and will return to a long-term trajectory of stable movement.”

In the note that was sent to the Global Times on Thursday, Chen wrote that expectations for a stabilizing yuan are replacing expectations of depreciation as a market consensus.

Liu Dongliang, a senior analyst at China Merchants Bank, echoed that sentiment in a separate note sent to the Global Times on Thursday.

“There is no more market basis for persistent yuan depreciation and the phase of heavy depreciating pressure on the yuan’s exchange rate is over,” Liu said.

Improving conditions

The two analysts attribute the yuan’s recent surge to improving conditions for the Chinese currency amid better-than-expected economic growth, a rise in foreign exchange reserves and a weakening dollar.

The Chinese economy grew 6.9 percent year-on-year in the first half of 2017, 0.2 percentage point faster than the pace in the same period last year and well above the 6.5 percent growth rate target set by the Chinese government for the whole year.

On top of that, China’s foreign exchange reserves expanded for a sixth straight month in July to $3.08 trillion, increasing 0.8 percent from June, according to official data released on Monday.

“The improving fundamentals for the yuan and market expectations consolidated the foundation for the long-term stability of the yuan’s exchange rate,” Chen wrote.

The downward trend of the dollar’s exchange in the first half, due mainly to the fall of “Trump trade” (a surge in US stocks, Treasury yields and the dollar after Donald Trump won the US presidential election) and better-than-expected economic performance in Europe and Japan, also lifted up the yuan, Liu said.

Since January, the dollar has lost more than 11 percent against the euro and 6 percent against the Japanese yen, The New York Times reported on Wednesday. Overall, the greenback fell 8 percent against a basket of major currencies, according to the report.

However, there is market expectation that the dollar would bounce back in the coming months and the yuan might fluctuate frequently but won’t return to days of stagnation, Liu said, noting the yuan’s exchange rate will fluctuate between 6.6 and 6.9 to the dollar for the remainder of the year.

With the yuan’s firm position against the dollar, tight control of cross-border capital flows might be eased up and the focus will be put back on deepening financial market openness and supporting the real economy, Chen said.

Source: Global Times

 

Trump wrong to link Sino-US ties to North Korea

US President Donald Trump challenged Beijing’s “one China” policy before taking office, but shifted his attitude and said he had “great chemistry” with his Chinese counterpart Xi Jinping after they first met at the Mar-a Lago resort in Florida in April. But the honeymoon was overshadowed four months later by White House discussions over trade measures against China. The Sino-US relationship has been witnessing ups and downs during Trump’s first half year in office.

Many factors are shaping Washington’s China policy, but it’s worth particular attention that Trump always ties his Beijing policy to the Pyongyang nuclear issue, a disappointing choice.

Frankly speaking, the North Korean nuclear issue is one of the most difficult conundrums for the international community. Trump requires Beijing to address the issue and bases the extensive, sophisticated and multi-layered Sino-US relationship on the nuclear crisis.

It seems the White House would rather jeopardize the entire Sino-US relationship if China doesn’t act as Trump wishes in thwarting North Korea’s nuclear ambitions.

This is a terrible strategy. Trump’s remarks and behaviors have been constantly rocking the Beijing-Washington relationship since Pyongyang tested an intercontinental ballistic missile in July, and sadly, there is no sign that Trump will change this strategy.

Earlier, Secretary of State Rex Tillerson accused China of being North Korea’s “principal economic enabler” and it’s reported by US media that it is crafting a set of measures, including economic sanctions and restrictions, to further press China to rein in its northern neighbor’s escalating nuclear threat. This undoubtedly will put the Sino-US relationship at risk.

In addition, under “America First” slogan, Trump puts “the interests of the American people and American security above all else.” The “America First” policy will certainly affect China’s economic interests in the era of globalization. There is little likelihood that Trump’s foreign policy would shift away from this slogan. Trump had said earlier that it “will be the foundation of every decision” he would make.

In the meantime, Trump stresses “peace through strength,” compared with his predecessor Barack Obama’s “soft power” approach. There is no suspense that he will, sooner or later, take a tough stance on China, no matter in the form of an arms race or in geopolitical strategy.

Signs have already emerged. Trump reportedly has approved a plan giving the country’s navy greater freedom in operating in the South China Sea. He commissioned America’s newest and largest aircraft carrier, the USS Gerald R. Ford, in Virginia last month. The Pentagon is sparing no effort in instigating South Korea to install the Terminal High Altitude Area Defense (THAAD) system which will pose a serious threat to China’s strategic security. Given the above, fluctuations in the Sino-US relationship are inevitable in Trump’s era.

But Beijing has resources and leverage to handle its ties with Washington. So far, the Chinese government has been patient with Trump, and expects to reach a consensus with the US in bilateral ties. Earlier, Beijing called for building a new type of major power relations featuring win-win cooperation, but the concept was not accepted by the Obama administration. Trump is unlikely to embrace the notion either. Even if the two countries agree on the new type of major power relations, China-US strategic rivalry and economic differences remain profound.

Beijing needs to stay patient with the Trump administration, and at the same time should show its determination in safeguarding China’s interests. Trump is good at bluffing, but he is just a paper tiger. Trump backed down from his confrontational stance over Beijing, committing to the “One China” policy in front of China’s unyielding insistence. His attempts to militarily deter North Korea in fact are aimed at pressuring China to do more over the issue. If he goes too far, China should show a firm opposition and even take retaliatory measures to sober him up. We have to respond firmly, otherwise, he will be always taken as a real tiger.

Source: Global Times

China sends first hack-proof code from space

China’s quantum communication ground station in Lijiang, Southwest China’s Yunnan Province. Photo: Courtesy of the University of Science and Technology of China

Chinese scientists have sent a hack-proof code from a satellite to the Earth, becoming the first in the world to realize quantum key distribution (QKD) from space to the ground.

The achievement, based on experiments conducted with the world’s first quantum satellite, Quantum Experiments at Space Scale (QUESS), was published in the authoritative academic journal Nature on Thursday.

The Nature reviewers commented that the experiment was an impressive achievement, and constituted a milestone in the field.

Nicknamed “Micius,” after a 5th Century BC Chinese philosopher and scientist who has been credited as the first person ever to conduct optical experiments, the 600-kilogram-plus satellite was sent into a sun-synchronous orbit at an altitude of 500 kilometers on August 16, 2016.

“We are very pleased with the achievements as we had originally scheduled to complete them in two years rather than only one,” Pan Jianwei, lead scientist of QUESS and a Chinese Academy of Sciences academician, was quoted as saying by China Central Television (CCTV).

An assistant researcher on Pan’s team, who requested anonymity, told the Global Times on Thursday that the technology will not be exclusively used in the fields of national defense and finance.

However, as the cost of quantum communication is still high, and due to the nature of areas like national defense where confidentiality is crucial, the application of the technology in these areas may come before other fields, the researcher said.

The satellite sent quantum keys to ground stations in Xinglong, in North China’s Hebei Province, and Nanshan, near Urumqi, capital of northwest China’s Xinjiang Uyghur Autonomous Region, the Xinhua News Agency reported.

The communication distance between the satellite and the ground station varies from 645 kilometers to 1,200 kilometers, and the quantum key transmission rate from the satellite to ground is up to 20 orders of magnitude more efficient than that expected using an optical fiber of the same length, Pan said.

When the satellite flies over China, it provides an experiment window of about 10 minutes. During that time, the 300 Kbit secure key can be generated and sent by the satellite, he said.

“That, for instance, can meet the demand of making an absolutely safe phone call or transmitting a large amount of bank data,” Pan said.

In an e-mail sent to the Global Times on Thursday, Pan’s team from the University of Science and Technology of China (USTC) wrote that in the QKD, the information is encoded so that any eavesdropper on the quantum channel that attempts to gain information about the key will inevitably introduce disturbances in the system, and this will be detected by the communicating users.

Commercial applications

“Satellite-based quantum key distribution can be linked to metropolitan quantum networks where fibers are sufficient and it is convenient to connect numerous users within a city over 100 kilometers. We can thus envision a space-ground integrated quantum network, enabling quantum cryptography – most likely the first commercial application of quantum information, which is useful at the global scale,” Pan said.

The establishment of a reliable and efficient space-to-ground link for faithful quantum state transmission paves the way for global-scale quantum networks, he added.

Theoretically, quantum communication using QKD is unbreakable, which has been proved mathematically and in physics, the assistant researcher explained.

Pan also revealed that Chinese scientists will work with their counterparts from European countries, including those from Italy and Germany, to explore the possibility of inter-continental QKD.

“We have begun to do the satellite-to-ground quantum key distribution between the Micius satellite and an Austrian ground station, and we will finish the tests this month,” read the e-mail.

Apart from the research experiments, the practicality and application of the technology is another focus for the Chinese scientists.

“Talks have been held between the research team and potential buyers of the technology. We are trying to realize the use of QKD in mobile targets such as ships at sea and foreign-based institutes,” Pan told CCTV.

Pan also noted that to enhance practicality, just like the Beidou (China’s GPS system) satellites, there should be a constellation of such satellites to build a global hack-proof communications network.

“We plan to launch satellites to higher orbits and construct a satellite constellation. We’ve begun to develop new techniques to increase the link efficiency, including larger-size telescopes, better acquiring, pointing, and tracking systems, and wave-front correction through adaptive optics,” read the e-mail.

Source: Global Times

 

N.Korea, US should not jeopardize peace efforts

North Korea’s plan to launch a missile strike on Guam could force the US to abandon negotiations, but the two sides should avoid further provocations which would threaten hopes for a peaceful solution in the Korean Peninsula, said experts.

“The Strategic Force of the Korean People’s Army (KPA) is seriously examining the plan for an enveloping strike at Guam through the simultaneous firing of four Hwasong-12 intermediate-range strategic ballistic missiles in order to interdict the enemy forces on major military bases on Guam and to signal a crucial warning to the US,” said a statement released by General Kim Rak-gyom, commander of the Strategic Force of the KPA, on Wednesday, the Korean Central News Agency reported.

“The Hwasong-12 missiles to be launched by the KPA will cross the sky above Shimane, Hiroshima and Kochi Prefectures of Japan. They will fly 3,356.7 kilometers for 1,065 seconds and hit the waters 30 to 40 kilometers away from Guam,” the agency added.

Guam is an unincorporated US territory in the Western Pacific Ocean, more than 3,000 kilometers to the southeast of North Korea, and has a US Navy installation equipped with a submarine squadron, a Coast Guard group and an air base.

North Korea’s Hwasong missiles have the ability to reach Guam if the US and its allies do nothing. But in combat, the US and its allies would destroy its missiles before their launch, Song Zhongping, a military expert who served in the PLA Rocket Force, told the Global Times.

This photo taken on Wednesday and released by North Korea’s official Korean Central News Agency on Thursday shows a rally in support of North Korea’s stance against the US in Kim Il-sung square in Pyongyang. Photo: AFP

“Hwasong missiles need a lengthy preparation time, including pumping liquid fuel and entering launch position. So in this period, a US spy satellite would be able to locate it and be destroyed by an air strike,” Song said.

The US is not intimidated by North Korea’s plan. “North Korea best not make any more threats to the US,” Trump said. “They will be met with fire, fury and frankly power the likes of which this world has never seen before.”

Guam governor Eddie Calvo said, “there was some concern among the public on Guam but no panic, and the authorities were ‘very confident’ that there was no heightened threat,” Reuters reported.

Raising tensions

It doesn’t matter how long North Korean missiles can fly or how accurate they are. The point is North Korea’s plan does not help negotiations and peace, Lü Chao, a Korea expert at the Liaoning Academy of Social Sciences, told the Global Times on Sunday.

“North Korea’s tough message can only undermine hopes for a peaceful solution. Those making efforts to restart negotiations, whether from the US or other countries, will be very disappointed. In other words, Pyongyang gives hardliners in the US an excuse to push for a military solution to the crisis,” Lü said.

The fact is joint US-South Korea drills cannot intimidate North Korea from further provocation, and North Korea’s missile and nuclear tests also cannot force the US to restart negotiations, so both Washington and Pyongyang are wasting time and money, and it would be better for them not to risk regional stability, Lü stressed.

North Korea makes such provocations because it believes countries in this region, including China and Russia, are afraid of military conflict, and they will try their best to protect North Korea from the US, so Pyongyang can provoke the US and ruin regional stability as much as it wants, said Zheng Jiyong, director of the Center for Korean Studies at Fudan University.

“It’s time to tell North Korea that China doesn’t want war in the peninsula, but we are not afraid of war if anyone sparks the conflict and we are capable of controlling the situation. But North Korea will face serious destruction. Therefore, for its own good, North Korea should stop making trouble for the region,” Zheng said.

Source: Global Times

MEP urges monitoring of nuclear facilities after Sichuan earthquake

China’s Ministry of Environmental Protection (MEP) has asked local nuclear and radiation safety monitoring stations in Southwest China’s Sichuan Province to closely monitor the situation and avoid a secondary disaster caused by an impact on the local nuclear facilities, after a strong earthquake hit Jiuzhaigou county in Sichuan.

The MEP said on Wednesday that currently the safety of the nuclear equipment in the area is under control and no damages have been reported. Moreover, the environmental radiation monitoring results are normal.

The death toll from Tuesday’s 7.0-magnitude earthquake in Sichuan has risen to 20, with 431 injured as of press time.

Among the injured in the earthquake, 18 are in serious condition, according to the provincial government. Seventeen of the seriously injured have been transferred to the cities of Chengdu and Mianyan for treatment.

More than 50,000 tourists, including 126 foreigners, were evacuated following the earthquake, local authorities said Thursday morning.

Rescue workers found 16 people trapped at a scenic spot called Panda Sea in Jiuzhaigou. Ten firefighters were dispatched to rescue them Thursday morning and the result of their efforts is not available as of press time.

Power supplies to the 17 towns in Jiuzhaigou county have been restored. Traffic on a major highway linking Jiuzhai-Huanglong Airport to the county resumed on Thursday.

Jiuzhaigou is a popular tourist destination in the mountains on the eastern edge of the Qinghai-Tibet Plateau. It is part of the Aba prefecture and is known for ethnic minority communities and stunning scenery.

Source: Xinhua-Global Times

US attempt to mix trade, political goals will accomplish neither

Negative news about Sino-US trade ties has appeared frequently recently.

A recent report from Politico, citing two anonymous officials, said that the US was mulling various economic measures against China, including trade restrictions and economic sanctions. Shortly after, media reported that US President Donald Trump was considering invoking Section 301 of the Trade Act of 1974, which would empower his administration to launch an investigation into alleged Chinese violation of intellectual property rights and forced technology transfer, but the plan was postponed at the last minute.

In the meantime, US Secretary of Commerce Wilbur Ross issued an article named “Free Trade is a Two-Way Street” in The Wall Street Journal, blasting China and Europe as “protectionists dressed in free market clothing.” He also stated that the Trump administration “will use every available tool to counter the protectionism of those who pledge allegiance to free trade while violating its core principles.”

Taking a close look at the background of the recent speculation surrounding US trade action against China, it is not hard to discern the logic behind the US re-politicalization of trade issues. Earlier this year, the US government expressed willingness to offer trade “concessions” to China in exchange for China’s help in pressuring North Korea over its nuclear program, highlighting its geopolitical priority over trade policy. The core of the Korean Peninsula issue is the conflict between the US and North Korea. By chattering about and overstating the so-called “China responsibility theory,” the US appears to have gone to the extreme of politicalizing trade and economic issues. Yet, it is dangerous to involve political factors in Sino-US economic and trade relations, which will not help the US achieve either political or trade goals.

However, while accusing other countries of trade protectionism, the US refused to sign the anti-protectionist commitment in the G20 finance ministers’ communique in March this year, forcing the G20 joint trade commitment to go backward from resisting “all forms of protectionism” to “working to strengthen the contribution of trade to our economies.” It has used trade protection measures, subsidies, discriminatory measures and other unfair trade measures in its own trade practices. Take agricultural products as an example. The highest tariff China currently imposes on imports of agricultural products is 65 percent, while US tariffs on such imports could be as high as 350 percent. The US also offered subsidies to multinational companies by various means. Boeing, Ford Motor, General Electric, General Motors and JPMorgan Chase rank among the top recipients of government subsidies, according to media reports.

It is even more disturbing to see that the US might conduct an investigation into whether steel imports pose a threat to US national security under the rarely used Section 232 of the Trade Expansion Act of 1962. It is clearly an abuse of the WTO’s national security exception for the purpose of protecting some outdated and low-efficiency industries in the US. The potential action, combined with the strengthened “security review” over investment projects in the country, has pointed to the US trend and “toolbox” of unilateral policy against its trade rivals, posing a serious threat to world trade.

It must be pointed out that unilateralism does not work on the path of free trade. The best consequence unilateralism could achieve is nothing but loss for both sides. China and the US should stick to the basic position of win-win cooperation, adhere to the basic way of resolving problems through consultation, and maintain smooth communication in major economic policies so as to ensure that the development of Sino-US economic and trade relations won’t be derailed. That’s the right two-way path.

Source: Global Times

Identifying ‘gray rhinos’ key to reducing their risk

It’s only recently that the term “gray rhino” entered the lexicon of the economic world, but what it indicates — large and obvious risks that are often neglected — has always been around.

In China’s case, the “gray rhinos” could stem from shadow banking, the real estate bubble, high leverage at State-owned enterprises (SOEs), local government debt and illegal fundraising, according to the Office of the Central Leading Group on Finance and Economic Affairs, China’s top economic policymaking office.

Identifying “gray rhinos” is important in dealing with them. How can we guard against a certain risk if we don’t even acknowledge its existence? The US subprime mortgage crisis was a typical example of failing to recognize the “gray rhino.” Before the crisis, many people were aware that there was a problem with subprime mortgages, but combined with the inattention of regulatory bodies to this problem, some were inclined to believe that the problem would somehow go away, which proved to be wishful thinking.

The “gray rhinos” threatening China are well-known to the public, which has heard numerous warnings from various experts. Take the real estate bubble as an example. It’s apparent to many that the current state of China’s economic development can hardly sustain high property prices in major cities for long.

However, since the real estate sector is a pillar industry of the economy, any attempt to prick the bubble may trigger a crisis and have a negative impact on the overall economy. Therefore, deflating the bubble without pricking it is a delicate, long-term balancing act for the government.

While the real estate bubble seems relatively urgent and severe, it should be pointed out that shadow banking has played a crucial role in the formation of almost all the “gray rhinos” in China, contributing not only to the bubble in the property sector but also to SOEs’ high leverage.

But shadow banking itself is not the real cause of the problem, and a proper understanding of the origin of “gray rhinos” is needed to address the risks. The rise of the shadow banking sector is driven by financing needs that cannot be met through either the formal banking system or the capital market.

China’s banking system has developed unevenly and it is not completely market-driven. The inadequate incentive structure in the financial system keeps lenders from serving the needs of all enterprises and consumers. China’s financial imbalances and excessive liquidity have also contributed to the growth of shadow banking, as excessive liquidity has failed to flow into the real economy and has instead circulated in the financial system. This situation has in turn exacerbated the real estate bubble, SOEs’ high leverage, excess local government debt and other risks.

Addressing such risks without pricking the bubble requires a delicate balance of measures, meaning that decision-makers need a high level of wisdom to steer the whole economy.

An “iron fist” approach should be avoided or it may risk triggering a new crisis. For instance, when China’s securities regulators cracked down on margin financing outside the brokerage system in June 2015 to reduce mounting risks in the stock market, their action backfired as it stoked market fears and led to plunges in stock prices.

With high leverage seen as a source of financial risks, some are concerned that the deleveraging process will cause a slowdown in economic growth, which may generate new risks and cause new crises. Such worries could be justified if China’s economic environment remained stuck in the past, when financial institutions and SOEs relied heavily on excess liquidity and high leverage.

To break out of this cycle, China must further facilitate the growth of small and medium-sized enterprises (SMEs) as well as innovative companies. That requires strong policy support from the government, such as lowering the entry barriers to key industries for non-SOEs and reducing the tax and regulatory burdens of SMEs to improve their profitability. Capital always seeks the highest returns, so if SMEs improve their revenues and profits, capital will naturally be drawn into them and keep liquidity from flowing out of the real economy.

To defuse China’s “gray rhinos,” authorities need to control risk and reduce leverage in traditional sectors, while at the same time providing incentives to guide capital into SMEs and innovative industries that will be the new drivers of continued economic growth.

Source: Global Times

China’s medical cosmetology industry sees global fastest growth rate

China’s medical cosmetology industry has seen the world’s fastest growth rate of 40 per cent since 2015, far exceeding the global growth rate of 7 per cent. The information is contained in a white paper recently released by SoYoung, China’s most popular medical cosmetology mobile app, Beijing Morning Post reported on August 9.

The paper shows that 1 in every 2.5 medical cosmetology consumers around the globe is Chinese. And 14 million Chinese people are projected to seek beauty through medical cosmetology in 2017, up 42 per cent than 2016 year-on-year. This is much higher than the global growth rate of 7 per cent.

Post-90s consumers are predicted to account for 53 per cent of the whole industry in 2017, quite different from the U.S. where according to statistics, consumers aged over 36 exceed 74 per cent.

Young consumers in China choose medical cosmetology mainly to be much more confident and meet job demands, while American consumers seek to resist senility.

In addition, statistics reveal that people with high incomes are much more inclined to choose medical cosmetology.

Nearly 80 per cent of women with monthly incomes of more than 30,000 RMB ($4,497) say they intend to seek beauty through medical cosmetology.

However, the rapid growth of the Chinese medical cosmetology industry does not only bring opportunities, but also challenges for practitioners.

Some beauty parlors without operation qualifications seek excessive profits by any means, thereby posing potential risks to consumers’ interests, the white paper disclosed.

Low-cost shared fitness rooms introduced in Beijing

Many shared fitness rooms were recently introduced in Beijing residential communities after a series of shared products including bikes, sleeping capsules and phone chargers were made available.

The room offered by the Beijing-based Mipao Technology requires a deposit of 99 RMB ($14.8) and charges 0.2 RMB per minute. Every room occupies an area nearly 5 cubic meters, in which a running machine is offered.

Bi Zhen, CEO of Mipao Technology said market research shows that 95 percent of Chinese need exercise, while those with gym cards make up only 10 percent. Bi added that the shared fitness rooms will greatly meet the people’s exercise needs.

However, analysts worry that there could be low demand for shared fitness rooms due to single variety fitness services, the high construction cost of the rooms and lack of shower facilities inside the rooms as in common gyms.

They suggested that self-service fitness rooms could only grow in future if they offered high-quality, experienced services.

Consecutive rise in China’s foreign exchange reserves attributed to supply-side reforms

Experts say consecutive improvements in China’s foreign exchange reserves in the first 6 months of 2017 illustrate that supply-side structural reforms undertaken by the government in 2016 to support economic growth are beginning to bear fruit.

According to statistics released recently by the People’s Bank of China, foreign exchange reserves reached $3.08 trillion by the end of July 2017, up $23.9 billion from the previous month and achieving increments in six consecutive months.

Experts said the rise can be attributed to a series of positive changes in China’s economy brought about by reforms, including good momentum for economic transformation and upgrading, rationality in purchasing foreign exchange and active investments by overseas business people in the Chinese market.

Against the backdrop of supply-side reforms, upgrade of enterprise products and improvements in export comprehensiveness provided strong economic support for the picking up of China’s foreign exchange reserves, said Zhang Huanbo, associate researcher at the Department of Research, China Center for International Economic Exchanges.

Zhang added that China’s foreign exchange reserves saw rapid growth from nearly $165.5 billion at the beginning of the 21st century and a slow decline after reaching the peak of $3.99 trillion in 2014.

Due to pressure from capital outflows brought about by irrational purchase of foreign exchange before, concerned Chinese departments took timely measures to offer proper guidance. Many enterprises faced with risks and problems of investments, mergers and acquisitions overseas reconsidered their plans abroad and thus released pressure for outflow of foreign exchange, Zhang noted.

In addition, increase in foreign direct investments is another contributor to the rise of China’s foreign exchange reserves.

Statistics released by China’s State Administration of Foreign Exchange show that China’s net inflow of foreign direct investments was $14.2 billion in the first half of 2017, signifying foreign investors’ bullish bet on the Chinese market as evident in the fact that more and more foreign banks are setting up branches in China.

Experts stressed the possibility of China’s international balance of payments being further optimized and cross-border capital flows becoming steadier despite any future fluctuations in the country’s foreign exchange reserves.