BEIJING, Dec 18: China is closely monitoring the slide in the Russian rouble, the foreign exchange regulator said on Thursday, as the currency of one of its major energy imports struggles to avoid a free-fall. Wang Yonggui, head of policy and regulations for the State Administration of Foreign Exchange (SAFE), told a news conference that China was not overly concerned about signs of forex outflows in recent months.
‘Under the circumstance, signs of capital outflows in certain months are normal. Overall, we still see net capital inflows,’ he said, adding that many companies have opted to park export income overseas instead of selling off hard currency to banks, given the strong two-way fluctuations in the yuan spot market.
Xiao Lihong, another SAFE official, said the government was stepping up investigations into fake trade deals, following widespread suspicions that strong export figures in September and October were inflated by manipulated invoices designed to smuggle yuan into China in order to speculate on the stock markets.
However, she said recent unusual spikes in exports of jewellery and precious metals were not closely linked to speculative capital flows, addressing media reports. ‘There is no close link (between them) but we cannot say there is no problem,’ she said.
The yuan has been under pressure in the last month due to increased year-end dollar demand by some firms and growing market expectations of more policy easing after the central bank made a surprise cut to interest rates in November. Such easing is seen as negative for the yuan. The central bank has signalled it does not want the yuan to collapse, strengthening the official guidance rate but traders said it has been intervening less in the spot market, which is allowed to trade 2 percent higher or lower than the midpoint on any given day.
Spot yuan weakened sharply in the aftermath of the remarks, down 0.3 percent to 6.2187 per dollar in late morning trade, after the central bank set a weaker midpoint on Thursday.
(AGENCIES)
Follow our WhatsApp channel