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The effects of Britain’s vote to leave the European Union will show gradually over time, but won’t change the stable pattern of China’s capital movement, according to the nation’s foreign exchange regulator.
Wang Chunying, a spokeswoman at the State Administration of Foreign Exchange, said at a conference on Thursday that no immediate Brexit-triggered shocks to China’s capital flows had been noted.
“We stepped up market monitoring prior and after the Brexit referendum, but so far no big disturbances on China’s cross-border capital flows have been observed,” she said.
Post-Brexit market uncertainty may further strengthen the US dollar and reduce the likelihood of interest rate increases by the Federal Reserve, Wang said.
The impact on the economy in Britain and Europe, as well as on China’s trade and investment with their economies, won’t show immediately nor result in sharp changes, she said.
Wang said the regulator would continue to step up monitoring to safeguard against risks of capital flows.
The impact of Brexit and the policy response is likely to top the agenda at the meeting of G20 finance ministers and central bankers in Chengdu this weekend.
The yuan was under a fresh round of downward pressure after the Brexit result on June 23. The yuan was trading at 6.7 against the US dollar on Tuesday, a key psychological level for the rate, before it bounced back to 6.67 on Thursday morning in the onshore market.
Wang said the yuan’s exchange rate regime, which takes reference to a basket of currencies, can better adapt to market changes. The yuan remains basically stable against a basket of currencies, despite its depreciation against the greenback, she said.
China’s foreign exchange reserves ended two months of straight declines and rose unexpected by U$13.4 billion last month to US$3.21 trillion at the end of June, more than twice the level of Japan’s.
Wang said fluctuations in reserves “around a reasonable level” would become “new normal”.
She did not elaborate on what a reasonable level was, but said steady economic growth and capital inflows were fundamentals to support stable capital movement over the long term.
(SOUTH CHINA MORNING POST)
