Capital flows, yuan to remain stable

China continued to see cross-border net capital inflows in March, and the two-way -capital flows and yuan's exchange rate will remain stable in the future, a senior currency regulator said at a press conference held Thursday in Beijing.

Companies are more willing to withhold and purchase -foreign currencies and less willing to do foreign exchange settlements in the near term, Guan Tao, head of the international payment department at the State Administration of Foreign Exchange (SAFE), the country's foreign exchange regu-lator, told reporters on Thursday.

The March surplus in foreign exchange sale and purchase business was $41.1 billion, down 10.5 percent from February while the forward foreign exchange sale and purchase stood at $2.7 billion in net foreign exchange settlement, down $20 billion from -February, data from the SAFE showed.

"We are glad to see these changes, and it will not get on our nerves if we discovered that the surplus in foreign exchange sale and purchase is dwindling, and we will show some tolerance," Guan said.

From the macro level, these changes help the building-up of a supply and demand equilibrium of foreign currencies and also push reasonable allocation of currencies among enterprises at the micro level, Guan said.

The regulator said the two-way capital flows and fluctuation of yuan's exchange rate would be a norm against the backdrop of the external payment balance and the yuan's exchange rate trending toward reasonable and balanced levels.

"The fact that the yuan now fluctuates in a wider band discouraged arbitrage, and the drop in exports in February contributed to the decrease in foreign currency surplus," Cai Xianpu, a researcher with Shenzhen-based Zero Power Intelligence, told the Global Times on Thursday.

In February, China's exports contracted 18.1 percent from the same period a year ago, resulting in a trade deficit of $22.99 billion, the biggest deficit since March 2012, data released by the General Administration of Customs showed on April 10.

"The drop in the surplus showed that companies are more sensitive to the yuan exchange rate, which has kept fluctuating, and change their strategies to cope with market changes in a constant fashion," Liu Dongliang, a senior currency analyst at China Merchants Bank Co in Shenzhen, told the Global Times on Thursday.

From the beginning of this year, the yuan has fallen 3 percent against the dollar, wiping out more than what it gained in 2013, reducing the chances for "hot money" to make profit and sparking fears in the market of an outflow of "hot money."

However, Yi Gang, head of the SAFE, said over the weekend that there were no outflows of "hot money" in China in 2013 as well as the first quarter of this year.