Large-scale capital outflows not expected
The yuan's exchange rate has become "stable," an official with the State Administration of Foreign Exchange (SAFE) said during a press conference on Thursday.
China is unlikely to see large-scale capital inflows or outflows at the moment, said Wang Yungui, director of the Comprehensive Department at the SAFE, during the administration's regular third-quarter press conference.
Wang also noted that the yuan would depreciate against the US dollar if the US Federal Reserve announces an interest rate hike in the near future, but this would be a "normal phenomenon" and wouldn't trigger abnormal capital flows.
The yuan has seen some exchange rate fluctuations in recent weeks.
On August 11, it depreciated by about 2 percent against the US dollar, the biggest one-day slide in nearly two decades.
The 2 percent change followed the announcement by the People's Bank of China (PBC), the central bank, on August 11 that it would adjust the system for fixing the yuan's central parity rate.
The new mechanism takes market supply and demand into consideration, as well as price movements in major currencies, the PBC said.
Xi Junyang, a professor with the Department of Finance at the Shanghai University of Finance and Economics, told the Global Times on Thursday that the yuan had been "too reliant" upon the US dollar under the old system.
"When the US dollar became stronger, the yuan also appreciated against non-dollar currencies. This has had a negative effect on China's exports to those countries," Xi said.
Xi noted that the PBC's move "shows China is taking a further step toward a market-oriented exchange rate system."
He also noted that the new central parity system reduces the exchange rate gap between offshore yuan and domestically held currency, thus deterring speculative capital flows.
The yuan's depreciation caused some concern about the possibility of large-scale capital outflows, but experts have noted that such flows depend more on the outlook for the yuan's future trend.
"If people see the August depreciation as a prelude to more rounds of depreciation, capital outflows would take place. If they consider the depreciation as a single event, then there won't be large-scale capital outflows," Xi said.
He also pointed out that based on the current situation, the likelihood of large-scale fluctuations in the exchange rate is small.
Wang also said that the depreciation pressure on the yuan has been eased following the launch of the new central parity system, making large capital outflows less likely.
According to Wang, SAFE has taken some measures to curb capital outflows recently and will intensify a crackdown on outflows conducted through illegal money dealers.
But he stressed that SAFE hasn't launched any new policies to restrict people's foreign currency purchasing rights, and the authorities will be able to meet the "genuine and legal" demand for foreign exchange by firms and individuals.
Bai Ming, a research fellow with the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Thursday that it is hard to tell whether the yuan's recent depreciation can help to boost China's exports to other countries.
"The yuan's depreciation would cause exports to rise only under certain conditions, such as improved competitiveness of Chinese products, more support from government policies, and an increase in demand in international markets," he said.
According to a statement from the Ministry of Commerce on Wednesday, the yuan's depreciation was not aimed at boosting exports.
Statistics from the General Administration of Customs on September 8 showed that China's exports slumped 6.1 percent year-on-year to about 1.204 trillion yuan ($189 billion) in August.
