MNI BRIEF: China's SAFE To Ensure Capital FLows, Stable Yuan

China’s State Administration of Foreign Exchange (SAFE) will act when necessary to prevent any risk of the yuan exchange rate overshooting, and will expand its toolkit for managing cross-border liquidity, including with counter-cyclical adjustment measures, its deputy chief Li Bin said on Thursday.

Some other emerging Asian economies have acted similarly, imposed position limits on forex derivatives, adjusting foreign exchange reserve requirement ratios and tightening oversight of financial institutions’ maturity mismatches, Li noted. 

China has steadily refined its market-driven formation mechanism for the yuan exchange rate, and compared with other major emerging market currencies, the yuan has demonstrated both flexibility and stability in line with economic fundamentals, he said. 

The authorities will also support Hong Kong’s role as an offshore RMB hub and promote international use of the yuan, said Li. (See MNI: PBOC Persists With Yuan Support For Now-Advisors)