PBOC calls for efforts to prevent drastic exchange rate changes

The People's Bank of China, the country's central bank, called for efforts on Friday to better guide expectations in China's foreign exchange market and resolutely prevent any drastic fluctuations in exchange rates.

"Efforts will be made to correct pro-cyclical and one-way market behaviors when necessary to curb speculation," the PBOC and the State Administration of Foreign Exchange said in a joint statement on Friday, after the China Foreign Exchange Committee held a meeting on Thursday.

The statement came after the renminbi breached the 7-per-dollar level in onshore and offshore trading on Wednesday, the first time in several months. The renminbi advanced against the dollar after the statement release.

Global monetary tightening and recent risk events in the banking industry within the United States and Europe have intensified risk aversion sentiment, which has propped up the US dollar and led to two-way fluctuations of the renminbi lately, the statement said.

Nevertheless, the country's macroeconomy, international payments and foreign exchange reserves have solid fundamentals while financial institutions, enterprises and residents have an overall stable expectation of exchange rates, the statement said.

"These factors have provided a firm foundation and strong safeguard for the stable operation of the foreign exchange market," the statement said, adding that renminbi exchange rates are able to stay generally stable at a reasonable level.

The central bank also stressed in the China Financial Stability Report 2022 on Friday that both the fundamentals of China's economic stability, long-term improvement and the productive factors underpinning the country's high-quality development have remained unchanged.

Vowing efforts to reinforce the system that safeguards financial stability, the PBOC said in the report that it will actively promote the establishment of the financial stability guarantee fund, give full play to the role of the deposit insurances and industry guarantee funds, and take market-based and law-based approaches to defuse potential risks.