State Administration of Foreign Exchange Signals Commitment to Exchange Rate Stability Foreign Investors Net Purchase of Domestic Stocks and Funds Exceeds $10 Billion in First Half

    On July 22, the State Council Information Office held a press conference featuring Li Bin, Deputy Director and Spokesperson of the State Administration of Foreign Exchange (SAFE); Jia Ning, Director of the Balance of Payments Department at SAFE; and Xiao Sheng, Director of the Capital Account Management Department at SAFE. They presented foreign exchange receipts and payments data for the first half of 2025 and answered journalists' questions.

    At the event, SAFE reiterated its commitment to addressing market concerns, signaling its determination to stabilize the exchange rate, and outlined several key measures for the next phase. Concurrently, data on foreign capital allocation in China's market for the first half of the year was released, showing a net increase of $10.1 billion in foreign holdings of domestic stocks and funds. This indicates growing global capital allocation toward China's stock market and a positive outlook on the Chinese market.

    Positive Outlook on China's Market

    Foreign Investors Net Purchase of Domestic Stocks and Funds Reaches $10.1 Billion

    Since the start of 2025, the external environment has become more complex and volatile, with rising unilateralism and protectionism, weakened momentum in global economic and cross-border trade growth, and increased turbulence in international financial markets. China's foreign exchange market has maintained stable operations, demonstrating strong resilience and vitality, outperforming market expectations.

    In the first half of the year, the scale of foreign-related receipts and payments steadily increased. Cross-border receipts and payments by non-bank sectors, including enterprises and individuals, totaled $7.6 trillion, up 10.4% year-on-year, reaching a record high for the same period. Cross-border capital flows continued to show net inflows. Non-bank sectors, including enterprises and individuals, recorded a net inflow of $127.3 billion, maintaining the net inflow trend since the second half of last year. Notably, the net inflow in the second quarter increased by 46% quarter-on-quarter. Foreign investors overall increased their net holdings of domestic stocks and bonds.

    On July 22, Jia Ning, Director of the Balance of Payments Department at the State Administration of Foreign Exchange, disclosed at a State Council Information Office press conference that foreign investors increased their net holdings of domestic stocks and funds by $10.1 billion in the first half of the year, reversing the overall net reduction trend seen over the past two years. Notably, net increases surged to $18.8 billion in May and June, indicating heightened global capital allocation interest in China's stock market.

    Foreign investment in RMB bonds also continued to rise, with foreign holdings of onshore RMB bonds currently exceeding $600 billion, reaching a historically high level.

    Meanwhile, from January to May, net inflows of equity-type foreign direct investment into China reached $31.1 billion, a 16% year-on-year increase. Net inflows of securities investment into China amounted to approximately $33 billion, reversing the net outflow trend seen in the second half of last year. Outbound investment progressed in an orderly manner. From January to May, equity-type outbound direct investment reached $51.9 billion, remaining largely unchanged year-on-year, while outbound securities investment remained active.

    Foreign exchange market transactions were robust. In the first half of the year, the total trading volume in the onshore RMB foreign exchange market reached $21 trillion, up 10.2% year-on-year. Spot and derivatives trading volumes amounted to $7.4 trillion and $13.6 trillion respectively, accounting for 35% and 65% of the total.

    Foreign exchange reserves remained stable. At the end of June, China's foreign exchange reserves stood at $3.3174 trillion, an increase of $115.1 billion from the end of 2024, indicating steady growth in the scale of reserves.

    AFE reveals key measures for the next phase

    At the meeting, the State Administration of Foreign Exchange (SAFE) disclosed several key measures for the next phase.

    First, it plans to extend a batch of innovative pilot policies to more pilot free trade zones nationwide. On July 22, Xiao Sheng, Director of the Capital Department of SAFE, stated at a State Council Information Office press conference that SAFE plans to extend a batch of innovative pilot policies to more pilot free trade zones nationwide.

    Specifically, on one hand, it will further expand pilot policies for cross-border trade facilitation, including five measures such as supporting banks in optimizing new international trade settlement methods, expanding the scope of net settlement for trade receipts and payments, and facilitating foreign exchange receipts and payments for current account items. On the other hand, efforts will be intensified to advance high-level opening-up in cross-border investment and financing, encompassing five policies such as the Qualified Foreign Limited Partner (QFLP) foreign exchange management pilot, direct foreign debt registration by banks, and shared foreign debt quotas for parent-subsidiary leasing companies.

    Second, preparations are underway to fully abolish domestic reinvestment registration for foreign direct investment nationwide. Xiao Sheng stated that building on earlier pilot programs, the nationwide abolition of domestic reinvestment registration for foreign direct investment is planned to facilitate direct transfers of reinvestment funds to relevant accounts by foreign-invested enterprises. This will reduce operational costs and capital turnover time for enterprises while enhancing investment efficiency. The public consultation phase for this notice has concluded. The AFE is currently compiling and analyzing the collected opinions and suggestions. The notice will be formally released as soon as possible after fully incorporating feedback from all parties.

    Third, relevant documents regarding the increase of the foreign debt borrowing quota for certain science and technology innovation enterprises to US$20 million will be formally released promptly. Xiao Sheng stated that in the first half of the year, SAFE uniformly raised the foreign debt borrowing limit for science and technology innovation enterprises to $10 million, with select enterprises—those prioritized through the “innovation points system”—eligible for a higher limit of $20 million. The public consultation phase for these policies has concluded, and the formal release will follow promptly after thorough review and incorporation of all feedback.

    Addressing Market Concerns

    Signaling Exchange Rate Stability

    On July 22, SAFE addressed market concerns regarding the exchange rate, signaling its commitment to stability.

    At a press conference, Li Bin, Deputy Director and Spokesperson of SAFE, stated that from a macro perspective, the market-based formation mechanism of the RMB exchange rate continues to improve, with enhanced exchange rate flexibility enabling timely release of external pressures and promoting supply-demand equilibrium. At the micro level, enterprises' awareness of exchange rate risk neutrality has been steadily rising, with cross-border RMB transactions growing steadily. In the first half of the year, both the hedging ratio for corporate foreign exchange and the proportion of cross-border RMB receipts and payments under goods trade reached around 30%, both hitting record highs. Reduced foreign exchange risk exposure helps maintain rational market trading. At the policy level, the foreign exchange market has accumulated substantial experience in counter-cyclical adjustments and possesses a rich reserve of policy tools. Regulatory effectiveness in the foreign exchange sector has steadily improved, and the capacity to prevent and mitigate external shocks has continuously strengthened. “We have the confidence and capability to continue maintaining the stable operation of the foreign exchange market.”

    The State Administration of Foreign Exchange stated that the market currently holds no significant expectations for either appreciation or depreciation of the renminbi.

    Li Bin further noted that market expectations remain stable. Based on indicators such as forwards and options, there are currently no significant expectations for either appreciation or depreciation of the renminbi, with market transactions proceeding rationally and orderly. When the renminbi weakens, enterprises increase their foreign exchange settlements at higher rates; when it strengthens, they increase purchases at lower rates. Overall, there are no irrational trading behaviors such as chasing gains or cutting losses.

    In the first half of this year, the RMB appreciated by 1.9% against the US dollar. The exchange rate fluctuated within a range of 7.15 to 7.35 against the dollar, maintaining fundamental stability at a reasonable and balanced level while also serving as an automatic stabilizer for macroeconomic and international balance of payments adjustments.