BEIJING — China will continue to open its forex market and let the market decide exchange rates, a senior official said on Sept 13.
“We will not change the direction of opening up and will make more efforts in the currency and finance sectors,” said Lu Lei, deputy director of the State Administration of Foreign Exchange (SAFE).
Lu said the Chinese market is immature as it is transforming and the situation will be changed through opening-up. The authorities will encourage more domestic companies to go global and welcome more foreign companies join domestic market players.
China’s central bank announced on Sept 12 that it had scrapped reserve requirements of 20 percent for financial institutions settling foreign exchange forward yuan positions.
Meanwhile, the central bank’s substantial supervision of reserves put aside by foreign financial institutions was also loosened.
The move is expected to make it cheaper for companies and investors to buy dollars while selling the yuan, and thereby help ease the pace of the Chinese currency’s recent rally, analysts said.
The central parity rate of the yuan continued to weaken against the US dollar after China relaxed control on capital outflows and the dollar rebounded from last week’s drop.
The central parity rate of the yuan weakened 105 basis points to 6.5382 against the US dollar on Sept 13, according to China Foreign Exchange Trade System.