PBOC sees stable RMB amid 2-way fluctuations

A senior Chinese central bank official said on Wednesday that the renminbi exchange rate is expected to continue fluctuating in both directions, as a range of factors will exert both upward and downward pressure on the currency.

Geopolitical tensions and uncertainties over monetary policy in major economies remain the key external factors influencing the renminbi, said Zou Lan, deputy governor of the People's Bank of China.

Speaking at a news conference, Zou noted that while the US Federal Reserve kept its benchmark interest rate unchanged in June, it sent a hawkish signal. The European Central Bank raised rates by 25 basis points as a precautionary measure, and the Bank of Japan delivered another rate hike following its increase in December.

Although crude oil prices have retreated from earlier highs and any further policy adjustments by the Fed and ECB are expected to be gradual, the geopolitical situation in the Middle East has recently been complex and volatile, and uncertainties remain over the global inflation outlook and the future direction of monetary policy among major economies, he said.

Despite the challenging external environment, the renminbi has remained broadly stable with two-way flexibility. By the end of June, it had appreciated 3 percent against the US dollar from the end of 2025, while the CFETS RMB Index, which measures the currency against a basket of foreign currencies, had risen 4.7 percent.

"The exchange rate movements reflect supply and demand in the foreign exchange market and also demonstrate stronger market confidence in China's macroeconomic fundamentals," Zou said.

Looking ahead, he noted that China's improving economic fundamentals, continued progress in high-quality development and a more resilient foreign exchange market will help underpin the currency.

The ability of market participants to adapt to exchange rate fluctuations has also gradually improved. During the first five months, the proportion of companies using foreign exchange hedging instruments rose to 34.4 percent, up 4.5 percentage points from 2025, while around 30 percent of China's cross-border trade was settled in renminbi.

The PBOC will closely monitor changes in the international economic and financial environment, allow the market to play a decisive role in exchange-rate formation and keep the renminbi basically stable at a reasonable and balanced level, Zou said.

In addition, China's central bank will introduce a series of measures to deepen the development of the offshore renminbi market by enhancing liquidity, expanding the supply of RMB-denominated assets and strengthening connectivity with onshore markets.

Xie Guangqi, director-general of the PBOC's Monetary Policy Department, said the central bank will improve its liquidity support framework to provide stable funding across different maturities for the offshore RMB market.

The PBOC will enrich the pool of offshore RMB assets, promote active trading in offshore RMB financial products and expand the range of services provided by the offshore financial infrastructure, Xie said.

The central bank will strengthen links between onshore and offshore markets through cross-border repo transactions, Bond Connect and greater financial infrastructure connectivity. It also plans to support the launch of offshore RMB government bond futures and further develop the offshore interest rate swap market, he added.

In the first half, China's monetary policy has effectively supported the real economy, with credit growth remaining steady, financing costs near record lows and lending continuing to shift toward key sectors, Zou said.

By the end of June, the M2, a broad measure of money supply, had increased 8 percent year-on-year and outstanding aggregate financing to the real economy had risen 7.4 percent, both outpacing nominal GDP growth. In the first half, new yuan loans totaled 10.72 trillion yuan ($1.58 trillion), while bond financing reached 8.51 trillion yuan, reflecting stronger direct financing.

Zou said the PBOC will continue to implement an appropriately accommodative monetary policy, strengthen countercyclical and cross-cyclical adjustments, and support domestic demand and high-quality economic growth.

jiangxueqing@chinadaily.com.cn