China’s foreign exchange regulator has announced plans to further open its foreign exchange market in the second half of the year while enhancing oversight of cross-border capital flows. The State Administration of Foreign Exchange (SAFE) outlined these priorities following a work meeting held on Saturday.
SAFE said it will continue to expand institutional access within the foreign exchange sector, introduce measures to optimize foreign exchange management related to the current account, and promote reforms to facilitate trade. Efforts will also focus on reducing exchange-rate hedging costs for small and medium-sized enterprises through multiparty cooperation and supporting pilot programs in regions such as the Hainan free-trade port.
The regulator emphasized it will strengthen monitoring of cross-border capital movements, refine macroprudential policies, and apply comprehensive measures to maintain stability in the foreign exchange market. Additionally, SAFE pledged to enhance supervision of market trading activities and intensify crackdowns on illegal cross-border financial activities by using advanced technologies, including artificial intelligence.
SAFE’s initiatives form part of a broader drive to open China’s capital account. The regulator plans to continue reforming the banking foreign exchange business environment and implement policies to facilitate cross-border investment and financing.
In a related announcement, the People's Bank of China (PBOC) reaffirmed its commitment to a moderately loose monetary policy and maintaining ample liquidity. The central bank intends to support the issuance of panda bonds—yuan-denominated bonds issued by foreign entities on the mainland—and promote further development of the offshore yuan market. This includes bolstering Shanghai’s cross-border and offshore financial services sector and consolidating Hong Kong’s role as a key offshore yuan business hub.
These policy statements came shortly after the Chinese Communist Party’s Politburo called for accelerated fiscal spending and measures to boost capital market confidence amid a slowing economy. China’s gross domestic product grew by 4.3% in the second quarter, marking the weakest quarterly expansion since late 2022, down from 5% in the first quarter.
Last month, PBOC governor Pan Gongsheng unveiled several initiatives aimed at strengthening cross-border financial connections, including raising the Southbound Bond Connect’s annual net investment quota to 800 billion yuan (approximately HK$929 billion), up from 500 billion yuan.