China's Central Bank Governor: Stable Yuan Key to Global Financial Stability

China's central bank governor, Pan Gongsheng, has emphasized the importance of maintaining the stability of the yuan exchange rate for global financial stability. In a recent speech, Pan highlighted the need for a balanced and adaptive exchange rate policy, prioritizing the stabilization of prices at reasonable levels while ensuring the yuan remains stable at an equilibrium level.

The yuan's stability is crucial for China's economic growth and global financial stability. In 2024, China's economy is expected to maintain stable growth, with stimulus measures rolled out in late 2024 revitalizing production, demand, and market sentiment. Domestic demand has shown great potential for improvement, with measures to boost consumption and investment delivering standout results, such as a 11.8 percent year-on-year increase in retail sales for home appliances.



To maintain the yuan's stability, the People's Bank of China (PBOC) has implemented a series of policies. These include adopting a more proactive fiscal policy and a moderately loose monetary policy, prioritizing the stabilization of prices at reasonable levels. The central bank has also vowed to strengthen foreign exchange market resilience, enhance cross-border capital flow monitoring, and deepen international currency cooperation.



The PBOC has taken steps to manage market expectations and prevent one-sided collective expectations from forming in the foreign exchange market. By providing clear guidance and communicating its policy stance, the central bank aims to prevent exchange rate overshooting risks and maintain the yuan's stability at a reasonable and equilibrium level.

China's commitment to high-quality economic development and opening-up is bolstering the currency's global stature. The internationalization of the yuan is a natural process driven by the market, as China's foreign trade continues to expand, leading to increased use of the yuan in international trade.

However, maintaining the yuan's stability in the face of external pressures and market fluctuations remains a challenge. The PBOC must continue to strengthen market-oriented exchange rate policies, prevent one-sided expectations, and utilize countercyclical adjustments to manage market expectations and investor sentiment.

In conclusion, China's central bank governor has emphasized the importance of maintaining the stability of the yuan exchange rate for global financial stability. The PBOC has implemented a series of policies to achieve this goal, including adopting a proactive fiscal policy, a moderately loose monetary policy, and strengthening foreign exchange market resilience. As the yuan's internationalization progresses, China must continue to manage market expectations and investor sentiment to maintain the currency's stability in the face of external pressures and market fluctuations.