On the 25th, at the 2020 International Monetary Forum, Xiao Gang, a member of the National Committee of the Chinese People’s Political Consultative Conference and former chairman of the China Securities Regulatory Commission, said that despite the turbulence in the international financial market, compared with the international market, China’s financial market has shown a relatively stable operation and strong toughness. It is recommended to build a RMB global financial asset allocation center, take measures such as accelerating the reform of financial market elements, and abolishing unnecessary administrative controls.
Xiao Gang pointed out that China's stock market has achieved a relatively rapid growth overall. In particular, the number of IPOs in Shanghai and Shenzhen should exceed those of Nasdaq and the New York Stock Exchange. From the perspective of the RMB exchange rate, the supply and demand in the foreign exchange market have maintained a basic balance, and foreign exchange reserves have also increased. The RMB exchange rate has increased in flexibility, and the exchange rate has maintained a two-way volatility and is generally stable.
China's financial market has shown a relatively stable situation and strong resilience, while also having strong vitality. As for why foreign capital is so interested in RMB assets? Xiao Gang believes that there are several reasons:
One is that China is the mainstay of stabilizing the global economy. Recently, China’s economic data for the first half of the year has been released, achieving a 3.2% growth in the second quarter. The recovery of economic growth is conducive to enhancing the confidence of foreign investors in RMB assets, especially attracting long-term capital inflows.
Second, the valuation of A-shares in major global stock markets is still relatively low. As of June 30, the P/E ratio of the Shanghai and Shenzhen 300 Index was 12.69 times, which was lower than the S&P 500 index of 26.07 times. China's 10-year government bond yield is still around 3%. Therefore, for investors who hold USD liquidity, RMB assets are relatively attractive.
Third, China's capital market has become one of the largest markets in the world. The stock market plus the bond market totaled 160 trillion yuan, ranking second in the world. Our public fund market also ranks fifth in the world. Such a large-capacity market has high activity and greater resilience. In particular, China’s stocks and bonds have been included in many mainstream international indexes. Once included in the international index, overseas long-term funds will follow the allocation, so It also attracted more long-term funds to allocate RMB assets.
Fourth, various measures to expand financial opening in recent years have shown their effects. We have announced and implemented a series of financial opening measures this year, such as the cancellation of QFII and RQFII investment quotas, and the abolition of restrictions on the proportion of foreign shares held by financial institutions. The ease of asset allocation for foreign investors to participate in China's financial market has been greatly improved.
Regarding how to build a RMB global financial asset allocation center, Xiao Gang suggested: First, we must accelerate the reform of financial market elements and eliminate unnecessary administrative controls; second, actively promote the internationalization of RMB. It is necessary to promote the pricing of commodities in RMB and increase the use of currency swaps; third, to advance RMB exchange rate reform and capital account convertibility in an orderly manner, to expand the scope of exchange rate fluctuations in a timely manner, and to improve the RMB exchange rate formation mechanism; fourth, to strengthen the building of supervisory capabilities and prevent imported risks.
Source: Xinhua Finance
观点 | 肖钢：打造人民币全球金融资产配置中心