MNI POLICY: China's Forex Reserve 'Important and Responsible'

     BEIJING (MNI) - China's foreign exchange reserve is "an important and

responsible investor" in the global financial markets, and it operates by

market-based principles while respecting global market rules and industry norm,

Pan Gongsheng, the head of China's State Administration of Foreign Exchange,

said at the Lujiazui forum in Shanghai. 

     Here are some of the key points made by top Chinese officials at the

opening of the forum today organized by the Shanghai government and the People's

Bank of China (PBOC):

     - China has the "basis, confidence and ability" to keep the smooth

operations of its forex market and the yuan exchange rate "basically stable at a

reasonable and balanced level", Pan said.

***Comment: Whether China will use its forex reserve in the ongoing trade war

has been a subject of speculation. While Pan's comment repeated China's past

official statements, it may also have been a subtle assertion of China's

leverage.

     - China has "struck a balance" between exchange rate flexibility and

stability in managing the yuan by macroprudential measures, Pan said. China's

forex market is stronger withstanding risks, major market participants have

gained a "deeper understanding" of the economy's resilience and the Chinese

government's macro-control abilities, while businesses and residents are more

rational and orderly in conducting forex businesses, Pan said.

     - China will turn Shanghai into a global center for yuan asset allocation

and risk management, and as more global indices include yuan assets, there will

be greater demand for its shares and bonds, said PBOC Governor Yi Gang. China

will continue to enhance interbank forex and bond markets, offer more forex

futures, boost market participants and support Silk Road bonds, Yi said.

     - The long-term outlook of the Chinese economy remains positive, while

external pressure aids growth, Vice Premier Liu He said. The rapid buildup of

China's macro leverage ratio has been contained, and it will rigorously promote

the healthy development of the capital market, Liu said.

     - The Chinese economy should not rely excessively on real estate, and it

shouldn't let property developers obtain too much credit financing, said Guo

Shuqing, the chairman of the China Banking and Insurance Regulatory Commission. 

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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