The Chinese foreign exchange chief has warned against betting on the country’s rapidly appreciating currency as the regulator seeks to curb speculation and hedge against financial risks.

“Don’t bet on the appreciation or depreciation of the yuan. Companies that continue to gamble on it will certainly lose, â€Pan Gongsheng, head of the State Administration of Foreign Exchange and vice-governor of the central bank of China, said in a statement. word (link in Chinese) delivered Thursday at the 13th Lujiazui Forum in Shanghai.

The yuan has been tearing apart since the end of March and peaked in three years against the US currency in May. Chinese financial regulators recently intensified efforts to stabilize the exchange rate and curb speculation. Last week, the People’s Bank of China asked domestic lenders to hold more foreign currency in reserve, in a bid to ease upward pressure on the yuan.

Two-way fluctuations in the yuan exchange rate will become normal due to complicated internal and external factors, Pan said. This means that managing currency risk will have a major impact on the financial performance of companies, especially those with more active international operations, he said.

Managing the currency risk of companies should adhere to the principles of serving their core business and focusing on preserving capital rather than capital appreciation, with the aim of keeping their finances stable and healthy, Pan said. .

A banker who declined to be named told Caixin that many import and export companies prefer speculation, which means they try to profit from their currency trading, rather than hedge, which means that they aim to reduce the currency risk.

Pan said factors such as China’s monetary policy normalization and the country’s economic recovery after Covid will continue to have a stabilizing effect on the yuan, but also warned of uncertainties generated by foreign markets. , such as those caused by ultra-slack politics in many other countries.

Contact reporter Tang Ziyi ([email protected]) and editor Joshua Dummer ([email protected])

Download our app for getting late-breaking alerts and reading news on the go.

Get our free weekly newsletter must read.