Core Viewpoint - China's foreign exchange market has effectively responded to external shocks, demonstrating strong resilience and vitality, with performance exceeding market expectations [1] Group 1: Cross-Border Capital Flows - In the first half of the year, China's cross-border income and expenditure reached a total of $7.6 trillion, a year-on-year increase of 10.4%, marking a historical high for the same period [2] - Non-bank sectors recorded a net inflow of $127.3 billion in cross-border funds, continuing the net inflow trend since the second half of last year [2] - The net inflow under goods trade remained high, with foreign capital increasing its holdings of domestic stocks and bonds [2] Group 2: Market Resilience and Risk Management - The resilience of China's foreign exchange market has been enhanced, with improved mechanisms for the market-oriented formation of the RMB exchange rate and increased exchange rate flexibility [3] - The awareness of exchange rate risk among enterprises has improved, with the foreign exchange hedging ratio and RMB cross-border receipts under goods trade both reaching around 30%, a historical high [3] - The foreign exchange market has accumulated rich experience in counter-cyclical regulation, enhancing its ability to prevent and mitigate external shock risks [3] Group 3: Reform Initiatives - The State Administration of Foreign Exchange (SAFE) has completed public consultations on a draft notice to deepen cross-border investment and financing foreign exchange management reforms, which will be promoted nationwide [4] - The reforms include measures to facilitate the receipt of foreign funds by research institutions and to simplify the cross-border financing process for technology enterprises [4][5] - The reforms aim to eliminate the registration requirement for foreign direct investment reinvestment, thereby improving investment efficiency [5] Group 4: Attractiveness of RMB Assets - Foreign investment in RMB-denominated bonds has remained stable, with foreign holdings exceeding $600 billion, a historically high level [6] - In the first half of the year, foreign investors net increased their holdings of domestic stocks and funds by $10.1 billion, reversing a two-year trend of net reductions [6] - The proportion of foreign investors holding domestic bonds and stocks is estimated to be around 3% to 4%, indicating potential for stable and sustainable growth in foreign allocations to RMB assets [7] Group 5: Global Investment Trends - The demand for diversified global asset allocation has created favorable opportunities for foreign investment in China, as RMB assets have shown independent performance in global markets [8] - Continuous financial reform and opening-up in China are expected to further integrate domestic financial markets into the international financial system, enhancing the attractiveness of RMB assets [8]

Core Insights - The State Administration of Foreign Exchange (SAFE) reported that in the first half of 2025, the scale of cross-border income and expenditure for non-bank sectors, including enterprises and individuals, reached a historical high for the same period [1] Group 1 - The foreign exchange market maintained stable operations, demonstrating strong resilience and vitality [1] - Cross-border trade and investment financing were active, contributing to the record levels of cross-border income and expenditure [1] - The foreign exchange market expectations remained stable, with the RMB exchange rate maintaining basic stability and continued net inflow of cross-border funds [1] Group 2 - The supply and demand in the foreign exchange market were generally balanced, and the scale of foreign exchange reserves remained stable [1]