Core Viewpoint - The National Foreign Exchange Administration emphasizes that China's foreign exchange market is expected to remain stable in the second half of the year, supported by robust economic fundamentals, steady progress in opening up, and enhanced market resilience [3][4]. Economic Fundamentals - China's GDP grew by 5.3% year-on-year in the first half of the year, with domestic consumption and capital formation contributing 77% to economic growth, an increase of 17 percentage points from the previous quarter [3]. - The country is committed to expanding domestic demand as a long-term strategy, promoting the integration of technological and industrial innovation [3]. Foreign Exchange Market Resilience - The resilience of China's foreign exchange market has improved, with a more flexible exchange rate mechanism that can respond to external pressures [4]. - The corporate awareness of exchange rate risk has increased, with the foreign exchange hedging ratio and the proportion of cross-border RMB transactions reaching historical highs of around 30% [4]. Cross-Border Capital Flows - In the first half of the year, there was a net inflow of $127.3 billion in cross-border funds from non-bank sectors, continuing the trend from the second half of last year, with a 46% increase in the second quarter [5]. - Foreign investment in domestic stocks and bonds increased, with a net inflow of $10.1 billion in stocks and funds, reversing the previous two years' net outflow trend [6]. International Investment Trends - A survey indicated that 30% of global central banks plan to increase their allocation to RMB assets, reflecting the growing appeal of RMB-denominated investments for risk diversification [7]. Banking Sector Developments - Six new banks initiated foreign exchange business reforms in the first half of the year, bringing the total to 22 banks involved in these reforms [8]. Service Trade Performance - China's service trade income grew by 13% year-on-year in the first half of the year, with cross-border travel income increasing by 42% and the service trade deficit decreasing by 14% [9]. Direct Investment Trends - From January to May, net inflows of equity direct investment into China increased by 16% year-on-year, amounting to $31.1 billion [10]. Currency Exchange Rate Stability - The RMB appreciated by 1.9% against the USD in the first half of the year, maintaining stability within a range of 7.15 to 7.35 [11]. - The market shows no significant expectations for RMB appreciation or depreciation, indicating rational trading behavior [12]. Market Activity - The total trading volume in the domestic RMB foreign exchange market reached $21 trillion in the first half of the year, a 10.2% increase year-on-year [14]. - The combined scale of bank settlement and sale of foreign exchange reached $2.3 trillion, marking the second-highest level for the same period historically [15]. - The total scale of foreign-related income and expenditure reached $7.6 trillion, a historical high for the same period, with a year-on-year growth of 10.4% [16].

Core Insights - Foreign investment in domestic stocks and funds increased by a net amount of 10.1 billion USD in the first half of the year, reversing a trend of net selling over the past two years [1] - The total amount of foreign-held RMB bonds exceeded 600 billion USD, indicating a historically high level of foreign investment in this asset class [1] - The net increase in foreign investment in domestic stocks surged to 18.8 billion USD in May and June, reflecting a growing willingness among global capital to allocate to the domestic stock market [1] - Future foreign investment in RMB assets is expected to maintain stable and sustainable growth [1]