Interpret China's Foreign Exchange Administration Policy: Focus on Solid Progress in Foreign Trade

The 2026 National Work Conference on Foreign Exchange Administration was held in Beijing from January 5 to 6. The conference analyzed the current financial and foreign exchange situation and arranged key tasks for 2026. Liu Zhiqin, Senior Research Fellow at the Chongyang Institute for Financial Studies, Renmin University of China, stated in an interview with Sputnik News Agency that the detailed policy rules have not yet been fully formulated. Amid the rapidly evolving domestic and international markets, it is necessary to adopt more refined and forward-looking measures to balance liberalization and regulation, and achieve dynamic coordination between stability and progress. We should adhere to taking the development of foreign trade as the foundation of foreign exchange administration, and promote the internationalization of the RMB as a key path to enhance the stability and quality of the foreign exchange market.

The National Work Conference on Foreign Exchange Administration pointed out that in 2026, the work of foreign exchange administration should adhere to the principle of making progress while maintaining stability, improve quality and efficiency, better coordinate development and security, and strive to build a foreign exchange management system and mechanism that is more convenient, more open, more secure, and more intelligent. Efforts will be made to advance in-depth reforms and high-level opening-up in the foreign exchange field, effectively meet the foreign exchange needs of various entities, prevent and defuse external shock risks, further strengthen in-process and post-event supervision, and strive to create a foreign exchange policy environment that ensures both robust liberalization and effective regulation, so as to contribute to a good start for the 15th Five-Year Plan period.

The conference deployed seven key tasks for foreign exchange administration in 2026:

1.Steadfastly advance full and rigorous Party self-governance;

2.Deepen reforms to facilitate foreign exchange transactions;

3.Steadily promote high-level institutional opening-up in the foreign exchange field;

4.Adhere to bottom-line thinking and build solid breakwaters and seawalls for the foreign exchange market;

5.Further consolidate and strengthen foreign exchange supervision, and enhance the capacity and level of supervision in the context of opening-up;

6.Safeguard the security, liquidity, and preservation and appreciation of foreign exchange reserve assets;

7.Promote the revision of the Regulations on Foreign Exchange Administration, build a higher-standard balance of payments statistics system, and steadily explore the construction of Smart Foreign Exchange Management.

Liu Zhiqin interpreted the impact of this conference on China's economy and offered prospects for the development of China's foreign trade and foreign exchange market:

Detailed Policy Rules Unfinalized; Foreign Exchange Control Still in the Exploration Phase

Liu Zhiqin noted that since the launch of reform and opening-up, foreign exchange administration has been advancing under a dual-track system balancing opening-up and control. In his view, the conference has only conveyed the guiding principles and spirits for now, with the detailed rules yet to be fully formulated. In essence, the existing institutional frameworks and norms will continue to be applied, while upholding the core policy tenets.

As for foreign exchange control, the current practice is still in a phase of ongoing exploration, and a comprehensive, well-established and mature set of foreign exchange control policies and measures has not yet been developed. This is because the international and domestic landscapes are evolving at an exceptionally fast pace—particularly the foreign exchange market, which witnessed rapid changes and emerging new phenomena and issues in 2025. Against this backdrop, it is imperative to introduce more refined and forward-looking policy measures to boost trade development while strengthening foreign exchange regulation, with a particular focus on enhancing the standardization of the foreign exchange market.

Combining Liberalization with Regulation: Effective Implementation Is Key to Pursuing Prosperity and Security in Parallel

Liu Zhiqin stated that as we can see, the guiding principles and policies set forth at the conference are broad in nature, serving as directional guidelines. When it comes to policy implementation—for instance, fostering a foreign exchange policy environment that ensures both vibrant liberalization and robust regulation—new issues will constantly emerge in the market. Although we have long been advancing the approach of combining liberalization with regulation, the crux lies in how to implement it more effectively to better facilitate the development of economic and trade relations.

Personally, I believe that whether the regulation is stringent or relaxed, it should be conducive to promoting the prosperity and stability of economy and trade while minimizing risks. The purpose of regulation is to safeguard security, rather than restrict capital flows or impede market prosperity. However, abnormal phenomena do crop up in the market from time to time, posing a significant test to the administrative and regulatory authorities. This test is not only a means to verify and enhance the competence of policymakers; more importantly, it requires us to truly integrate regulatory measures with market mechanisms in an organic manner.

Making Progress While Maintaining Stability is a Basic State Policy; The Relationship Between Stability and Progress Must Be Properly Handled

Liu Zhiqin pointed out that making progress while maintaining stability has always been our basic state policy. For all industries and fields, stability takes precedence, and progress follows closely behind. Focusing on stability is undoubtedly correct, but this does not imply inaction or a lack of ambition; rather, the purpose of stability is precisely to promote development. It is important to note that if a department or policy places excessive emphasis on stability without pursuing change and progress, it will actually be detrimental to the development of the economy and trade markets.

To achieve favorable and orderly development of the economy and trade, it is essential to properly handle the relationship between stability and progress. While stability is certainly important, it is not everything. In reality, there are cases where inaction is chosen in the name of seeking stability, and "lying flat" is even regarded as a form of stability. In contrast, an attitude and action characterized by striving for progress, working to achieve the best results, and daring to assume a certain degree of risk are far more conducive to economic development.

Improving Quality and Efficiency Requires Clear Standards; Prioritizing Solid Progress in Foreign Trade Is Fundamental

Liu Zhiqin holds that in the field of foreign trade administration, improving quality and efficiency is a relatively complex task. Particularly in the foreign exchange market, questions such as how to standardize and quantify the improvement of quality and efficiency, and how to define the so-called "quality", all require relevant authorities to issue clear standards.

For the 15th Five-Year Plan, I believe there is one fundamental principle above all else: we must make solid progress in foreign trade work, and ensure that foreign trade develops in an orderly, stable and secure manner. Foreign exchange stems from foreign trade—without foreign trade, where would foreign exchange come from? Foreign trade is the soil, while foreign exchange is the flowers or plants that grow from it. Stabilizing the foreign trade market should be a key priority in our foreign exchange administration efforts. However, at present, many people only focus on foreign exchange itself, while ignoring the role of foreign exchange as a lever to boost the prosperity and sound development of the foreign trade market.

Optimistic Outlook on China's Foreign Trade During the 15th Five-Year Plan Period

Liu Zhiqin stated, "I believe that during the 15th Five-Year Plan period, China's foreign trade will continue to maintain its prosperity and deliver impressive performance. This is mainly attributable to the fact that as the world’s largest manufacturing and industrialized nation, China has achieved rapid development in high-tech sectors, with a constant stream of innovations emerging, which are highly attractive to the international market. Meanwhile, China has consistently ranked among the top globally in terms of cost-performance ratio and product quality. In addition, various revenues generated by the service sector will directly drive the development of the foreign trade market. The prosperity, quality improvement and efficiency enhancement of the foreign trade market will, in turn, help strengthen the stability of the foreign exchange market and generate steady returns. And the stability and steady returns of the foreign exchange market will further boost the development of China’s foreign trade."

He added, "I hold a relatively optimistic view on the foreign trade situation during the 15th Five-Year Plan period, mainly due to the uncertainties in the international market. Particularly, the difficulties faced by the United States and some Western economies in their trade and import-export markets have created more favorable development space for the Chinese market and its foreign trade. This is precisely a crucial prerequisite for the joint prosperity and development of China's foreign trade and foreign exchange markets."

The Core Function of the Foreign Exchange Market Is Risk Hedging; Importance Must Be Attached to Renminbi Internationalization

Liu Zhiqin holds that the core function of the foreign exchange market is risk hedging, where the risks in question refer to avoiding defaults, payment breaches and losses.

He emphasized that in the field of foreign exchange administration, importance should be attached to the development of Renminbi internationalization. The internationalization of the Renminbi and the promotion of the digital Renminbi will help stabilize the foreign exchange market and may further enhance its overall quality.

Wang Wentao, Minister of Commerce of China, stated earlier that China has further consolidated its position as a major trading power, with remarkable achievements in high-quality development. Foreign trade has withstood pressure and demonstrated strong resilience, with the scale of merchandise trade remaining the world’s largest. The international market shares of China’s exports and imports have stayed above 14% and 10% respectively, and the scale of trade in services has maintained its status as the world’s second-largest.

According to statistics released by the State Administration of Foreign Exchange (SAFE) of China, by the end of December 2025, China’s foreign exchange reserve stood at USD 3.3579 trillion, an increase of USD 11.5 billion or 0.34% from the end of November. The reserves have remained above the USD 3.3 trillion mark for five consecutive months, hitting a new high since December 2015. China has continuously consolidated and expanded the sound momentum of steady economic growth. The supporting conditions and underlying trends for its long-term positive economic development remain unchanged, which is conducive to maintaining the basic stability of the foreign exchange reserve scale.