December 18, 2014 / 2:48 AM / 4 years ago

China FX regulator says closely monitoring Russian rouble slide

BEIJING (Reuters) - China is closely monitoring the slide in the Russian rouble, the foreign exchange regulator said on Thursday, as the currency of one of its major energy importers struggles to avoid a free-fall.

Wang Yungui, head of policy and regulations for the State Administration of Foreign Exchange (SAFE), told a news conference that China was paying attention considering the close economic relationship between the two.

“We haven’t seen a significant impact on our cross-border capital flows,” he said.

Chinese Foreign Ministry spokesman Qin Gang, speaking at a later news conference, added that he believed Russia would overcome its problems.

“Russia has rich resources, quite a good industrial base. We believe that Russia has the ability to overcome its temporary difficulties,” Qin said.

China’s exports to Russia rose an on-year 10.5 percent and imports went up 2.9 percent in the first three quarters of the year, with total trade valued at $70.78 billion.

Wang added that China was not overly concerned about signs of forex outflows in recent months.

"Under the circumstance, signs of capital outflows in certain months are normal. Overall, we still see net capital inflows," Wang said, adding that many companies have opted to park export income overseas instead of selling off hard currency to banks, given the strong two-way fluctuations in the yuan spot market CNY=CFXS.

Xiao Lihong, another SAFE official, said the government was stepping up investigations into fake trade deals, following widespread suspicions that strong export figures in September and October were inflated by manipulated invoices designed to smuggle yuan into China in order to speculate on the stock markets.

However, she said recent unusual spikes in exports of jewelry and precious metals were not closely linked to speculative capital flows, addressing media reports.

“There is no close link (between them) but we cannot say there is no problem,” she said.

The yuan has been under pressure in the last month due to increased year-end dollar demand by some firms and growing market expectations of more policy easing after the central bank made a surprise cut to interest rates in November. Such easing is seen as negative for the yuan.

The central bank has signaled it does not want the yuan to collapse, strengthening the official guidance rate CNY=SAEC but traders said it has been intervening less in the spot market, which is allowed to trade 2 percent higher or lower than the midpoint on any given day.

Spot yuan weakened sharply in the aftermath of the remarks, falling to as low as 6.2215 per dollar, after the central bank set a weaker midpoint on Thursday. It ended at 6.2163 per dollar.

Reporting by Kevin Yao; Additional reporting by Ben Blanchard; Editing by Jacqueline Wong

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