Guan Tao: China's major banks have become a foreign exchange reservoir, and some should take on the role of counter-cyclical adjustment

The global chief economist of BOCIC, Guan Tao, stated that in the absence of direct intervention by the Chinese central bank in the foreign exchange market, major domestic banks have become a "reservoir" for regulating market foreign exchange liquidity. The surplus and deficit of foreign exchange settlement and sales are more reflected in the changes in comprehensive foreign exchange positions caused by banks adjusting the domestic foreign exchange supply and demand gap. The external financial asset and liability behaviors of the non-bank sector are more pro-cyclical, while the banking sector, due to its role as a foreign exchange "reservoir," is more risk-neutral and even somewhat counter-cyclical; some banks may even need to take on a counter-cyclical adjustment role