(Bloomberg) — China is able to accommodate the impact of the Federal Reserve’s rate hikes, a senior foreign exchange official said, downplaying concerns about the yuan’s weakness and capital outflows.

Recent moves in the Chinese currency were market-based and expectations on the yuan have been “basically stable,” said Wang Chunying, spokeswoman of the State Administration of Foreign Exchange. The foreign exchange market will likely remain stable due to China’s resilient economic fundamentals, sustaining trade surplus and foreign direct investment inflows, low foreign debt risks and the increasing flexibility of the , she said.

“With strengthened resilience in the foreign exchange market, China has the foundation and conditions to adapt to the Fed’s policy adjustment,” Wang said at a briefing Friday.

As the Chinese currency trade offshore experiences its worst weekly decline since August 2015 when China devalued their yuan in an effort to counter an economic slowdown, the comments come as it is facing the biggest weekly drop in Chinese currency. As of 5.41 pm local time, the dollar had fallen 0.9% to $6.5258/dollar. This brings its losses to 2.6% over the last five days. 

Wang insisted that the yuan’s movements have been two way and that they were “stable and healthy.” Money has kept flowing into the country through trade in goods and direct investment, while Chinese companies’ overseas investment has become “more rational” and household demand for foreign exchange is weak amid travel curbs to contain Covid, she said. Market participants’ buying of the local currency when it falls will also help limit the room for further depreciation, she added.

The continued rises in U.S. yields have threatened to exacerbate outflows from China’s bond market, as the People’s Bank of China has loosened policies further to counter the economic headwinds caused by Covid lockdowns.

The yield advantage of China’s government bonds over U.S. Treasuries — which vanished for the first time since 2010 this month — is not the sole factor affecting overseas investors’ decisions, Wang said. 

Long-term foreign inflows will continue to trend unchanged as China has a higher interest rate than the U.S., even after inflation. This allows investors stable returns and diversification of risks. As China becomes a global index, the central banks of all countries are looking to find alternative currencies. Passive bond inflows should also continue.

Wang said outflows from China’s bond and equity markets moderated toward the end of March and slowed further in April, without specifying.