BEIJING, May 28 (Xinhua) -- Short-term fluctuation of the Chinese yuan's exchange rate is normal, but in the long run, China's sound economic fundamentals determine that the yuan will not see continuous depreciation, a central bank official said.

"Speculation by shorting the yuan will surely lead to a huge loss," Guo Shuqing, Party chief of the People's Bank of China and chairman of the China Banking and Insurance Regulatory Commission, said in an interview with Xinhua.

China remains the largest engine of world economic growth, and owns a large market and huge growth potential, Guo said. "As the quality of economic development improves, the yuan's exchange rate will continue to move closer to the purchasing power parity."

The Chinese government has won extensive international recognition for its efforts over the past few years to strike a balance between the yuan rate's flexibility and stability, Guo said.

Over the past more than 10 years, all cases of the relatively substantial devaluation of the yuan have stemmed basically from external reasons, he said.

The latest case came in May, when the offshore rate of the yuan against the U.S. dollar depreciated up to about 3 percent, "entirely due to the U.S. moves that escalated economic and trade frictions, which in turn affected market sentiment," Guo said.

"Despite the recent fluctuation in the forex market, there has been no panic among Chinese companies and people," Guo said.

Besides the forex market, China's stock and bond markets have also "remained relatively stable" so far this year, Guo said.

The country's financial sector has been stable and the risks have been held within control over the past years, partly due to moves to deepen reform and open wider to the outside world, improve corporate governance, and forestall and defuse financial risks in key areas, he added.

Besides the opening-up of banking and insurance sectors, China will also open the securities and fund sectors following its existing schedule, Guo said.

He added that the financial market's opening-up should always stay in line with the country's risk control capability, and special attention should be paid to prevent large-scale inflows and outflows of short-term cross-border capital.

China welcomes foreign institutions with good market reputation and credit records, which have expertise in areas such as risk control, credit rating, wealth management and pension insurance, to "enter China, enrich market entities, innovate financial products and stimulate market vitality," Guo said.