Han Jian Member of the Balance-of-Payments Statistical Committee of the IMF
BOP statistics is a statistical system that fully reflects the foreign-related economic development of a country. It is one of the so-called four primary accounts of the macro-economy (the other three are the System of National Accounts, the Monetary and Financial Statistics, and the Fiscal Statistics). In 1995, upon approval of the State Council, the People’s Bank of China (PBOC) promulgated the Measures for the Declaration of Balance-of-Payments Statistics (hereinafter referred to as the “Measures”), laying a legal foundation for China’s implementation of BOP statistics. With the constant expansion of China’s foreign-related transactions, a number of new challenges have arisen from the BOP statistics. The State Council recently decided to amend the Measures; the changes will come into force as of January 1, 2014. The amendments to the Measures mark an important move to improve the country’s BOP statistical system as required by the latest IMF standards. In the following, we present interpretation of the Measures in six respects:
I. The BOP statistics not only include transactions, but they also cover the stock of external assets and liabilities.
In the past, countries throughout the world, including China, focused on cross-border capital flows and placed less emphasis on the stock of external assets and liabilities. The lessons learned from the financial crises over the several years highlight the importance of reliable statistics on external assets and liabilities, which is a foundation for the formulation of scientific macro-economic policies and wise decisions for routine supervisions and for tackling potential crises. In 2009 the IMF published the 6th edition of The Balance of Payments and International Investment Position Manual, with a special emphasis on the statistical requirements for the stock of external assets and liabilities. Correspondingly, with respect to the scope of BOP statistics, special emphasis was placed on the amendment to the statistics on the stock of external financial assets and liabilities held by Chinese residents. Thus far the declaration of BOP statistics not only includes economic transactions between Chinese residents and non-Chinese residents, but also covers external financial assets and liabilities of Chinese residents.
II. Both Chinese and non-Chinese residents are responsible for issuing statistical declarations.
The Balance of Payments and International Investment Position Manual (sixth edition) not only specifies the BOP statistical requirements of residents, but also specifies the statistical requirements for non-residents. Prior to the amendments, the Measures only specified the declaration obligations of Chinese residents. With the expansion of China’s foreign-related economy, an increasing number of non-residents have begun to carry out foreign-related transactions through domestic financial institutions. For a complete understanding of China’s BOP status, non-Chinese residents carrying out economic transactions within the territory of China are now incorporated into the scope of the declaration entities, as required by the revised Measures. According to the revised Measures, both Chinese residents and non-Chinese residents carrying out economic transactions within the territory of China are required to declare their BOP information.
It should be noted that only non-Chinese residents who carry out economic transactions within the territory of China are required to make statistical declarations. Non-Chinese residents with no economic transactions in China or with economic transactions outside the territory of China are not subject to a statistical declaration. Economic transactions between Chinese residents and non-Chinese residents are primarily declared by the Chinese residents. Non-Chinese residents shall only declare data that do not meet the BOP statistical requirements or are not acquired through the declarations by Chinese residents. The State Administration of Foreign Exchange (SAFE) will specify the time-points, aspects, and channels of declaration by non-Chinese residents in light of the actual circumstances. Furthermore, “residents” as specified in the Measures are residents in statistical terms, including both institutions and individuals.
III. Not only entities directly involved in the transactions are obligated to make declarations, but intermediaries, such as registration, settlement, and trusteeship agencies, also must make such declarations.
In the past, the entities subject to the BOP statistical declarations were primarily that participated directly in the transactions. As foreign-related transactions have become more diversified in terms of the types and methods of transactions, new products and businesses, such as cross-border portfolio investments, financial derivatives, and bank cards, have come to the fore. In view of the large number of entities involved in making declarations, data collection through intermediaries engaging in services such as registration, settlement, and trusteeship will help facilitate data acquisition, increase the accuracy of the relevant data, reduce social costs, and relieve the burdens on the declaration entities to submit the relevant data. The previous version of the Measures only specified the declaration obligations of entities directly involved in transactions and securities registration agencies. According to the Measures, institutions that provide services such as registration, settlement, and trusteeship are also subject to the declaration.
IV. Both institutions and individuals are subject to the declarations
As China is moving ahead in its opening-up drive, the stock of external financial assets and liabilities of individual Chinese residents is also increasing. However, these data, which should be incorporated into the scope of the statistics and monitoring to complete the BOP statistical data, cannot be fully collected by financial institutions. According to the amended Measures, “Resident Chinese individuals who hold external financial assets and liabilities shall declare the conditions of their external financial assets and liabilities according to the regulations of the SAFE.” This is a supplementary provision of the Measures. Thus far, the SAFE has not worked out any regulations on the specific measures for individuals’ declarations of external assets and liabilities. Resident individuals holding external assets and liabilities above a certain amount may be required to submit the relevant information to the authorities, according to detailed rules that are expected to be formulated based on the actual circumstances.
V. Both BOP statisticians and other personnel involved with statistics, such as bank staff, are obligated to keep the relevant information confidential.
In order to relieve the concerns of the declaration entities regarding breaches of data and to reduce the work by the declaration entities in fulfilling their declaration obligations, the previous version of the Measures specified that BOP statisticians are obligated to keep the data declared by the relevant entities confidential. The amended Measures again underscore the confidentiality obligations from the perspective of the complete data-acquisition process, requiring that banks, dealers, and institutions that provide services such as registration, settlement, and trusteeship when dealing with the relevant businesses shall keep strictly confidential all data known to them that are declared by the relevant entities.
VI. Not only will violations of the foreign exchange administration regulations be punished, but violations of the BOP statistical regulations will also be punished.
In practice, institutions and individuals attach great importance to complying with the regulations on the administration of foreign exchange under the current account and the capital account and the administration of foreign exchange business, but they tend to neglect their statistical obligations as provided by the law. According to the Measures, Chinese and non-Chinese residents who fail to make BOP statistical declarations as required by the regulations shall be punished in accordance with Article 48 of the Regulations on Foreign Exchange Administration of the People’s Republic of China (hereafter, the Regulations) of the SAFE and its branches or sub-branches. In order to facilitate implementation, the amended Measures delete all inapplicable penalty clauses specified in the previous version and simplify the wording to maintain consistency between the Measures and the Regulations. Entities that fail to make BOP statistical declarations in accordance with the regulations will be subject to penalties. The foreign exchange administration authorities may order the relevant entities to make corrections and the authorities may issue warnings to the relevant entities. Institutions that act in violation of the relevant regulations may be fined no more than RMB 300,000. Individuals who act in violation of the relevant regulations may be subject to a fine of no more than RMB 50,000.
