The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on banks' foreign exchange sales and settlements and banks' foreign-related payments and receipts for customers for July 2017, and its press spokesperson answered media questions on recent cross-border capital flows.
Q: China's cross-border capital flows remained steady in the first half, with a good momentum for growth. Could you brief us on China's cross-border capital flows for July?
A: China's cross-border capital flows maintained a basic equilibrium in July. First, the supply and demand of foreign exchange remained balanced in China. In July, banks registered a deficit of USD 15.5 billion in foreign exchange settlements and sales, down by 26% month on month. In particular, a deficit of USD 6.3 billion was recorded in banks' foreign exchange settlements and sales for customers, down by 53%. In the same month, the value of foreign exchange contracted for forward settlements and sales recorded a surplus for fourth consecutive month, which was USD 2.6 billion. Under the combined impact of banks' spot and forward foreign exchange settlements and sales, and foreign exchange supply and demand factors such as options, a better equilibrium between the supply and demand of foreign exchange was maintained in China in the month than in the prior two months. Second, the deficit in foreign-related payments and receipts of non-banking sectors remained steady. In the month, the deficit was USD 22 billion, consistent with that of May and June. To be specific, the deficit of foreign-related receipts and payments in RMB and foreign currencies registered USD 13.8 billion and USD 8.2 billion respectively. Moreover, China's foreign exchange reserves as at the end of July, which were unveiled on August 7, had climbed for 6 consecutive months and amounted to USD 3.0807 trillion, representing a month-on-month increase of USD 23.9 billion.
Domestic participants witnessed more stable and orderly foreign-related receipts and payments. First, market participants' desire to settle foreign exchange stayed stable while their desire to purchase foreign exchange was weakened. In July, the ratio of banks' foreign exchange settlements for customers to foreign-related foreign exchange receipts was 62%, down by 1 percentage point; the ratio of banks' foreign exchange purchases for customers to foreign-related foreign exchange payments was 63%, down by four percentage points month on month. Second, enterprises' enthusiasm for funding in foreign currencies was strengthened stably. In July, China continued to see stable growth in the outstanding external debt registered; and the foreign exchange purchased by enterprises to repay domestic foreign exchange loans hit a new low in recent years, down by 46% month on month. Third, foreign exchange purchased by individuals dropped. Since the beginning of this year, as market expectations are further stabilized, individuals' use of foreign exchange has become more reasonable and orderly. In July, foreign exchange purchased by individuals went down by 35% month on month and 27% year on year.
Since the beginning of this year, China's economy has been more stabilized with a good momentum for stronger growth, and market expectations have become further stabilized, boosting remarkable improvement in China's foreign exchange situations. Going forward, China's cross-border capital flows will remain stable, economic fundamentals will be more supportive, expansion and further opening of domestic markets is expected to deliver stronger outcomes, and domestic market participants' adjustment of external assets and liabilities will be more stable.
