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 August 2017, and its press spokesperson answered media questions on recent cross-border capital flows.
Q: Could you brief us on China's cross-border capital flows for August?
A: China's cross-border capital flows were further balanced in August. First, the supply and demand of foreign exchange in China remained balanced. In August, banks' foreign exchange settlements rose by 11% month on month, and their sales of foreign exchange went up by 1%, leading to a deficit of USD 3.8 billion, down by 75%. The value of foreign exchange contracted for forward settlements and sales recorded a surplus for fifth consecutive month, which was USD 3.1 billion, up by 18% month on month. Under the combined impact of foreign exchange supply and demand factors, such as banks' spot and forward foreign exchange settlements and sales, and options, a better equilibrium between the supply and demand of foreign exchange was maintained in China in the month than in July. Second, the deficit in foreign-related payments and receipts of the non-banking sector contracted remarkably. In August, foreign-related receipts of the non-banking sector jumped by 14% month on month, and foreign-related payments grew by 6%, leading to a deficit of USD 3.5 billion, down by 84%. In addition, as at the end of August, China's foreign exchange reserves amounted to USD 3.0915 trillion, up by USD 10.8 billion month on month, representing its seventh consecutive month of growth.
Domestic market participants witnessed more stable foreign-related transactions, which featured more capital inflows into major channels such as trade and investment. First, market participants' desire to settle foreign exchange rose while their desire to purchase foreign exchange set a new record low. In August, the ratio of banks' foreign exchange settlements for customers to foreign-related foreign exchange receipts was 62.2%, up by 0.2 percentage point month on month; the ratio of banks' foreign exchange purchases for customers to foreign-related foreign exchange payments was 61.5%, down by 1.2 percentage point month on month, consistent with the level of the beginning of 2014. Second, cross-border capital inflows and net foreign exchange settlements under trade in goods increased. In August, the surplus of foreign trade under trade in goods dropped slightly on a month-on-month basis, but the surplus of banks' foreign-related receipts and payments for customers and the surplus of banks' foreign exchange settlements and sales for customers under trade in goods (Customs statistics) went up by 48% and 26% month on month respectively. Third, FDI and foreign exchange settlements rose rapidly. In August, FDI rose by more than 30% month on month, and foreign exchange capital settlements climbed by more than 20% month on month. Moreover, foreign exchange purchases and payments under enterprises' ROI culminated in August, and individuals' purchases of foreign exchange were much lower than the same period last year.
Recently China's economy has been performing well with a good momentum for growth, continuing to strengthen market confidence. The RMB exchange rate has experienced two-way fluctuation and stable growth, making domestic market participants more sensible in foreign-related transactions in terms of expectations and behaviors. Going forward, as China's domestic economic fundamentals become more stable, the level of opening up is further deepened, and market expectations are further stabilized, China's cross-border capital flows will sustain a stable, orderly and balanced pattern.
