The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on banks' foreign exchange settlement and sales and banks' foreign-related receipts and payments for customers for April 2018. 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 April 2018?
A: China's foreign exchange market remained stable in April. First, banks recorded a surplus of USD 10.6 billion in their foreign exchange settlement and sales in the month, and an accumulated deficit of USD 7.6 billion for January to April, indicating a relative equilibrium in the supply and demand in the foreign exchange market. Second, non-banking sectors such as enterprises registered a deficit of USD 9.9 billion in foreign-related receipts and payments in the month, and an accumulated surplus of USD 800 million for January to April, suggesting relevant market participants have maintained balanced cross-border capital flows in the year to date. In particular, a surplus of USD 900 million was recorded in foreign-related foreign exchange receipts and payments in the month. Third, the balance of China's foreign exchange reserves declined in the month, due to foreign exchange rate conversion and asset price correction. All these showed that the foreign exchange market has been operated stably.
Major items on the supply and demand in the foreign exchange market presented a momentum for stable and orderly growth. First, trade in goods remained a major supply item of foreign exchange. The non-banking sectors like enterprises reported a surplus of USD 30.6 billion in foreign exchange settlement and sales under trade in goods in April, up by 84% month on month, which was generally aligned with the balance of foreign trade reported by the Customs and its movement trends. Second, a basic balance with slight earnings was registered in foreign exchange settlement and sales under the capital and financial account. In the month, the non-banking sectors recorded a surplus of USD 2.3 billion in foreign exchange settlement and sales under the capital and financial account, down by 42% month on month. Third, the deficit in foreign exchange settlement and sales under trade in services for enterprises and individuals dropped slightly but stably. In the month, the deficit was USD 17.8 billion, down by 19% month on month and by a slight 2% year on year. Foreign exchange purchases by individuals stayed steady. In the month, the amount of the contracts signed for forward foreign exchange settlement and sales rose by 1.6 and 3.1 times year on year respectively, leading to a surplus of USD 5 billion, indicating risk aversion associated with foreign exchange rate was remarkably strengthened under the impact of two-way fluctuations of the RMB exchange rate.
Since the beginning of April, the global financial markets have witnessed heightened volatility. The USD exchange rate and interest rate were strengthened, emerging markets were under heavier pressure from capital outflows and currency depreciation, but China's cross-border capital flows stayed steady, indicating China's economic fundamentals have played a fundamental role in stabilizing the expectations of the foreign exchange market. Going forward, as China's economy continues to perform stably, China's foreign exchange market will adapt better to the changes in external environment and continue with the rational and balanced landscape of cross-border capital flows.
