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 May 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 May 2018?
A: China's cross-border capital flows stay stable currently. In May, banks registered a surplus of USD 19.4 billion in foreign exchange settlement and sales, as a result that companies and individuals adjusted their domestic assets in RMB and foreign currencies as expectations of foreign exchange remained stable. The non-banking sector like domestic companies posted a deficit of USD 7.4 billion in foreign-related receipts and payments, 26% lower than that of April, while foreign-related foreign exchange receipts and payments recorded a surplus of USD 2.6 billion, which was relatively balanced. The balance of foreign exchange reserves fell by USD 14.2 billion in May, owing to the combined impact of depreciation of the non-USD currencies against the US dollars and higher asset prices. The domestic foreign exchange market continued stable operation.
Cross-border capital flows through major channels grew stably and remained balanced. On the one hand, trade in goods remained as the major channel for net cross-border capital inflows and foreign exchange supply. In May, banks' foreign-related receipts and payments under trade in goods for customers (customs coverage) was in surplus and picked up by 42% month on month; banks' foreign exchange settlement and sales under trade in goods for customers was also in surplus and climbed by 32% month on month. The foreign-related receipts and payments and foreign exchange settlement and sales under direct investment and portfolio investment of domestic non-banking sector such as domestic companies remained in surplus. On the other hand, due to seasonal factors, companies' purchases of foreign exchange under returns of investment and individuals' purchases of foreign exchange both rose. In May, foreign exchange purchased under ROI neared USD 7 billion, up by 98% month on month; and foreign exchange purchased by individuals perked up by a slight 2% month on month but fell by 10% year on year. Moreover, as companies' risk aversion associated with foreign exchange rates became stronger, the amounts of the contracts signed for forward foreign exchange settlement and sales grew by 5% and 22% month on month respectively, or rose 1.3-fold and twice year on year. Banks' forward foreign exchange settlements and sales recorded a surplus of USD 1.7 billion, suggesting companies' overall expectations of foreign exchange rates remained stable.
The global financial markets have continued to be volatile since May, with some emerging economies struggling with capital outflows and currency depreciation. Nevertheless, China's economy has stayed stable with a strong momentum for growth. The market expectations have been stabilized and changes in external environment have been dealt with, providing a fundamental guarantee for the stable operation of China's foreign exchange market.
