The State Administration of Foreign Exchange (SAFE) has recently released the data on banks' foreign exchange sales and settlement and their foreign exchange receipts and payments for clients for July 2018. The SAFE press spokesperson answered media questions on recent cross-border capital flows.

Q: What would you say about China's cross-border capital flows in July?

A: The supply and demand of China’s foreign exchange market maintains overall stability and the foreign-related transaction behaviors of market players are rational and orderly. First, the balance of foreign exchange reserves has risen steadily. The balance stood at USD3,117.9 billion at the end of July, up by USD5.8 billion from the end of June. Second, the deficit of banks’ settlement and sales of foreign exchange and cross-border receipts and payments narrowed year on year. In July, the deficit of banks’ foreign exchange settlement and sales was USD9.4 billion, down by 39% year on year. Specifically, the deficit of foreign exchange settlement and sales by banks for clients reached USD400 million, indicating that enterprises and individuals tend to become more balanced in foreign exchange settlement and sales. The deficit of foreign-related receipts and payments of domestic enterprises and other non-banking sectors stood at USD12 billion, down by 45% year on year. Third, the willingness of market players for foreign exchange settlement has risen month on month, witnessing slight increase of foreign exchange sales rate. In July, the ratio of foreign exchange settlements by bank clients to the foreign-related foreign exchange receipts was 73%, up by 5 percentage points month on month, which was the highest since July 2015; while the ratio of foreign exchange purchases by bank clients to the foreign-related foreign exchange payments was 67%, up by 3 percentage points, which is still low in recent years.

The opening-up policy continued to play its role, with overseas capital flowing in continuously, and the foreign exchange purchase by enterprises and individuals maintained stable. On the one hand, cross-border capital inflows under direct investment and securities investment etc. increased on the whole. In July, foreign-related receipts under direct investment reached USD34.5 billion, up by 46% year on year and up by 87% cumulatively since the beginning of this year; foreign-related receipts under securities investment stood at USD23 billion, up by 1.6 times year on year and up by 1.5 times cumulatively since the beginning of this year. Under this circumstance, foreign exchange settlement under direct investment and securities investment has also presented an upward trend as compared with the same period last year. On the other hand, the foreign exchange purchase by market players through major channels remained stable on the whole. In July, foreign exchange purchase under enterprises’ ODI and investment income both registered year-on-year decline, and the net foreign exchange purchase of individuals decreased by 12% and 13% on year-on-year and month-on-month basis respectively.

Since the beginning of this year, the international financial market has witnessed considerably increasing volatility. However, due to the overall stable operation of domestic economy and steady progress of opening-up, China’s cross-border capital flows have maintained the development trend of overall stability and basic equilibrium, and the elasticity of RMB exchange rate has been further strengthened. In the future, the fundamentals of China’s economy in strong resilience and adaptability as well as ample room for maneuver will remain unchanged and will continue to serve as the basis for the stable operation of foreign exchange market. Meanwhile, China will adhere to the objective of reform and opening-up. As relevant measures are pressed ahead with and cross-border capital flow management framework is continuously improved, the activity and stability of China’s cross-border capital flow will be further strengthened, which is conducive to maintaining the independent equilibrium of balance of payments and adapting to the development and changes of market environment.