As shown in the statistics of the State Administration of ForeignExchange (SAFE), in January 2020, the amount of foreign exchange settlement and sales by banks wasRMB 1006.7 billionand RMB 962.5 billion, respectively, with a settlement of RMB 44.2 billion. In the US dollarterms，the amount of foreign exchangesettlement and sales by banks was USD 145.5 billion andUSD 139.1billion, respectively, with a settlement of USD 6.4 billion. In particular,the amount of foreign exchange settlement and sales by banks for customers wasRMB 913.9 billionand RMB 856.6 billion,respectively, with a settlement of RMB 57.3 billion; theamount of foreign exchange settlement and sales for banks themselves was RMB 92.8 billion andRMB 105.9 billion,respectively, with a deficit of RMB 13.1 billion.During the period, newlysignedcontractamountof forwardforeignexchangesettlementand sales was RMB 99.2 billion andRMB 37 billion,respectively, with a net newly signed contract amount offorward foreign exchange settlement of RMB 62.2 billion. Atthe end of January,outstandingamountof forwardforeignexchangesettlementand salesby the endof the currentperiod was RMB 500.4 billion andRMB 409.3billion, respectively, with a net outstanding amountof forward foreignexchange settlement of RMB 91.1 billion; the net Delta exposureof outstanding options was RMB -255.9 billion.
Please note that the data for few banks isincomplete due to the disease caused by COVID-19.
Addendum: Glossary and relevant definitions
Balance of payments(BOP) refers to all economic transactionsbetween residents and non-residents.
Foreignexchange settlement and sales by banks refers to settlement and sale transaction that bank executes for customersand for the banks themselves, including statistic data onsettlements of forward contracts for foreign exchange settlementand sales and the exercises of option, and excludingthe transactions in the interbank foreign exchange market. The statistic reporting date of Foreign exchangesettlement and sales by banks should be the trade day of theForeignexchange settlement and sales transaction. By definition, foreignexchange settlement means foreign exchange holders sell foreignexchange to designated foreign exchange bank, and foreignexchange sales means designated bank sells foreign exchange to foreign exchange buyers. The net position of foreign exchange settlement andforeign exchange sales could be position squared throughtransactions on the inter-bank foreign exchange market, and it is one ofthe major contributors to the country’sforeign exchange reserve fluctuation, though it is not equal to netchange in foreign exchange reserves during the same period
Unlikethe principle of balance-of-payments statistics, which cover the transactionsbetween residents and non-residents, foreign exchange settlement and sales bybanks only cover transactions of RMB and foreign currencies between banks and customers or on banks for themselves.
Thenewly signed contract amount of forward foreign exchange settlement and sales refers to the binding forward contract between designated foreignexchange bank and client that predetermines foreign exchange currency, amount,exchange rate and tenor which to be executed upon maturity. Thenewly signed forward contract enables corporate to lock inadvance the exchange rate for the purchase or sale of a currency on a futuredate to manage relevant foreign exchange risk arising fromRMB volatility. In general, bank will hedge its foreign exchange risk exposures arise from the newly signed forward contract in the Interbank foreign exchange market. For example,when bank has net foreign exchange long position, bankwill short the equivalent amount of foreign exchange in the Interbank foreignexchange market in advance, or vice versa. Therefore, the newly signedcontract amount of forward foreign exchange settlement and sales is also one of contributors to China’s foreign exchange reserve fluctuation.
Theunwind amount of forward foreign exchange settlement and sales refers to, where client is unable to perform the original forwardcontract due to change in its real demand, client to fully or partially closeits forward position by executing another deal with opposite direction to theoriginal contract.
Therolling amount of forward foreign exchange settlement and sales refers to client to adjust the settlement date of original contract dueto change in its real demand.
Theoutstanding amount of forward foreign exchange settlement and sales by the endof the current period refers to the total amount of forwardcontracts accumulated from all non-matured forward contracts with client. Thenewly signed contractamount and the outstanding amount should satisfy the equationthat: theoutstanding amount of forward foreign exchange settlement and sales by the endof the current period = theoutstanding amount of forward foreign exchange settlement and sales at the endof the previous period + the newly signed contract amount of forward foreignexchange settlement and sales for the period - settlements of forwardcontracts for foreign exchange settlement and sales for the period - the unwindamount of forward foreign exchange settlement and sales for the period.
The net Deltaexposure of outstanding options refers to the implied foreignexchange spot risk exposure from outstanding option contracts that bank executedwith client. Bank shall hedge such risk in the foreign exchange market for risk management during deal life cycle.
The cross-border receiptsand payments bynon-banking sectors refers to the receipts andpayments between domestic non-banking sectors (including institutional and individual residents)and non-residentsthrough domestic banks, excluding receipts and payments in cash. In particular,the statisticsincludescross-border receipts and payments between non-banking sectors andnon-residents through domestic banks (including RMB and foreign currency), and domesticreceipts and payments between non-banking sectors and non-residents throughdomestic banks (temporarily excluding domestic receipts and payments in RMBbetween individual residents and non-resident individuals). Data are collected whencustomers conduct receipts and payments with non-resident counterparties atdomestic banks. Specifically, the receipts refer to the capitalof non-bankingsectors received fromnon-residents via domestic banks; the payments refer to the capitalof non-bankingsectors paid to non-residents via domestic banks.
Thecross-border receipts and payments by non-banking sectors is based on cash basis,different from the accrual basis required by the Balance of Payments Statistics. The statisticsmerely reflects the cashflows between non-banking sectors and non-residents and does not include bartertransactions or transactions with non-residents conducted by the banksthemselves. Therefore,the scope of thestatistics is narrower than that of the Balance of Payments Statistics.
