The State Administration of Foreign Exchange (SAFE) has recently released data on foreign exchange settlement and sales by banks as well as cross-border receipts and payments by non-banking sectors in February 2023. The SAFE Deputy Administrator and Press Spokesperson Wang Chunying answered media questions on China’s foreign exchange receipts and payments of February 2023.
Q: Could you brief us on China’s foreign exchange receipts and payments in February 2023?
A: China’s foreign exchange market’s supply and demand remained balanced. In February, the amounts of foreign exchange settlement and sales by banks were basically unchanged from the previous month, and cross-border receipts and payments by non-banking sectors, including enterprises and individuals, became more balanced. After the Spring Festival, there was an increase in the import of raw materials and the replenishment of stocks by enterprises, which led to an increase in foreign-related expenditures. It reflects the seasonal characteristics of the production and operation of enterprises. Viewing from the first two months of 2023, foreign-related receipts and payments by non-banking sectors posted a surplus of USD 31.4 billion. The cross-border capital flows made a good start on the whole, and supply and demand in China’s foreign exchange market remained in equilibrium.
Market entities generally maintained a rational trading pattern. In February, the foreign exchange settlement rate, the measurement of customers’ desire to settle foreign exchange, or the ratio of foreign exchange sold by customers to banks to foreign exchange received by customers, reached 70.3%, up by 8.9 percentage points month on month. It shows that market entities maintained a rational trading mode of “settlement of foreign exchange at higher rates”, and their willingness to settle foreign exchange was strengthened. On the other hand, the foreign exchange sales rate, which measures customers’ desire to buy foreign exchange, or the ratio of foreign exchange purchased by customers from banks to foreign-related foreign exchange payments made by customers, stood at 68.6%, basically the same as the previous month. It shows that the willingness of market entities to purchase foreign exchange was generally stable.
Trade in goods continued to play a fundamental role in stabilizing cross-border capital flows. The cross-border trade surplus in goods was USD 25.9 billion in February, essentially unchanged from the same period in 2022, and still maintained on a large scale. The services trade deficit decreased slightly month on month and year on year to USD 4.3 billion. While the expenditure of cross-border travel was recovering orderly, exports of some emerging service industries also increased steadily.
In the future, China’s foreign exchange market will have the foundation and conditions to operate smoothly. As the impact of policies on stabilizing economic growth continues to emerge, the expansion of production and operation activities of enterprises has accelerated, and China’s economic operation has rebounded significantly, leading to a more consolidated foundation for maintaining stable cross-border capital flows. At the same time, the opening-up of China’s financial market has made steady progress, and the use of RMB assets as investment and natural hedge has become increasingly prominent. Supported by these factors, foreign capital will continue to steadily invest in China’s securities market. In addition, China’s foreign exchange market has become more resilient, and market entities have become more mature and rational, allowing them to better adapt to changes in the external environment.
