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 April 2023. The SAFE Deputy Administrator and Press Spokesperson Wang Chunying answered media questions on China's foreign exchange receipts and payments of April 2023.
Q: Could you brief us on China's foreign exchange receipts and payments in April 2023?
A: In general, China's foreign exchange market operated smoothly, and the supply and demand of foreign exchange within the country remained basically balanced. In April, the foreign exchange settlement and sales by banks registered a surplus of USD 5.5 billion, while the cross-border receipts and payments by non-banking sectors, including enterprises and individuals, were roughly unchanged from the previous month. Considering factors like forward settlement, option trading, and banks' foreign exchange positions, the supply and demand of domestic foreign exchange were basically in balance.
Market expectations remained stable, and the transactions in China's foreign exchange market were rational and orderly. In April, on the one hand, 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 72%, which was 8 percentage points higher than the monthly average in the first quarter of this year. 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 71%, up by 3 percentage points over the monthly average in the first quarter of this year. In April, there was an increase in the willingness of enterprises and other market entities to settle and sell foreign exchange. This shows that there was an expectation of renminbi exchange rate stability and that transactions on the foreign exchange market were being carried out rationally. As a result, there was an independent balance between the supply and demand for foreign exchange.
Cross-border capital flows under the current account continued to play a fundamental role in stabilizing the foreign exchange market, while capital flows under the capital account remained stable and orderly. In April, the cross-border trade surplus in goods reached USD 29.3 billion, still at a relatively high level. Meanwhile, the cross-border trade deficit in services registered USD 6.3 billion, basically at the same level as the average monthly scale in the first quarter. The cross-border travel expenditure of residents recovered orderly, but still lower than the pre-epidemic level. Under the capital account, foreign direct investment (FDI) in China maintained a net inflow in April, and overseas investors purchased domestic securities for two consecutive months. This indicates that China's economic development prospects and the value of RMB assets further enhanced the confidence of global investors. Meanwhile, China's outbound direct investment (ODI) and outbound portfolio investment remained stable and orderly.
Looking forward to the future, the foundation for long-term stability in China's foreign exchange market is expected to remain strong. China's commitment to pursuing progress while ensuring stability has resulted in a stable economic recovery, demonstrating steady and sound growth momentum and improved expectations. These economic fundamentals have become increasingly supportive of the foreign exchange market. Furthermore, the spillover effects of monetary policy tightening in major developed economies are expected to weaken gradually. With increased market maturity and rationality among market participants in recent years, China's foreign exchange market has developed tremendous resilience, allowing it to better react to changes in the external environment.
