-
According to the statistical data released by the State Administration of Foreign Exchange (SAFE), in September 2011 the amount of foreign exchange settlements and sales by banks on behalf of clients amounted to USD142.6 billion and USD116.6 billion respectively. The surplus of foreign exchange settlements and sales by banks on behalf of clients amounted to USD26 billion. For the first nine months of 2011, the cumulative amount of foreign exchange settlements and sales by banks on behalf of clients amounted to USD1211.2 billion and USD830.5 billion respectively. The surplus of foreign exchange settlement and sales was USD380.7 billion. In September 2011, foreign-related receipts and payments by domestic banks on behalf of clients amounted to USD209 billion and USD197 billion respectively, and the surplus of foreign-related receipts and payments reached USD12 billion. For the first nine months 2011, the cumulative foreign-related receipts and payments of banks on behalf of clients amounted to USD1700.9 billion and USD1461.9 billion respectively; and the surplus of the cumulative foreign-related receipts and payments reached USD248 billion. 2011-10-31/en/2011/1031/1018.html
-
According to statistical data released by the State Administration of Foreign Exchange (SAFE), in October 2011 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD115.2 billion and USD112.1 billion respectively. The surplus of foreign exchange settlement and sales by banks on behalf of clients amounted to USD3.2 billion. For the first ten months of 2011, the cumulative amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD1326.5 billion and USD942.6 billion respectively. The surplus of foreign exchange settlement and sales was USD383.9 billion. In October 2011, foreign-related receipts and payments of domestic banks on behalf of clients amounted to USD186.8 billion and USD175.9 billion respectively; and the surplus of foreign-related receipts and payments reached USD10.9 billion. In the first ten months 2011, the cumulative foreign-related receipts and payments of banks on behalf of clients amounted to USD1896.7 billion and USD1637.8 billion respectively; and the surplus of the cumulative foreign-related receipts and payments reached USD258.9 billion. 2012-01-04/en/2012/0104/1021.html
-
Question 1: What have the foreign exchange authorities done about cracking down on illegal and irregular capital inflows during the past five years? Answer: In recent years, facing the complicated and volatile economic and financial situations both at home and abroad, the State Administration of Foreign Exchange (SAFE), in accordance with the decisions and arrangements of the CPC Central Committee and the State Council, deeply implemented the scientific outlook on development, adhered to the principle of “expanding domestic demand, making structural adjustments, reducing the surplus, and promoting the balance of payments,” strengthened the monitoring and management of cross-border capital flows, increased efforts to carry out foreign exchange inspections on the basis of developments in the change of situation, improved foreign exchange inspection methods, rigorously cracked down on illegal and irregular flows of foreign exchange funds, and effectively guarded against the impact of cross-border capital flows. From 2007 to 2011, the foreign exchange authorities investigated a total of over 15,000 cases of activities in violation of the foreign exchange laws and regulations, and imposed a total of RMB 1.27 billion in administrative fines. In 2007, the SAFE carried out a “Comprehensive Inspection of the Inflow and Settlement of Foreign Exchange Funds” in ten coastal areas, such as Guangdong, whose total amount of foreign exchange receipts and payments accounted for more than 50% of China’s total, basically determining the channels for the inflow of illegal and irregular foreign exchange funds, such as those in the guise of foreign direct investment and trade in goods. In 2008, China ’s surplus of foreign exchange settlement and sales continued to expand, and the situation worsened in terms of the surplus of foreign exchange settlement and sales in trade in goods exceeding the surplus of customs imports and export trade. The SAFE carried out special inspections and investigations in five regions, such as Jiangsu, of the situation of importing without foreign exchange payments and making foreign exchange payments without foreign exchange purchases, and determined the reason for such a situation in terms of the trade in goods and its impact on the sharp increase in the surplus of foreign exchange settlement and sales. In 2009, the SAFE carried out special inspections of foreign-invested enterprises in ten regions, such as Liaoning, and discovered violations of the regulations on foreign exchange administration, e.g., some foreign-invested enterprises handled the procedures for profit remittances by making use of false vouchers, and for the foreign exchange settlement of capital by making use of false materials, and willfully changed the use of funds after conversion. In 2010, the SAFE organized and carried out special actions for dealing with and cracking down on hot money in 13 provinces (cities) with a large volume of foreign exchange business, carried out a comprehensive inspection of the foreign exchange inflows by such key channels as trade in goods and foreign direct investments, and rigorously cracked down on irregular cross-border capital flows. In 2011, the SAFE promoted throughout the country special actions for dealing with and cracking down on hot money. During the year, the foreign exchange authorities investigated and handled a total of 3,488 cases involving activities in violation of the regulations on foreign exchange administration, collected RMB 503 million in penalties and confiscations, and made outstanding achievements in dealing with and cracking down on the inflows of hot money. Question 2: What achievements have the foreign exchange authorities made in recent years in terms of cracking down on major activities in violation of the foreign exchange laws and regulations, such as illegal banks? Answer: The SAFE pays much attention to investigation of major cases in violation of the foreign exchange laws and regulations involving large amounts, wide regions, and many participants. The major cases involved a huge volume of funds, caused great damage to domestic macro-controls and market stability, and had an adverse social impact. From 2007 to 2011, the SAFE overcame difficulties and gathered its forces together to deal a crushing blow to the illegal activities. During that period, the foreign exchange authorities investigated a total of 23 major cases, involving RMB 31.937 billion; cooperated with the public security bodies to ferret out 65 cases involving illegal banks, 26 cases involving online foreign exchange speculation, and 119 cases involving illegal sales and purchases of foreign exchange, with a total amount of over RMB 100 billion; apprehended more than 1,000 suspects, and imposed a total of RMB 160 million in administrative fines; and rigorously cracked down on the arrogance of the offenders and criminals violating the laws on foreign exchange administration and effectively safeguarded the economic and financial order of China. While rigorously cracking down on the major activities in violation of the laws and regulations, such as the illegal banks, the SAFE implemented measures based on a combination of dredging and blocking principles, improved regulatory measures, further improved the convenience of services, satisfied the reasonable demands of the society for cross-border payments, and put pressure on the space for illegal foreign exchange trade. Question 3: What are the key targets of inspection in the foreign exchange authorities’ crack down on the illegal and irregular cross-border flows of foreign exchange funds? Answer: The SAFE firmly focused on the key link of cross-border capital flows, i.e., the financial institutions, such as the banks, in its inspections, and deeply carried out special inspections of financial institutions. In 2007, the foreign exchange authorities carried out special inspections of the foreign exchange collection and settlement and the short-term external debt in 208 banks and branches in four regions, such Beijing . In 2008, the foreign exchange authorities carried out special inspections on implementation of the management policy for the foreign exchange settlement of capital by the designated foreign exchange banks in ten regions, including Guangdong and Fujian . In 2009, the foreign exchange authorities carried out comprehensive inspections of foreign exchange business compliance of the head offices and nine branches of two joint-stock banks. In 2010, in consideration of such problems as the rapidly expanding scale of the inflows of foreign exchange funds through the banks, the foreign exchange authorities intensified their efforts to inspect the banks’ foreign exchange business. In 2011, the foreign exchange authorities further increased the frequency of inspections. While carrying out special inspections of the head offices of Chinese- and foreign-funded banks, the foreign exchange authorities carried out sample inspections in return visits to 26 banks that had been inspected in 2010 and effectively consolidated the achievements of these inspections. Question 4: In recent years, the foreign exchange authorities’ achievements in the investigation of cases involving illegal and irregular capital such as hot money have significantly improved. What is the main reason for this? Answer: As the scale of foreign exchange receipts and payments continuously expands, the foreign exchange trade methods become more complicated, and the illegal and irregular flows of foreign exchange funds, such as hot money, become more complicated and secretive, consequently, the traditional foreign exchange inspection methods that rely on manpower and manual work can no longer meet the work requirements of the situation. In order to improve the inspection efficiency and precisely crack down on illegal and irregular funds such as the hot money, the SAFE energetically elevated and improved the off-site inspection methods. In 2010, the SAFE developed the Off-site Foreign Exchange Inspection System. The system has wide coverage and a strong search ability for information, can rapidly and accurately lock the subjects in violation of the laws and regulations and their violation activities, strengthened the ability of the foreign exchange authorities to deeply search for clues about illegal and irregular capital flows, changed the past working mode that was based upon extensive screening, and played an important role in improving the accuracy, initiative, and effectiveness of cracking down on illegal and irregular flows of foreign exchange funds, such as the hot money. Question 5: The special actions dealing with and cracking down on hot money contribute to deterring flows in violation of the foreign exchange laws and regulations. In addition, what measures do the foreign exchange authorities have to enhance the law-abiding awareness of market players? Answer: Based upon regulatory practices in recent years, most of the market players carried out lawful foreign exchange operations, most of the demand to use foreign exchange and transactions had authentic bases, and part of the activities in violation of the regulations on foreign exchange administration were due to a lack of knowledge of the policy adjustments and regulatory changes in foreign exchange administration. Therefore, in recent years, while rigorously cracking down on activities in violation of the foreign exchange laws and regulations, the SAFE placed high priority on foreign exchange policy propaganda and alertness education and actively took a variety of measures to promote lawful operations by foreign exchange business operators. First, increasing efforts on positive propaganda, and reducing unintentional irregular activities. One the one hand, the foreign exchange authorities spread the foreign exchange administration policies through a variety of media, such as television, newspapers, and networks; on the other hand, the foreign exchange authorities introduced foreign exchange administration knowledge and business handling procedures through such means as on-site consultations and the distribution of brochures so as to actively help foreign-related enterprises and the public better acknowledge and understand foreign exchange administration policies and regulations and the specific handling procedures, and to reduce unintentional irregular activities by foreign exchange transaction participants. Second, increasing efforts for the disclosure of information on illegal and irregular activities to deter activities in violation of the laws and regulations. From 2007 to 2011, the SAFE provided the public with services for searching and disclosing information on illegal and irregular activities in a total of 9,775 enterprises. In 2010 and 2011, the SAFE publicly exposed some major irregular activities, and disclosed, in 6 batches, typical cases of activities in violation of the foreign exchange laws and regulations involving 17 bank violators, 26 enterprise violators, and 13 individual violators. Question 6: What arrangements do the foreign exchange authorities have this year to crack down on illegal and irregular cross-border capital flows? Answer: In 2012, the SAFE will thoroughly implement the spirit of the Central Economic Working Conference and the National Financial Working Conference, grasp well the general keynote of the work for “Steady Development,” continuously enhance the sensitivity and prospects of inspection work, and increase efforts to monitor and crack down on unusual cross-border capital flows, such as hot money; give full play to the advantages of the Off-site Foreign Exchange Inspection System, and carry out special inspections and investigations; strengthen resource integration and interdepartmental cooperation, and continue to increase efforts to crack down on illegal and criminal activities with respect to foreign exchange, such as illegal banks; actively improve the inspection methods, perfect the inspection means, and improve the relevant and effectiveness of foreign exchange inspection work; seriously punish activities in violation of the foreign exchange laws and regulations in accordance with the law, create a stable, harmonious, and sound market environment for foreign exchange reform and development, and effectively safeguard the economic and financial security of China. 2012-06-07/en/2012/0607/1053.html
-
On May 16, 2012, the 37th annual meeting of the International Organization of Securities Commissions (IOSCO) convened in Beijing . The China Securities Journal conducted an interview with M SunLujun, head of the Capital Account Administration Department of the SAFE, on issues related to the QFII system. Q1: This year marks the 10th year since China launched the QFII system. How do you regard implementation of the system during the past ten years? A: Ten years have past since the QFII system was launched in China at the end of 2002. It is an institutional arrangement under such circumstances that foreign investors are granted limited access to China ’s capital market, and the RMB capital account remains nonconvertible. This arrangement allows qualified foreign institutional investors living up to certain standards to make portfolio investments in China 's capital market within verified investment quotas. Implementation during the past ten years shows that the QFII system is an important move by the government to promote the opening-up of the capital market and the convertibility of the RMB capital account. The involvement of QFIIs in the domestic stock market has played an important role in improving the framework of the system, investment philosophy, corporate government, risk control, and technical level of the capital market, as well as enhancing the services of domestic custodians and investment banks. It also stimulates cooperation between domestic and foreign financial institutions, facilitates the standardization and internationalization of the capital market, and provides practical experience for further reform and development of the capital market. Q2: From the perspective of the assignment of responsibilities, the CSRC is currently responsible for examining and approving the qualification and market admittance of QFIIs, while the SAFE is responsible for examining and approving the QFII quota to invest in the domestic stock market. Could you briefly describe the procedures for QFII quota examination and approval? A: According to the relevant laws and regulations of the QFII system, QFII institutions shall, upon receipt of portfolio investment business licenses from the CSRC, submit through trustees, within one year, investment quota applications to the SAFE. The SAFE implements a collective examination mechanism to examine the investment quotas. A quota examination committee is established consisting of the heads of the SAFE departments to examine QFIIs that have submitted complete and regulatory compliant applications. A meeting is held once a month to examine the applications. This mechanism has played an active role in enhancing the transparency, fairness, standardization, and timeliness of the QFII quota examination. The SAFE has maintained close communications and coordination with the relevant CSRC departments. An effective information-sharing mechanism has been established to facilitate communications. Q3: Could you say something about examination and approval of the QFII quota in recent years? A: Since implementation of the QFII system, the SAFE has worked closely with the CSRC in controlling the pace of the quota examination and in increasing the scale of investments by QFIIs. This has been achieved in accordance with the government target to support and promote the reform and development of the capital market, and based on the circumstances of the BOP conditions and the development of the stock market. As of May 16, 2012, the SAFE had approved an investment quota of USD26.013 billion for 138 QFIIs (excluding three institutions with nullified quotas due to changes in the investment entities and the approved relevant quotas). In general, the pace of the quota examination is consistent with the demand of the QFIIs. For instance, during the initial period of QFII implementation and the expansion of the global financial crisis in 2008, the amount of the approved quota was relatively small due to fewer applications submitted by the QFIIs; during periods when the QFII system was steadily carried out, the SAFE approved average quotas of USD3-3.5 billion each year. It should be noted that in 2011 the country faced great pressures from cross-border fund inflows. In response, the SAFE properly slowed the pace of QFII quota examination, with a total amount of USD1.92 billion approved for the whole year. Since the beginning of 2012, China ’s balance of payments has moved toward equilibrium. In order to further promote the reform and development of the capital market, the SAFE timely adjusted and accelerated the pace of the QFII quota examinations. As of May 16, 2012, USD4.373 billion had been granted to 38 QFIIs, nearly equal to the total investment quota approved in 2010 and 2011. Q4: We noticed that the CSRC recently released data showing that by the end of April 2012, 163 overseas institutions had been granted QFII qualifications. According to data newly released by the SAFE, as of May 8, 2012, only 141 QFIIs had been granted investment quotas. What is the source of this discrepancy? A: The CSRC gathered and released data on QFII qualifications, and the SAFE gathered and released data on QFII investment quotas. The discrepancy is due to three factors: (1) some QFIIs did not submit the applications to the SAFE on time; (2) some QFIIs had to alter their submitted applications due to fundraising reasons or adjustments to the investment schedule; (3) some QFIIs asked to defer the approval of the quotas due to fundraising difficulties. Excluding the above reasons, the SAFE has maintained a pace consistent with that of the CSRC in QFII examination and approval. Q5: Recently, the CRSC said that it will take measures to further promote the development of the QFII system, such as the lowering of the threshold for QFII admittance, further introducing overseas long-term funds, and so forth. Does the SAFE have similar plans? A: During formation and implementation of the QFII system, the SAFE has established close communications and coordination with the CSRC. The two authorities have also established a mechanism for smooth data-sharing. The SAFE has taken steps to promote the facilitation, standardization, and transparency of foreign exchange administration relating to the QFII system by revising the policies and regulations, establishing a quota examination committee, providing window guidance, and so forth, and by responding actively to the rational policy demands of the QFIIs. With respect to the quota examination and exchange policies, the SAFE has played a role similar to that of the CSRC in providing preferential policies on quota approval to a single QFII institution, a lock-up period for the principal, and so forth, in compliance with the policy orientation that mid- and long-term investors (overseas pension funds, insurance funds, donation funds, and so forth) should be further encouraged. Q6: Recently, the total quota for QFIIs was increased to USD80 billion upon approval of the State Council. What plan does the SAFE have for examining the increased quota? A: The State Council recently approved an increase in the QFII investment quota to USD80 billion. To facilitate the reform and development of the domestic stock market, the SAFE has made active adjustments to the investment quota and exchange administration, such as actively facilitating quota examination and approval, providing rapid access to the quota examination for mid- and long-term funds, including overseas pension funds and insurance funds, providing preferential policies for the amount of the initial investment quotas, increasing the initial approval amount for the aforesaid QFIIs, and properly streamlining the processes for managing the exchange accounts and RMB accounts of the QFIIs. Looking toward the future, the SAFE will continue to bolster the reform and development of the domestic capital market, maintain close communications and coordination with the CSRC, carry out policies for encouraging mid- and long-term overseas investment funds, further improve the quota examination mechanism for QFIIs, and increase the efficiency of the quota examination, thus further satisfying the quota needs of the QFIIs to invest in the domestic stock market and promoting the reform and development of the QFII system and the capital market. 2012-07-13/en/2012/0713/1057.html
-
The SAFE recently released China ’s International Investment Position for year-end 2011 and the revised data for the end of 2009 and 2010. The statistics reveal that at the end of 2011, China’s external financial assets hit USD4718.2 billion, external financial liabilities USD2943.4 billion, and external net financial assets USD1774.7 billion. Among the external financial assets, direct investments abroad came to USD364.2 billion, portfolio investments USD260 billion, other investments USD838.2 billion, and reserve assets USD3255.8 billion, accounting for 8 percent, 6 percent, 18 percent, and 69 percent respectively. In terms of external financial liabilities, foreign direct investments totaled USD1804.2 billion, portfolio investments USD248.5 billion, and other investments USD890.7 billion, accounting for 61 percent, 9 percent, and 30 percent respectively. The International Investment Position (hereinafter referred to as the IIP) is a statistical statement reflecting the stocks of financial assets and liabilities of one country or region to other countries or regions in the world at one specific point; together with the Balance of Payments Statement (BOP Statement) it constitutes the complete international accounts system, indicating the trade flows of the country or region. Compilation Principles and Indexes for the IIP I. Compilation Principles for the IIP In accordance with the standards of the Balance of Payments Manual (Fifth Edition) published by the International Monetary Fund (IMF), the IIP is a statistical statement which reflects at a specific point the stocks of financial assets and liabilities of one country or region to those of other countries or regions in the world. Changes in the IIP can be caused by changes in transactions, prices, or exchange rates, as well as by other adjustments during the specific period. The IIP is consistent with the BOP statement with regard to the principles of valuation, measurement, and conversion, and together with the BOP Statement constitutes a complete international accounts system of the country or region. China ’s IIP is a statistical statement which reflects at a specific point the stocks of China ’s financial assets and liabilities (excluding that of Hong Kong SAR, Macao SAR, and Taiwan Province ) to other countries or regions in the world. II. Explanation of the Major IIP Indexes According to IMF standards, items on the IIP are categorized according to assets and liabilities. Assets are divided into China ’s direct investments abroad, portfolio investments, other investments, and reserve assets, and liabilities are divided into foreign direct investments, portfolio investments, and other investments. The net position refers to external assets minus external liabilities. The items are specifically defined as follows: 1. Direct investment refers to external investment whereby an investor of one country operates an enterprise located in another country with the aim of acquiring effective control over the enterprise. It consists of direct investment abroad and foreign direct investment. Direct investment abroad includes the stocks of the direct investment abroad conducted by China’s non-financial sectors, the stocks of the capital and working capital allocated by domestic banks to set up branches overseas, as well as the stocks of loans between the parent companies and the subsidiaries both in China and abroad and the stocks of other receivables and payables. Foreign direct investment includes the stocks of foreign direct investment absorbed by China’s non-financial sectors, the stocks of direct investment overseas absorbed by the financial sectors (including foreign investment attracted by branches of foreign financial sectors and Chinese-funded financial sectors, and investments by foreign parties in joint financial sectors), as well as the stocks of loans between the parent companies and the subsidiaries both in China and abroad and the stocks of other receivables and payables. 2. Portfolio investment includes some kinds of investments such as shares, long- and medium-term bonds, and money market instruments. Portfolio investment assets refer to negotiable securities, such as shares, bonds, money-market instruments, and derivative financial instruments, which are held by Chinese residents but issued by non-resident enterprises. Portfolio investment liabilities refer to shares and bonds held by non-resident enterprises but issued by resident enterprises. 2.1 Equity securities mainly comprise those securities in the form of stocks. 2.2 Debt securities include long- and medium-term bonds, short-term (one year or less) bonds, and money-market instruments or transferable debt instruments, such as short-term treasury notes, commercial papers, and large-sum short-term negotiable certificates of deposits. 3. Other investment refers to all financial assets and liabilities, including trade credits, loans, currency, and deposits, as well as other assets and liabilities, but excluding direct investments, portfolio investments, and reserves assets. Long term refers to a contract period for the relevant financial assets/liabilities that is longer than one year, whereas short term refers to a contract period that is one year or less. 3.1 Trade credit refers to the direct business credit arising from the import and export of goods between China and other countries. Assets refer to the receivables of China ’s exporters and the advance payments by China ’s importers, and liabilities refer to the payables of China ’s importers and the advance receipts of China ’s exporters. 3.2 As to loans, assets refer to the external assets held by domestic institutions by providing loans to overseas institutions; and liabilities refer to loans borrowed by domestic institutions, such as loans from foreign governments, loans from international institutions, loans from foreign banks, and sellers’ credits. 3.3 As to currency and deposits, assets refer to the funds deposited abroad and the foreign cash in stock held by China’s financial institutions; and liabilities refer to the overseas private deposits and short-term funds from foreign banks attracted by China’s financial institutions, as well as other short-term funds, for instance loans from foreign exporters and individuals. 3.4 Other assets/liabilities refer to investments other than trade credits, loans, currency, and deposits, for example, non-equity capital paid of international institutions and other receivables and payables. 4. Reserves assets refer to external assets that can be used at any time and are effectively controlled by the PBOC, consisting of monetary gold, special drawing rights (SDRs), the reserves position in the Fund, and foreign exchange. 4.1 Monetary gold refers to the gold held by the PBOC as reserve. 4.2 SDR is a kind of ledger assets, which is allocated by the IMF according to the capital share of its members; it can be used to repay the debt to the IMF and to make up for the deficit in the balance of payments between the governments of member countries. 4.3 Reserves positions in the Fund refer to assets that are in the ordinary accounts of the IMF and that can be used freely. 4.4 Foreign exchange refers to current assets and liabilities that are retained by the PBOC and that can be used as a means of international compensation. 2012-06-07/en/2012/0607/1054.html
-
According to statistical data released by the State Administration of Foreign Exchange (SAFE), in March 2012 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD132.7 billion and USD124.8 billion respectively. The surplus of foreign exchange settlement and sales amounted to USD7.8 billion. During the same period, the total amount involved in contracts for forward settlement of foreign exchange with banks on behalf of clients was USD21.2 billion, the total amount involved in contracts for forward sales of foreign exchange was USD17.9 billion, and the net forward exchange settlement totaled USD3.3 billion. For the first three months of 2012, the cumulative amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD370.2 billion and USD338.6 billion respectively. The surplus of foreign exchange settlement and sales was USD31.6 billion. During the same period, the cumulative amount in the contracts for forward settlement of foreign exchange with banks on behalf of clients was USD48.8 billion, the cumulative amount in the contracts for forward sales of foreign exchange was USD36.3 billion, and the cumulative net forward settlement of foreign exchange with banks on behalf of clients was USD12.5 billion. In March 2012, foreign-related receipts and payments of domestic banks on behalf of clients amounted to USD214.1 billion and USD199.2 billion respectively, and the surplus of foreign-related receipts and payments totaled USD14.9 billion. For the first three months of 2012, cumulative foreign-related receipts and payments of banks on behalf of clients amounted to USD590.6 billion and USD535.4 billion respectively, and the surplus of the cumulative foreign-related receipts and payments reached USD55.1 billion. Annex: Glossary and relevant definitions Balance of Payments refers to all economic transactions occurring between residents and non-residents in China , including all financial transactions and barter exchanges resulting in changes in the assets and liabilities of residents and non-residents. Foreign Exchange Settlement and Sales by Banks refer to settlement and sales conducted by designated foreign exchange banks for their clients or for themselves, excluding data on inter-bank foreign exchange market transactions. Foreign exchange settlement and sales by banks on behalf of clients refer to, including the foreign exchange settlement and sales by banks for themselves, those conducted by designated foreign exchange banks for their clients. The time of conversion between the RMB and the foreign currency is regarded as the time-point for the statistics on the foreign exchange settlement and sales by banks. Specifically, foreign exchange settlement refers to the sale of foreign exchange to designated foreign exchange banks by owners of foreign exchange; foreign exchange sales refer to the sale of foreign exchange by designated foreign exchange banks to users of foreign exchange. The difference between the foreign exchange settlement and sales is regarded as an offset balance. Such differences, which will be offset by the banks through transactions on the inter-bank foreign exchange market, function as a major force resulting in changes to the country’s foreign exchange reserves. However, this is not equivalent to the net change in the foreign exchange reserves during the same period. The principle for transactions between residents and non-residents does not apply to the preparation of statistics on foreign exchange settlement and sales by banks on behalf of clients, and such statistics only cover RMB and foreign currency transactions between banks and their clients, namely, exchange transactions between RMB and foreign currencies, which fall outside the category of the balance- of-payments statistics. Contracts for Forward Settlement and Sales of Foreign Exchange refer to the contracts for forward settlement (sales) of foreign exchange executed between banks and clients through consultation, in which the foreign currency, amount, exchange rate, and term for the forward settlement (sales) of foreign exchange are agreed upon; where the foreign exchange is due to be received (paid), the foreign exchange settlement (sales) is to be handled on the basis of the foreign currency, amount, and exchange rate specified in such contracts. The forward foreign exchange settlement and sales business enables enterprises to lock up the exchange rate in advance for future foreign exchange settlement or sales, and to effectively avoid the risk of changes in the RMB exchange rate. In general, the banks will hedge the risk exposure arising from the forward foreign exchange settlement and sales business on the inter-bank foreign exchange market. For example, where the total amount involved in the contracts for forward settlement of foreign exchange executed by banks is more than that of the contracts for forward sales of foreign exchange, the banks generally will sell an equivalent amount of foreign exchange in advance on the inter-bank foreign exchange market, and vice versa. Therefore, the forward settlement and sales of foreign exchange business is also a factor that affects changes in China ’s foreign exchange reserves. Foreign-related Receipts and Payments by Banks on Behalf of Clients refers to receipts and payment occurring between domestic non-bank resident institutions/individuals (collectively referred to as the “non-bank sector”) and non-resident institutions/individuals through domestic banks, exclusive of the receipts and payments in cash and foreign-related receipts and payments by the banks themselves. In particular they include cross-border receipts and payments between non-bank sectors and non-residents through domestic banks (including RMB and foreign exchange), and domestic receipts and payments between non-bank sectors and non-residents through domestic banks (temporarily excluding receipts and payments in RMB between domestic individual residents and domestic non-resident individuals). Statistics are collected at the time the clients conduct the foreign-related receipts and payments at the domestic banks. Specifically, foreign-related receipts of banks on behalf of clients refer to funds collected by non-bank sectors from non-residents via domestic banks; external payments by banks on behalf of clients refer to funds paid by non-bank sectors to non-residents through domestic banks. Although the foreign-related receipts and payments of banks on behalf of clients are an integral part of the balance-of-payments statistics, the accounting method for the statistics, unlike the accrual basis of accounting required by the balance of payments statistics, is based on a cash basis. In addition, they merely reflect fund flows between non-bank sectors and non-residents, and do not include barter transactions and foreign transactions conducted by the banks themselves. The scope of the statistics on the foreign-related receipts and payments of banks on behalf of clients is smaller than the scope of the balance-of-payments statistics. 2012-05-15/en/2012/0515/1049.html
-
In general, the Compulsory Foreign Exchange Settlement and Sales System refers to the administrative arrangement whereby the foreign exchange income obtained by residents shall be sold to financial institutions designated by the State and foreign exchange to be utilized shall be purchased from financial institutions designated by the State. Residents do not have autonomy to keep and utilize the foreign exchange. The System is mostly adopted by economies with a shortage of foreign exchange resources. During the planned economy period, due to the shortage of foreign exchange, China implemented strict mandatory planning management of foreign exchange receipts and payments. Since the reform and opening up, in order to adapt to the requirements for China to establish a socialist market economy system, the reform of the foreign exchange administration system has been advanced in an orderly fashion, the residents’ autonomy to utilize foreign exchange has steadily expanded, and the levels of trade facilitation and investment have continuously improved. In January 1994, China cancelled the examination and approval procedures for foreign exchange utilization plans under the current account, such as enterprise imports, and began to allow enterprises to directly purchase foreign exchange from designated foreign exchange banks upon the strength of valid documents. In December 1996, China announced realization of current account convertibility and lifted restrictions on overseas payments and transfers under the current account; however, foreign exchange from such sources as the export income of the enterprises, in principal, still had to be sold to the designated foreign exchange banks. Since entry into the WTO, China ’s foreign economy has developed rapidly, and the principal contradiction in its balance of payments gradually changed from the past shortage of foreign exchange to a rapid increase in foreign exchange reserves. From 2002 to 2011, China ’s foreign exchange reserves increased by nearly USD 300 billion annually, 12 times the annual increment from 1994 to 2001. Conforming to the change in the situation and the actual requirements of the market players, from 2001, by improving management of the opening of foreign exchange accounts and management on the basis of limits, China has gradually expanded the autonomy of enterprises to retain foreign exchange. First, it relaxed the conditions for enterprises to open foreign exchange accounts and to retain foreign exchange. In 2001, enterprises which satisfied such conditions as the foreign exchange receipts from exports during the year were above the equivalent of USD 2 million and the foreign exchange payments of the year were above the equivalent of USD 0.2 million began to be allowed to open foreign exchange settlement accounts to retain their foreign exchange income from such matters as goods exports and trade in services within certain limits, subject to the approval of the foreign exchange authorities. In 2002, the restrictions on the conditions for account opening were lifted, and all enterprises with foreign trade operation rights or foreign exchange revenue under the current account were allowed to open foreign exchange accounts under the current account upon the approval of the foreign exchange authorities. In 2006, the ex-ante approval procedures for account opening were cancelled, and the enterprises may now open foreign exchange accounts under the current account directly with the banks without the approval of the foreign exchange authorities. Second, it raised the limit on the foreign exchange allowed to be retained in foreign exchange accounts. In 2002, the limit was 20 percent of the enterprises’ foreign exchange revenue under the current account during the last year. In 2004, the limit was raised to 30 percent or 50 percent. In 2005, the limit was further raised to 50 percent or 80 percent. In 2006, the original method whereby the limit was ratified only on the basis of the revenue that was changed, the limit was ratified on the basis of the sum of 80 percent of the foreign exchange revenue under the current account and 50 percent of the foreign exchange payments under the current account of the enterprises during the last year, thus, further raising the limit of foreign exchange that may be retained by the enterprises. In 2007, management of the account on the basis of such limits was cancelled, and enterprises began to be allowed to the keep foreign exchange on their own based on their operating needs. In 2008, the amended Regulations of the People’s Republic of China on Foreign expressly provided that the enterprises and individuals may retain the foreign exchange in accordance with the relevant provisions or sell the foreign exchange to the banks. Since 2009, in order to further promote facilitation of trade and investment and to improve policy transparency, the foreign exchange authorities have energetically carried out a cleaning-up of the regulations, and announced that a total of over 400 normative documents concerning foreign exchange administration were repealed and invalidated. It was announced that the normative documents concerning compulsory foreign exchange settlement and sales would be repealed, invalidated, or amended. At present, all the policies and regulations concerning compulsory foreign exchange settlement and sales are no longer in effect and are no longer implemented. Overall, the Compulsory Foreign Exchange Settlement and Sales System, as an administrative arrangement in the era of a shortage of foreign exchange, played an important role in supporting the development of the real economy and safeguarding the economic and financial security of China . As the foreign economy develops, the foreign exchange authorities have timely adjusted and abolished the Compulsory Foreign Exchange Settlement and Sales System, consistent with the concepts and purposes of foreign exchange administration keeping up with the times and serving the overall situation of economic development. In the future, foreign exchange administration will abide by the risk limits and further promote facilitation of trade and investment and actively serve the development of the real economy. 2012-06-07/en/2012/0607/1052.html
-
Question: At the end of last year, against the background of the more serious international financial turmoil, in the fourth quarter China experienced capital outflows, with a current account surplus but a capital account deficit in terms of the balance of payments. What is the situation this year? Answer: In the first quarter of this year, the situation of the fourth quarter of last year, whereby China had a current account surplus but a capital account deficit in terms of the balance of payments, was changed, and there was a return of the “twin surplus,” i.e., there was a current account surplus as well as a capital account surplus. However, the status of the overall balance of payments more closely approached equilibrium, mainly embodied in the following respects: First, the current account surplus was narrowed, accounting for a lesser proportion of GDP. According to preliminary estimates, the current account surplus in the first quarter was USD 24.7 billion, a decrease of 14 percent compared with that during the same period of last year, and the proportion of the current account surplus to GDP in the same quarter was 1.4 percent, a decrease of 1.4 percent compared with last year. Second, once again there was a capital account surplus. The size of net inflows of capital (including errors and omissions, the same below) in the first quarter was USD 49.9 billion, a decrease of 56 percent compared with the same period of last year, whereas there was a deficit of USD 48.1 billion in the fourth quarter of 2011. Third, the trend of increasing foreign exchange reserves further slowed down. After adjusting for the change in the exchange rate and asset prices, foreign exchange reserves calculated on the basis of the coverage of the balance of payments in the first quarter increased by USD 74.8 billion (including foreign exchange reserve earnings in the current period), a 46 percent decrease in the increment compared with the same period of last year. In other words, although since the beginning of this year net inflows of foreign exchange rebounded somewhat compared with the end of last year, there were still on a downward trend compared with the same period of last year. This is consistent with our earlier basic judgment that China ’s balance of payments was expected to maintain a surplus, but the size of the surplus would decrease significantly. Question: According to data published by the People’s Bank of China (PBC), there was a new increase of USD 123.8 billion in foreign exchange reserves in the first quarter of this year. Does this mean that China will again face pressures of massive capital inflows? Answer: This does not mean that China will again face pressures of massive capital inflows. First of all, although the data published by the PBC show there was a new increase of more than USD 120 billion in the balance of foreign exchange reserves in the first quarter, this was an increase in the book value of the reserve assets mainly arising from such factors as exchange rate and asset price changes, and it does not reflect actual cross-border capital flows. Second, the increment in the foreign exchange reserves included the operating earnings of the reserves. In view of the large size of operations and management of foreign exchange reserves in China, the operating earnings of the reserves play a significant role in the increase in the balance of foreign exchange reserves. Third, according to the data published by the PBC, in March there was a large increase in outstanding foreign exchange funds, but this does not lead to the conclusion that there is current a large net inflow of capital, mainly because there are differences in the concept and coverage between the outstanding foreign exchange funds and the increment in foreign exchange reserves. Fourth, net inflows of capital rebounded the first quarter, mainly because the environment for international markets improved, the appetite for global investment risks increased, and capital flowed back to the emerging markets. However, the net inflows of cross-border capital in the first quarter still decreased by more than 50 percent compared with the same period of last year. Finally, because the European sovereign debt crisis is still developing and evolving, and the world is still in the process of financial deleveraging, the risks of massive cross-border capital flows are increasing. Question: The PBC announced that the range of fluctuations in the RMB exchange rate against the USD would be expanded as of April 16. What effect will this have on China ’s foreign exchange situation? Answer: This is a major move to further deepen the reform of the RMB exchange rate formation mechanism under the circumstances that China ’s balance of payments situation has gradually improved, the RMB exchange rate has approached a reasonable equilibrium, and development of the foreign exchange market has matured. Since the expansion of the fluctuation range of the exchange rate, in terms of appreciation and depreciation expectations of market transaction participants and actual transactions, the RMB exchange rate fluctuated moderately, and therefore expectations were stable, foreign exchange transactions and investments became more active, and the self-balancing capability of the foreign exchange market was further strengthened. Overall, deepening the reform of the RMB exchange rate mechanism is conducive to allowing market supply and demand play a larger role in the formation of the exchange rate and allowing the RMB exchange rate to approach a reasonable equilibrium level, promoting China’s balance of payments status to develop toward an equilibrium, improving the self-balancing capability of the foreign exchange market, and slowing down the accumulation of foreign exchange reserves. 2012-05-15/en/2012/0515/1051.html
-
According to statistics released by the SAFE, in the first quarter of 2012 inflows and outflows of direct investments by overseas investors in domestic financial institutions amounted to USD660 million and USD40 million respectively, resulting in a net inflow of USD620 million. Outflows and inflows of overseas direct investments by domestic financial institutions amounted to USD1.55 billion and zero respectively, resulting in a net outflow of USD1.55 billion (see table 1). As of the end of 2011, the stock of direct investments by overseas investors in domestic financial institutions amounted to USD68.43 billion, while the stock of overseas direct investments by domestic financial institutions amounted to USD52.66 billion (see table 2). To further increase the transparency of exchange statistical data, from the beginning of 2012 the SAFE will release the flow amount of direct investment by financial institutions on a quarterly basis, and the stock amount of direct investments by financial institutions on a yearly basis. Table 1: Direct Investment Flows by Financial Institutions (Quarterly) Unit: USD (100 mn) Item Q1, 2012 Net inflows of direct investments by overseas institutions 6.2 Inflows 6.6 Outflows 0.4 Net outflows of overseas direct investments 15.5 Inflows 0 Outflows 15.5 Table 2: Stock of Direct Investments by Financial Institutions (Annually) Unit: USD (100 mn) Item End 2011 Direct investments by overseas institutions 684.3 Direct investments by domestic institutions 526.6 Appendix: Glossary Financial institutions refer to the headquarters, branches, and sub-branches of institutions engaging in banking, securities, insurance, and other financial businesses which are established within the territory of China according to the law. Direct investments by financial institutions refer to equity investments by overseas investors in China’s domestic financial institutions or equity investments by China’s domestic financial institutions in overseas enterprises, which enable direct investors to have voting rights of 10 percent or more in the invested enterprises. The table of direct investment flows by financial institutions exhibits the amounts of capital flows of overseas direct investments by China’s domestic financial institutions and direct investments in China absorbed from overseas institutions. Specifically, inflows of direct investments by overseas institutions refer to the investment capital or increased investments by overseas investors in China’s domestic financial institutions, outflows refer to the investment capital decreased or withdrawn by overseas investors from China’s domestic financial institutions; capital outflows of foreign direct investments refer to capital investments or increased investments by China’s domestic financial institutions in overseas enterprises, inflows refers to decreased or withdrawn capital investments by China’s domestic financial institutions from overseas enterprises. The table of the stock of direct investments by financial institutions exhibits the stock amount of Chinese owners’ equity arising from foreign direct investments by domestic financial institutions and that of foreign owners’ equity arising from direct investments absorbed in China, including paid-up capital, undistributed profits, and so forth. 2012-07-13/en/2012/0713/1058.html
-
The SAFE recently released preliminary data on China ’s Balance of Payments Statement for the first quarter of 2012. In Q1 of 2012 the current account and the capital and financial account posted a “twin surplus” and international reserves maintained a growing momentum. In Q1, the surplus under the current account totaled USD24.7 billion. Specifically, according to the statistical coverage of the balance of payments, the surplus in goods, income, and current transfers reached USD21.7 billion, USD18.5 billion, and USD2.7 billion, respectively, whereas the deficit in trade in services amounted to USD18.2 billion. Meanwhile, China ’s surplus under the capital and financial account (including net errors and omissions) totaled USD49.9 billion. In particular, net inflows of direct investments amounted to USD44.1 billion. International reserve assets posted an increase of USD74.6 billion. Specifically, transactions in foreign exchange reserve assets registered an increase of USD74.8 billion (exclusive of the influence of non-transaction changes in value such as exchange rates and prices), the reserve position in the IMF registered a drop of USD400 million, and special drawing rights registered a rise of USD200 million. Balance of Payments for Q1, 20121 (Preliminary Data) Unit: USD100 million Item # Q1 of 2012 I. Current Account 1 247 A. Goods and Services 2 35 a. Goods 3 217 Credit 4 4314 Debit 5 4097 b. Services 6 -182 Credit 7 436 Debit 8 618 B. Income 9 185 C. Current Transfers 10 27 II. Capital and Financial Account2 11 499 Incl. Direct Investments 12 441 III. Reserves Asset 13 -746 3.1 Monetary Gold 14 0 3.2 Special Drawing Rights 15 -2 3.3 Reserves Position in the Fund 16 4 3.4 Foreign Exchange 17 -748 3.5 Other Claims 18 0 Notes: 1. This statement employs rounded-off numbers. 2. The data under the capital and financial account in this statement represent the balance between the current account balance and the amount of change in reserve assets, including net errors and omissions. 2012-05-15/en/2012/0515/1050.html