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In order to regulate the banksown foreign exchange settlement and sales business and to facilitate banking operations, the State Administration on Foreign Exchange (the SAFE) recently released the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Improving the Administration of the BanksOwn Foreign Exchange Settlement and Sales (Huifa No. 23 [2011]) (hereinafter referred to as the Circular). The Circular will come into effect as of July 1, 2011. The Circular standardizes regulation of the settlement and sales of foreign exchange under the banks own current and capital accounts: first, it embodies balanced management by establishing unified quantitative standards for the conversion of the banks capital (or working capital) between domestic and foreign currencies; second, it reflects convenient operationsby straightening out and integrating the administrative policies on the banks own foreign exchange settlement and sales and standardizing such business that is not clearly stipulated in some of the current policies; third, it reflects a streamlined review process by simplifying the requirement for ex-ante review for the settlement of the banks profits in foreign exchange and canceling the ex-ante review requirement for the dividends and bonuses paid by banks to foreign shareholders as well as for profits remitted by foreign banks; fourth, it stresses laying emphasis on major items by standardizing foreign exchange settlement and sales for items that have a great impact on balance of payment and foreign exchange operations; and fifth, it represents ex-post supervisionby reiterating the statistical requirements for the banks own foreign exchange settlement and sales as well as regarding the information to be submitted by the banks. The release of this Circular is expected to reduce the review requirements, streamline the administrative process, and facilitate the banks own foreign exchange settlement and sales and other related business activities in an orderly manner. 2011-06-13/en/2011/0613/1000.html
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The SAFE recently released its revised data on China's Balance of Payments Statement for Q1 of 2011. The statistics reveal that in Q1 of 2011 the current account and the capital and financial account continued to post a "twin surplus." In Q1 of 2011, China's surplus under the current account totaled USD28.8 billion, a decrease of 21 percent year on year. Specifically, according to the statistical coverage of the balance of payments, the surpluses in goods, income, and current transfers reached USD20.8 billion, USD5.1 billion, and USD11.6 billion, respectively, whereas the deficit in trade in services amounted to USD8.7 billion. Meanwhile, in Q1 of 2011 China's surplus under the capital and financial account totaled USD86.1 billion, an increase of 41 percent year on year. In particular, net inflows of direct investments and other investments amounted to USD44.8 billion and USD42.5 billion respectively, whereas net outflows of portfolio investments reached USD2.7 billion. China's international reserve assets from transactions increased by USD141.2 billion. Specifically, foreign exchange reserve assets registered a net increase of USD138 billion (exclusive of the influence of non-transaction value change factors such as exchange rates, prices, and so forth), reserve investment in the IMF registered an increase of USD3.2 billion, and special drawing rights registered a decrease of USD100 million. 2011-07-11/en/2011/0711/1003.html
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Initial estimates reveal that in Q1 of 2011 the current account and the capital and financial account (including net errors and omissions) continued to post a surplus and international reserves maintained a growing momentum. In Q1, the surplus under the current account totaled USD29.8 billion, a year-on-year decrease of 18 percent as calculated on a comparable basis (the same below). Specifically, the surpluses in goods, income, and current transfers reached USD20.8 billion, USD7.6 billion, and USD11.6 billion, respectively, whereas the deficit in trade in services amounted to USD10.2 billion. Meanwhile, China's surplus under the capital and financial account (including net errors and omissions) totaled USD111.4 billion. In particular, net inflows of direct investments amounted to USD42.6 billion. International reserve assets posted an increase of USD141.2 billion, a rise of 47 percent. Specifically, transactions in foreign exchange reserve assets registered an increase of USD138 billion (exclusive of the influence of non-transaction changes in value such as exchange rates and prices), the reserve position in the IMF registered an increase of USD3.2 million, and special drawing rights registered a decrease of USD100 million. 2011-05-24/en/2011/0524/996.html
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According to statistical data released by the State Administration of Foreign Exchange (SAFE), in May 2011 the amount of foreign exchange settlement and sales on behalf of clients by banks amounted to USD139 billion and USD87.1 billion respectively. The surplus of foreign exchange settlement and sales on behalf of clients by banks amounted to USD51.9 billion. During the first five months of 2011, the accumulated amount of foreign exchange settlement and sales on behalf of clients by banks amounted to USD644.6 billion and USD413.9 billion, respectively. The surplus of foreign exchange settlement and sales was USD230.7 billion. In May 2011, foreign-related receipts and payments by domestic banks on behalf of clients amounted to USD193.2 billion and USD160.3 billion, respectively, and the surplus of foreign-related receipts and payments reached USD32.8 billion. During the first five months of 2011, the accumulated foreign-related receipts and payments by banks on behalf of clients amounted to USD875.9 billion and USD742.7 billion, respectively; and the surplus of the accumulated foreign-related receipts and payments reached USD133.2 billion. 2011-06-30/en/2011/0630/1001.html
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According to the statistical data released by the State Administration of Foreign Exchange (SAFE), in April 2011 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD129.8 billion and USD85.2 billion respectively. The surplus of foreign exchange settlement and sales by banks on behalf of clients amounted to USD44.7 billion. In the first four months of 2011, the cumulative amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD505.6 billion and USD326.8 billion respectively. The surplus of foreign exchange settlement and sales was USD178.8 billion. In April 2011 foreign-related receipts and payments by domestic banks on behalf of clients amounted to USD177.8 billion and USD153.3 billion respectively, and the surplus of foreign-related receipts and payments reached USD24.5 billion. In the first four months of 2011, the cumulative foreign-related receipts and payments of banks on behalf of clients amounted to USD682.8 billion and USD582.3 billion respectively; and the cumulative surplus of foreign-related receipts and payments reached USD100.5 billion. 2011-05-25/en/2011/0525/997.html
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Question: Please introduce China ’s balance of payments status in the first half of this year. Answer: According to the preliminary statistics, China ’s balance of payments status in the first half of this year continued to improve. First, receipts and payments under the current account more closely approached an equilibrium. In the first half of the year, the current account surplus was USD83.2 billion, a year-on-year decrease of 5 percent, and the proportion of the current account surplus to GDP was 2.3 percent, a decrease of 0.5 percentage points compared with that in the last year. Second, cross-border capital flows presented a bi-directional change. In the first half of the year, the deficit in the capital and financial account (including net errors and omissions, the same below) was USD20.3 billion. In the first quarter, as the international market environment recovered, international capital flowed back into China , and in terms of the capital and financial account, there was a surplus of USD51.1 billion compared with the USD48 billion deficit registered in the fourth quarter of 2011. In the second quarter, there was again a net outflow of USD71.4 billion due to the combined influence of domestic and foreign factors. Third, the increase in foreign exchange reserves slowed down. In the first half of the year, the capital account deficit and the current account surplus offset each other, reserve assets calculated on the basis of the balance of payments coverage (excluding the influence of changes in non-trade value, such as the exchange rate and price) only increased by USD62.9 billion, with the growth rate decreasing by 78 percent compared with the same period of the last year; of this foreign exchange reserve assets increased by USD63.6 billion, with the growth rate decreasing by 77 percent compared with the same period of last year. Question: In the first half of the year, there appeared to be a deficit under the capital account of China . Does this mean that a large volume of foreign capital was withdrawn from China ? Answer: In the first half of the year, China indeed experienced an outflow of capital to some extent, but this does not mean that there was a large-scale and collective withdrawal of foreign capital. Theoretically, the current account surplus exceeding the increment of foreign exchange reserves means that the capital of China ’s domestic institutions and individuals presented a situation of a net output (i.e., a capital account deficit in the Balance of Payments Statements) and an increase in net foreign assets. In terms of other statistical data reflecting cross-border receipts and payments of enterprises and individuals and the banks’ foreign exchange credit receipts and payments, the main change in the current foreign exchange situation is that the holder of assets in foreign exchange has shifted from the central bank to domestic institutions and individuals and that foreign exchange is to be held by the people; any sign of a proactive withdrawal of foreign capital is still not obvious. First, in terms of the banks’ data on cross-border receipts and payments on behalf of clients under the capital account, in the first half of the year China’s domestic enterprises and individuals still maintained a net inflow of capital of up to USD77.6 billion. Second, in terms of the banks’ data on foreign exchange settlement and sales on behalf of clients under the current account and capital account, in the first half of the year the surplus of foreign exchange settlement and sales by domestic enterprises and individuals was USD29.5 billion, far less than the cross-border receipts and payments surplus of USD79.1 billion. The main reason for the above difference is that under the influence of the market environment, at present domestic enterprises and individuals have shifted from short dollar to long dollar and have begun financial operations whereby they are “incurring liabilities in domestic currency and holding assets in foreign currency.” Third, in terms of bank data on foreign exchange credit receipts and payments, in the first half of the year there was a new increase of USD130.1 billion with respect to various types of foreign exchange deposits with banks; this was used for domestic foreign exchange loans as well as for international loans and external investments. Such uses are reflected in the increase in the banks’ net foreign assets during the same period, and in the balance of payments statements they are recorded as an “outflow” item under the capital account. Fourth, in terms of detailed data on cross-border receipts and payments, cross-border payments in the first half of the year increased by 24 percent compared with the same period of the last year, of which the capital outflows under overseas direct investments in which the Chinese parties have control increased by 74 percent, whereas the capital outflows through the main withdrawal channels for foreign capital, such as the withdrawal of foreign direct investments and securities investments, and remittances of investment earnings of foreign investors and so forth only increased by 15 percent. Question: How should we regard the changes in the current situation of China ’s balance of payments? Answer: The current situation for China ’s balance of payments should be comprehensively recognized on the basis of the following: First, the decrease in the balance of payments surplus and the slowdown in foreign exchange reserve growth conform to China ’s macro-control direction and are beneficial for maintaining China ’s balance of payments equilibrium. Second, against the background of the slow recovery of the global economy and the worsening international financial turmoil, the major new emerging markets are generally experiencing an outflow of capital, a decrease in reserves, and a depreciation of the domestic currency, and it is unavoidable that China ’s cross-border capital flows are affected. Third, after the balance of payments and the RMB exchange rate approach an equilibrium and a reasonable level, the bidirectional fluctuation situation whereby there are inflows and outflows of cross-border capital and increases and decreases in the RMB exchange rate are unavoidable. Fourth, notwithstanding the fact that the trend of a unilateral appreciation of the RMB exchange rate against the US dollar is ending, the RMB continues to become stronger against most currencies, the nominal effective exchange rate and the real effective exchange rate of the RMB published by the Bank for International Settlements for the first half of the year appreciated 1.6 percent and 0.9 percent respectively. Meanwhile, the RMB spot exchange rate differential between home and abroad has narrowed; the dollar premium indicated by the forward exchange rate mainly reflects the interest rate spread between the RMB and foreign currencies rather than any depreciation expectations, and also indicates that the current RMB exchange rate is at reasonable level accepted by domestic and overseas parties and by market clearing. Fifth, China is able to tolerate the impact of cross-border capital flows due to its relatively rapid economic growth, sound financial condition, continuous surplus of trade in goods, abundant foreign exchange reserves, and the fact that foreign capital mainly consists of direct investments with high stability rather than securities investments with high volatility. Question: In the second half of the year, will China be exposed to the risk of a capital flow reversal? Answer: The SAFE still maintains its basic judgment made at the beginning of the year that China ’s balance of payments hopefully will maintain a basic equilibrium this year. Notwithstanding the fact that there are many unstable and uncertain factors at home and abroad in the second half of the year, some positive factors in favor of China ’s balance of payments equilibrium are gradually accumulating. First, a series of recently issued pre-adjustment and fine-adjustment policies will help strengthen market confidence and help maintain steady economic growth. Second, in consideration of the depressed world economy and the fact that the drop in international bulk commodity prices depressed import costs of domestic parties, China ’s trade surplus may further expand in the second half of the year. Third, each of the major economies has placed high priority on the maintenance of economic growth, and the relevant countries and regions have certain resources and a determination to prevent the debt crisis from becoming worse. Overall, as long as there are no major emergencies at home or abroad, China ’s balance of payments hopefully will still achieve a basic equilibrium. Even though capital net outflows will occur, they are tolerable and they conform to policy goal of “foreign exchange to be held by the people,” which has always been advocated by China and remains a part of the scope of the basic equilibrium in the balance of payments. 2012-07-31/en/2012/0731/1063.html
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In order to support foreign trade and to boost growth, the SAFE, the General Administration of Customs, and the State Administration of Taxation since August 1, 2012 have implemented a reform of the foreign exchange administration system for trade in goods throughout the country. Preliminary results were achieved within one month of implementation. In the early 1990s, China implemented an administration system whereby the flows of imported and exported goods and the flows of capital matched each other on a case-by-case basis and an on-site verification and writing-off system was applied. For a long period, this system was consistent with China ’s macro-economic and foreign trade situations, and it played an active role in supervising and encouraging enterprises to collect the full amount of foreign exchange in a timely manner, to guard against cheating on tax rebates from exports, and to crack down on foreign exchange evasion. However, as the scale of China’s foreign trade rapidly increased, it was difficult to adapt this administrative method of verification and writing-off on a case-by-case basis for the receipts and payments of foreign exchange from imports and exports to the current trade mode requirements and to the participant diversification. Therefore, in order to introduce a reform of the verification and writing-off system of foreign exchange payments for imports, as of August 1, 2012 the SAFE implemented a reform of the foreign exchange administration system for trade in goods throughout the country. The main content of the reform includes: First, simplifying the business handling formalities and procedures for foreign exchange receipts and payments for trade in imports and exports. The foreign exchange authorities cancelled the verification and writing-off system for receipts and payments of foreign exchange from imports and exports, with enterprises no longer required to handle the verification and writing-off procedures on a case-by-case basis with the foreign exchange authorities; cancelled the Online Inspection of Foreign Exchange Collections and Settlements from Exports, with the foreign exchange collections and settlements from exports of the complying enterprises no longer subject to limits; cancelled the ex-ante management of the ratio of trade credits, such as the advance receipts by and the deferred payments of foreign exchange by enterprises, and instead implemented ex-post dynamic monitoring; simplified the documents required for foreign exchange purchases and payments for imports, with the complying enterprises able to purchase foreign exchange in advance from the banks on the basis of their true and lawful needs for foreign exchange payments for imports, and able to handle the foreign exchange payment procedures with the banks upon the strength of the import customs declaration, contract, invoice, or any other document that proves the authenticity of the transactions. Second, adjusting the export custom declaration procedures, and simplifying the export rebate vouchers. Enterprises are no longer required to provide a verification form for the handling of the export custom declarations and for declaring export rebates. Third, improving regulatory means through aggregate verifications, dynamic monitoring, and classified management. The foreign exchange authorities carry out off-site aggregate comparisons between the flows of imported and exported goods and the enterprises’ flows of capital, conduct classified management and dynamic monitoring of the enterprises, and effectively guard against the risks of foreign exchange receipts and payments. Fourth, strengthening joint supervision by the authorities. The foreign exchange, customs, and tax authorities further strengthened cooperation, improving the coordination mechanism, realizing data sharing, creating synergy, and rigorously cracking down on irregular cross-border capital flows and activities in violation of the relevant laws, such as smuggling and tax fraud. In promoting the reform, the foreign exchange authorities actively transformed government functions, significantly reduced the administrative examination and approval items, with the number of administrative licensing items related to foreign exchange administration for trade in goods reduced from 19 to 4, and repealed 116 normative documents related to foreign exchange administration for trade. Furthermore, the foreign exchange authorities established and improved the operational rules and other standards and regulations, improved the internal control system, and enhanced administrative efficiency. Since the reform of the foreign exchange administration system for trade in goods was implemented one month ago, the positive effects of the reform in terms of facilitating trade activities and serving the real economy have already become apparent. This is embodied specifically in the significant improvement in the banks’ efficiency with respect to foreign exchange receipts and payments for trade, with the bank counters’ average processing time for foreign exchange collection and settlements reduced from 26 minutes per transaction to 9 minutes per transaction, and that for foreign exchange sales and payments reduced from 23 to 6 minutes. This is also embodied in the significant shortening of the time required for the enterprises’ receipts and payments of foreign exchange for foreign trade, and in the notable decrease in the “travel time cost” for the round-trip between the foreign exchange authorities and the banks, with the amount of human resources invested in trade receipts and payments reduced by one-third, the average cost of wages saved by each enterprise reaching RMB70,000, and that saved by each large-scale enterprise in the eastern developed regions even reaching RMB200,000, thereby reducing the enterprises’ operating costs for imports and exports and improving foreign trade competitiveness. While the reform promotes trade facilitation, it also strengthens the prevention and control of the risks of unusual cross-border capital flows. Since the reform, the complying enterprises, accounting for more than 95 percent of all enterprises, fully enjoy the benefits brought about by the policy on foreign exchange receipts and payments for trade in goods; the foreign exchange authorities can take advantage of information technology to screen those enterprises with unusual circumstances, and through dynamic monitoring, on-site verifications, and classified management, can strictly supervise the few enterprises with suspicious or irregular activities and can implement precise crackdowns. According to the statistics, the average daily traffic on the Foreign Exchange Monitoring System for Trade in Goods exceeds 200,000 person-times. As of the end of August 2012, more than 1,500 “empty-shell enterprises” were de-registered from the list, with banks no longer handling foreign exchange receipts and payments in trade for these enterprises; and the foreign exchange receipts and payments in trade of nearly 700 enterprises with unusual circumstances or suspected of being involved in activities in violation of the laws and regulations, such as evasion or illegal purchases of foreign exchange, to a certain degree have been restricted. 2012-09-03/en/2012/0903/1066.html
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According to statistical data released by the State Administration of Foreign Exchange (SAFE), in May 2012 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD135.1 billion and USD129.9 billion respectively. The surplus of foreign exchange settlement and sales amounted to USD5.1 billion. During the same period, the total amount involved with banks in contracts of forward settlement of foreign exchange on behalf of clients was USD15.9 billion, the total amount involved in contracts of forward sales of foreign exchange was USD21.2 billion, and the total amount of net forward exchange sales was USD5.3 billion. During the first five months 2012, the cumulative amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD615.5 billion and USD582.5 billion respectively. The surplus of foreign exchange settlement and sales was USD33 billion. During the same period, the cumulative amount involved in contracts of forward settlement of foreign exchange with banks on behalf of clients was USD73.4 billion, the cumulative amount involved in contracts of forward sales of foreign exchange was USD68 billion, and the cumulative amount of net forward settlement of foreign exchange with banks on behalf of clients was USD5.4 billion. In May 2012 foreign-related receipts and payments of domestic banks on behalf of clients amounted to USD224.9 billion and USD215.8 billion respectively, and the surplus of foreign-related receipts and payments reached USD9.1 billion. During the first five months of 2012, cumulative foreign-related receipts and payments of banks on behalf of clients amounted to USD1002.5 billion and USD929.8 billion respectively; and the surplus of the cumulative foreign-related receipts and payments reached USD72.8 billion. Addendum: 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 arrangements resulting in changes in the assets and liabilities of residents and non-residents. Foreign exchange settlement and sales by banks refers to settlement and sales conducted by designated foreign exchange banks for their clients or for themselves, excluding data on transactions on the inter-bank foreign exchange market. Foreign exchange settlement and sales by banks on behalf of clients (including foreign exchange settlement and sales by banks themselves) refer to settlement and sales by designated foreign exchange banks on behalf of their clients. The time of conversion between RMB and 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 refers to the sale of foreign exchange by designated foreign exchange banks to users of foreign exchange. The differences between foreign exchange settlement and sales are regarded as an offset balance. Such differences, which will be offset by the banks through transactions on the inter-bank foreign exchange market, are a major factor resulting in changes in the country’s foreign exchange reserves. But they are 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; such statistics only cover RMB and foreign currency between banks and their clients, namely, RMB and foreign currency exchange transactions that fall outside the category of the balance-of-payments statistics. Contracts for forward settlement and sales of foreign exchange refer to contracts for the forward settlement (sale) of foreign exchange executed between banks and their clients through consultation, in which the foreign currency, amount, exchange rate, and term for the forward settlement (sale) of foreign exchange are agreed upon; where the foreign exchange is to be received (paid), the foreign exchange settlement (sale) is to be handled on the basis of the amount of foreign currency and the exchange rate specified in such contracts. The forward foreign exchange settlement and sales business enables enterprises to lock into the exchange rate in advance for future foreign exchange settlement or sales and to effectively avoid the risk of RMB exchange rate changes. Generally, banks will hedge the risk exposure arising from the forward foreign exchange settlement and sales business through 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 in the contracts for forward sales of foreign exchange, generally the banks 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 a factor that affects changes in the foreign exchange reserves in China . Foreign-related receipts and payments by banks on behalf of their clients refer to receipts and payments occurring between domestic non-bank resident institutions/individuals (collectively called the “non-bank sector”) and non-resident institutions/individuals through domestic banks, which are exclusive of the receipts and payments in cash and foreign-related receipts and payments by the banks themselves. In particular, they refer to 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 when the clients carry out 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, different from the accrual basis of accounting required for the balance-of- payments statistics, is based on a cash basis. In addition, they merely reflect capital flows between the non-bank sectors and non-residents and do not include barter transactions or foreign exchange transactions conducted by the banks themselves. Furthermore, the scope of the statistics on foreign-related receipts and payments of banks on behalf of clients is smaller than the scope of the balance-of-payments statistics. 2012-07-13/en/2012/0713/1060.html
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According to statistical data released by the State Administration of Foreign Exchange (SAFE), in July 2012 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD127.5 billion and USD127 billion respectively. The surplus of foreign exchange settlement and sales amounted to USD500 million. During the same period, the total amount involved in contracts for forward settlement of foreign exchange with banks on behalf of clients was USD11.8 billion; the total amount involved in contracts for forward sale of foreign exchange was USD15.2 billion; and net forward exchange sales totaled USD3.4 billion. During the first seven months of 2012, the cumulative amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD872.5 billion and USD842.6 billion respectively. The surplus of foreign exchange settlement and sales was USD30 billion. During the same period, the cumulative amount in contracts for forward settlement of foreign exchange with banks on behalf of clients was USD95.7 billion, the cumulative amount in contracts for forward sale of foreign exchange was USD104.5 billion, and the cumulative net forward sale of foreign exchange with banks on behalf of clients totaled USD8.8 billion. In July 2012 foreign-related receipts and payments of domestic banks on behalf of clients amounted to USD218.4 billion and USD209.6 billion respectively; and the surplus of foreign-related receipts and payments totaled USD8.8 billion. In the first seven months of 2012, the cumulative foreign-related receipts and payments of banks on behalf of clients amounted to USD1443.7 billion and USD1355.8 billion respectively; and the cumulative surplus of foreign-related receipts and payments reached USD88 billion. Addendum: Glossary and relevant definitions The Balance of Payments refers to all economic transactions occurring between residents and non-residents in China , including all financial transactions and barter arrangements 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 carried out by designated foreign exchange banks either for their clients or for themselves, excluding data on transactions on the inter-bank foreign exchange market. Foreign exchange settlement and sales by banks on behalf of clients (including foreign exchange settlement and sales by the banks themselves) refer to settlement and sales by designated foreign exchange banks for clients. The time of conversion between RMB and the foreign currency is regarded as the time-point for the statistics on the foreign exchange settlement and sales by the 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 the users of foreign exchange. The difference between the foreign exchange settlement and sales is regarded as an offset balance. This difference, which is offset by the banks through transactions on the inter-bank foreign exchange market, is a major factor resulting in changes in the country’s foreign exchange reserves. But it is not equivalent to the net change in 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; such statistics only cover RMB and foreign currency transactions between banks and clients, namely, RMB and foreign currency exchange transactions that fall outside the category of the balance-of-payments statistics. Contracts for forward settlement and sales of foreign exchange refer to contracts for forward settlement (sale) of foreign exchange executed between banks and their clients through consultation, during which the foreign currency, amount, exchange rate, and term for the forward settlement (sale) of foreign exchange are agreed upon; where the foreign exchange is to be received (paid), and the foreign exchange settlement (sale) is to be handled on the basis of the amount of foreign currency and the exchange rate specified in such contracts. The forward foreign exchange settlement and sales business enables enterprises to lock into an exchange rate in advance for future foreign exchange settlement or sales and effectively to avoid the risks of changes in the RMB exchange rate. In general, banks will hedge the risk exposure arising from the forward foreign exchange settlement and sales business through 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 in 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 refer to receipts and payments occurring between domestic non-bank resident institutions/individuals (collectively called 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 individual domestic residents and individual domestic non-residents). The statistics are collected at the time when the clients carry out the foreign-related receipts and payments at the domestic banks. Specifically, the 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 via domestic banks. Although the foreign-related receipts and payments by banks on behalf of clients are an integral part of the balance-of-payments statistics, the accounting method for the statistics, different from the accrual accounting basis required for the balance-of- payments statistics, is based on a cash basis. In addition, it merely reflects capital flows between the non-bank sectors and non-residents and does not include barter transactions or foreign transactions conducted by the banks themselves. Furthermore, 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. 2012-08-24/en/2012/0824/1064.html
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As of the end of June 2012, China ’s outstanding external debt (excluding that of Hong Kong SAR, Macao SAR, and Taiwan Province ) reached USD785.172 billion. Specifically, the outstanding registered external debt reached USD495.072 billion and the balance of trade credit between enterprises totaled USD290.1 billion. With respect to the term structure, outstanding long- and medium-term external debt (with the remaining term) was USD196.95 billion and outstanding short-term external debt (with the remaining term) was USD588.222 billion. Specifically, trade credit between enterprises and bank trade financing respectively accounted for 49.32 percent and 24.57 percent of the total. The two accounted for 73.89 percent of the outstanding short-term external debt (with the remaining term). In terms of the type of debtor, the outstanding debt of Chinese-funded financial institutions was USD253.215 billion, accounting for 51.15 percent of the outstanding registered external debt; the outstanding debt of foreign-funded enterprises was USD141.54 billion, accounting for 28.59 percent; and the outstanding debt of foreign-funded financial institutions was USD57.284 billion, accounting for 11.57 percent. In terms of the types of debt, the balance of international commercial loans amounted to USD428.575 billion and the balance of foreign government loans and loans granted by international financial organizations amounted to USD66.497 billion. In terms of the currency structure, USD debt accounted for 77.77 percent, Euro debt 7.51 percent, and JPY debt 6.99 percent of the outstanding registered external debt. In terms of the sectors in which the debt is invested, with reference to the Industrial Classification of the National Economy, the outstanding medium- and long-term registered external debt (based on contract terms) invested in the manufacturing sector accounted for 23.67 percent, the transportation, storage, and postal sector 13.31 percent, and the electric power, coal, gas, and water production and supply sector 6.90 percent. In the first half of 2012, China newly borrowed USD21.255 billion in medium- and long-term external debt, repaid USD14.779 billion in principal of long- and medium-term external debt, and paid USD1.198 billion in interest. The net inflows under the outstanding long- and medium-term external debt were USD5.278 billion, down 25.24 percent on a year-on-year basis. Addendum: Definition of terms and interpretations Classification of the term structure of external debt. There are two classification methods for the classification of external debt in terms of the term structure. First, classification on the basis of the contract term, i.e., it is classified as medium- and long-term external debt in cases where the contract term is more than one year, and it is classified as short-term external debt in cases where the contract term is one year or less; second, classification on the basis of the remaining term, i.e., on the basis of the above classification method, medium- and long-term external debt due within one year will be classified as short-term external debt. In order to differentiate between the two classification methods, in this news release any indication of the classification method, i.e., the contract term or remaining term, follows the definitions of the medium- and long-term external debt and the short-term external debt. Trade credit between enterprises refers to the external liability arising from directly extending credit between the seller and buyer of goods, specifically transactions between residents in Mainland China and foreign non-residents (including non-residents in Hong Kong SAR, Macao SAR, and Taiwan Province), i.e., the debt incurred due to the difference between the time of payment and that of the transfer of ownership of the goods. Trade credit between enterprises includes credit directly provided by the supplier (e.g., the overseas exporter) for commodity transactions and services, and advance payments made by buyers (e.g., overseas importers) for goods, services, and on-going business (or business to be undertaken). Bank trade financing refers to loans related to trade extended by a third party (e.g., banks) to exporters or importers, for instance, loans extended by foreign financial institutions or export credit agencies to buyers. Trade-related credit is a broad concept. In addition to trade credit between enterprises, it also includes other kinds of credit provided for trade activities. According to the definition, trade-related credit includes trade credit between enterprises, bank trade financing, short-term notes related to trade, and so forth. 2012-09-14/en/2012/0914/1068.html