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The branches and foreign exchange administration departments of the State Administration of Foreign Exchange (SAFE) in all provinces, autonomous regions, and municipalities directly under the Central Government, and the SAFE branches in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo, the insurance group (holding) companies, the insurance companies, the insurance asset management companies and the designated China-funded foreign exchange banks: To further drive efforts of streamlining administration and delegating power to lower levels, improve the foreign exchange administration of insurance business, and guard against financial risks, the relevant issues with regard to the foreign exchange administration of insurance business are hereby notified as follows: I. An insurance company may handle the settlement of foreign exchange capital and funds raised through overseas IPO with a financial institution engaging in foreign exchange business (“financial institution”) according to the actual operating requirements. (I) Insurance companies are required to report the current year plan and previous year results of their foreign exchange settlement to the local SAFE branch or foreign exchange administrative department (“the local SAFE branch”) by the end of January each year, and submit the following documents: 1. Description of business operations, including, but not limited to, source of foreign exchange capital, amount and purpose of foreign exchange settlement, mismatch between assets in domestic and foreign currencies, and utilization of funds settled during the previous year; 2. Relevant supporting documents. Any foreign exchange settlement exceeding the reported plan and single transaction exceeding USD 50 million (inclusive) shall be reported by the insurance company concerned to the local SAFE branch in advance. (II) Financial institutions shall abide by the principles of “knowing your customer”, “knowing your business” and “due diligence” to examine the authenticity of documents for foreign exchange settlement, including: 1. foreign exchange settlement application, including, but not limited to, source of foreign exchange funds, amount and purpose of foreign exchange settlement; 2. plan for utilizing funds with foreign exchange settled and the supporting materials; 3. the audited balance sheets and income statements in RMB and foreign currency for the previous year; or the balance sheet and income statement for the recent period from an insurance company established for less than one year; or the balance sheet and income statement disclosed for the most recent period from a listed insurance company which has not disclosed its balance sheet and income statement for the previous year. (III) The RMB funds settled shall be used for purposes meeting the requirements prescribed by the insurance authority and the SAFE, such as setup of new branch office, daily operating expense, payment for domestic equity investment and RMB deposit margin. II. After completing relevant business filing with competent insurance authorities, the insurance agents and brokers can transfer the funds for insurance-related collection and payment for clients in the original currency through their foreign exchange accounts under the current account, with indemnities eligible for settlement or purchase of foreign exchange. (I) Insurance agents and brokers shall report to the local SAFE branch their current year plan for insurance-related foreign exchange collection and payment for clients by the end of January each year, and the business operations for the last quarter within the first 5 working days of each quarter, and submit the following documents: 1. Description of business operations, including, but not limited to, foreign exchange collection and payment for clients under insurance , list of overseas insurance partners, amount of foreign exchange collection and payment; and for settlement or purchase of foreign exchange for indemnities, the description should also include basic information on the settlement or purchase of foreign exchange for indemnities, amount of insurance indemnities and the corresponding amount of foreign exchange collection and payment, amount of foreign exchange settlement or purchase; 2. Relevant supporting documents. Any foreign exchange settlement or purchase exceeding the reported plan and single transaction exceeding USD 50 million (inclusive) shall be reported by the insurance agent or broker concerned to the local SAFE branch in advance. (II) When insurance agents and brokers conduct foreign exchange settlement of indemnities under insurance-related collection and payment for clients, the funds settled shall be transferred directly to the account of the recipient; for indemnities funds paid for clients to the account of the recipient, the funds settled can be retained by the insurance agents and brokers. Financial institutions shall examine the authenticity of foreign exchange settlement, and relevant materials include: 1. Description of business operations, including, but not limited to, reason for foreign exchange settlement, name of recipient of indemnities, opening bank account number; 2. Letter of proxy for foreign exchange settlement written by the recipient; 3. Plan for foreign exchange collection and payment for clients under insurance; 4. Other supporting documents required by financial institutions. Where insurance agents and brokers conduct foreign exchange purchase for indemnities under insurance-related collection and payment for clients, financial institutions shall examine the authenticity of the transaction. III. Insurance companies and their branches which have serious violations of laws and regulations and have received administrative penalties by the competent insurance authorities or the SAFE within the last three years are not eligible to apply for foreign exchange insurance business. IV. Insurance companies and their branches in any of the following circumstances, and insurance agents or brokers and their branches in the circumstance set out in this Paragraph (III) shall report to the local SAFE branch and submit an explanation letter within 20 working days since the case occurred or was found out. The local SAFE branch may request, where appropriate, the insurance companies, insurance agents or brokers and their branches to rectify, and acceptance of new foreign exchange insurance business shall be suspended during the period of rectification. (I) No foreign exchange insurance business has been undertaken for two consecutive years after the business license is issued; (II) Take-over announcement by the insurance authority has been received or there exist significant potential risks; (III) Having committed serious violations of laws and regulations and having received administrative penalties by the insurance authority or the SAFE. V. To ensure the compliance of cross-border collection and payment, domestic transfer, settlement and sales of foreign exchange conducted by insurance companies, insurance agents and brokers and their branches, the local SAFE branch shall perform supervision and management on the transactions, and conduct verification and inspection according to the law. VI. Where cross-border collection and payment, domestic transfer, settlement and sales of foreign exchange conducted by financial institutions, insurance companies, insurance agents and brokers and their branches violate relevant provisions in this Circular, the foreign exchange authorities shall impose punishment according to the Regulations of the People’s Republic of China on Foreign Exchange Administration and other regulations. VII. For the purpose of the Circular, an insurance company refers to the commercial insurance company or policy insurance company which is established and duly registered with the approval from the competent authority in the insurance industry. This Circular also applies to insurance group (holding) companies and insurance asset management companies. VIII. This Circular shall come into force as of July 1, 2019. Insurance group (holding) companies, insurance companies, insurance asset management companies, insurance agents and brokers shall report to the local SAFE branches their plans for settlement of foreign exchange capital and foreign exchange funds raised through overseas IPO, or foreign exchange collection and payment for clients under insurance for the second half of 2019 before June 30, 2019. Article 34 in the Circular of the State Administration of Foreign Exchange on Printing and Issuing Guidelines for Foreign Exchange Administration for Insurance Business (Huifa No. 6 [2015]) shall be rescinded at the same time; where there is inconsistency between the original Article 4 and 30 and this Circular, this Circular shall prevail. This Circular shall prevail in case of inconsistencies between other relevant regulations and this Circular. Upon receipt of this Circular, the SAFE branches and foreign exchange administrative departments should immediately forward it to the central sub-branches, sub-branches, local commercial banks, and foreign banks within their respective jurisdiction. Upon receiving this Circular, the insurance companies and the designated China-funded foreign exchange banks should promptly forward it to their branches. If you have any questions during the execution of these documents, please promptly contact the Current Account Management Department of the SAFE. Please follow the Circular in your implementation. The State Administration of Foreign Exchange May 31, 2019 2019-06-05/en/2019/0605/1520.html
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The State Administration of Foreign Exchange (SAFE) has recently issued the Circular on Further Facilitating Insurance Companies in Settlement of Foreign Exchange Capital (Huifa No. 17 [2019], hereinafter referred to as Circular). The official of the SAFE has answered press questions on relevant issues. 1. Could you brief us on the background of the Circular? A: In recent years, the SAFE has been actively serving China's new pattern of all-round opening-up, deepening reform and opening up in foreign exchange, driving the reform of "delegation, administration and service”, and constantly improving the capacity and level of foreign exchange administration to serve the real economy. In March 2015, reform on insurance-related foreign exchange administration was carried out to streamline business application materials and approval procedures, and improve the efficiency of foreign exchange insurance business. With the constant expansion of opening-up and the development of financial marketization, insurance companies have raised new demands for fund facilitation of foreign exchange insurance business. On the basis of fully investigating the demands of market entities and soliciting opinions from various parties, the SAFE has further promoted administration streamlining and power delegation, improved foreign exchange administration of insurance business, made research and issued the Circular. II. What are the main contents of the Circular? A: The Circular adheres to the "principle of actual demand", cancels the approval procedure for settlement of foreign exchange capital of insurance companies, improves the fund use efficiency of insurance companies, clarifies that financial institutions operating foreign exchange business (“financial institutions”) should conduct authenticity examination of business in accordance with the "three principles of business development", and standardizes the management of foreign exchange insurance business. The main contents include: The first is to cancel the approval procedure for settlement of foreign exchange capital of insurance companies and implement the discretionary foreign exchange settlement system. An insurance company may, according to actual operating requirements, handle the settlement of foreign exchange capital and funds raised through overseas IPO with a financial institution so as to improve the fund utilization efficiency of the insurance company. The second is to allow insurance intermediaries to conduct foreign exchange settlement or purchase of indemnities under insurance-related collection and payment for clients. Financial institutions shall examine the authenticity of foreign exchange settlement or purchase. The insurance agencies and insurance brokers that meet the requirements of the competent insurance authorities may directly handle foreign exchange settlement of indemnity funds under the insurance-related collection and payment for clients with a financial institution provided that the recipient of indemnities presents a power of attorney for foreign exchange settlement, so as to improve the payout efficiency with RMB for cross-border insurance-related collection and payment for clients. The third is to improve the ongoing and ex-post regulation of insurance-related foreign exchange business. The business compliance requirements of insurance institutions such as negative issues report shall be refined to ensure the healthy development of foreign exchange insurance business. III. What is the main consideration that allows insurance intermediaries to conduct foreign exchange settlement for indemnity funds under collection and payment for clients? A: With the constant expansion of opening-up and the development of financial marketization, in the efforts of serving the Belt and Road construction, more and more insurance intermediaries, especially insurance agencies and insurance brokers, are going global to serve cross-border insurance business. In the survey of market entities, some insurance intermediaries reflect the problem in RMB payout efficiency of cross-border insurance-related collection and payment service for clients. For example, due to the sudden occurrence of maritime and marine travel business, if the insurance intermediaries are not allowed to conduct exchange settlement of indemnity funds under the insurance-related collection and payment for clients, they will not be able to directly pay RMB to the policyholders, thus affecting the timeliness of relief efforts. The relaxing of the requirement for settlement of indemnity funds under collection and payment for clients by insurance intermediaries can effectively solve this problem and better serve the Belt and Road construction. IV. What contents shall be included in the independent report of negative issues of insurance institutions according to the Circular? A: The Circular adds a new management mode for insurance institutions to actively report negative issues. The reported items of insurance companies include: no foreign exchange insurance business undertaken for two consecutive years after obtaining the license to operate foreign exchange insurance business, being taken over by the insurance regulatory authorities, committing serious violation of laws and regulations and receiving administrative penalties. The reported items of insurance agencies and brokers include having committed serious violations of laws and regulations and having received administrative penalties. Local SAFE branches may require insurance institutions, if needed, to make rectification in order to effectively guard against financial risks. 2019-06-05/en/2019/0605/1522.html
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The branches and foreign exchange administration departments of the State Administration of Foreign Exchange (SAFE) in all provinces, autonomous regions, and municipalities directly under the Central Government, the branches in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo, and all designated Chinese-funded foreign exchange banks, In order to facilitate the settlement of cross-border e-commerce, promote the healthy development of foreign exchange business of payment institutions and prevent risks from foreign exchange payment, the SAFE formulated the Measures for the Administration of Foreign Exchange Business of Payment Institutions (“the Measures”, please see the Appendix) based on summarizing the pilot experience of cross-border foreign exchange payment business of payment institutions. Relevant issues are notified as follows: I. Payment institutions that participated in the pilot program on cross-border foreign exchange payment business before the implementation of the Measures shall, within three months from the implementation date of the Measures, conduct directory registration with the branches and foreign exchange administration departments of the SAFE (“the SAFE branches”) at the place of registration in line with the requirements of the Measures. II. Banks may, with reference to Article 12 of the Measures, apply to provide settlement and sales of foreign exchange and relevant fund receipt and payment services to cross-border e-commerce operators and consumers who purchase goods or services by presenting electronic transaction information, provided that the banks meet the requirements on transaction information collection and authenticity verification. III. In order to ensure the smooth transition of pilot business of payment institutions on cross-border foreign exchange payment, each SAFE branch shall accurately convey the policy requirements to the payment institutions within its jurisdiction, make scientific deployment of personnel and properly perform all kinds of work for implementation of the Measures. IV. This Circular shall come into force as of the date of promulgation. In case of any inconsistency between the previous provisions and this Circular, this Circular shall prevail. The Circular of the State Administration of Foreign Exchange on the Implementation of the Pilot Program of Cross-border Foreign Exchange Payment Business through Payment Institutions (Huifa No.7 [2015]) will be abolished. Upon receipt of this Circular, the SAFE branches should immediately forward it to the central sub-branches (sub-branches), local commercial banks, and foreign banks within their respective jurisdiction, and all designated Chinese-funded foreign exchange banks should promptly forward it to their branches. Appendix: Measures for the Administration of Foreign Exchange Business of Payment Institutions State Administration of Foreign Exchange April 29, 2019 2019-04-29/en/2019/0429/1525.html
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The People's Bank of China, the Ministry of Public Security of the PRC and the State Administration of Foreign Exchange issued the following reminder: Recently, some online platforms have been illegally engaged in foreign exchange margin transactions (also called foreign exchange security deposit, generally referring to such circumstance where customers invest in a certain amount of funds as deposit and conduct foreign exchange transactions within expanded investment amount at a certain leverage multiple), which has severely disrupted the financial order, resulted in property loss of the social public, causing adverse impacts and engendering serious potential risks: I. So far, the People's Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission as well as the State Administration of Foreign Exchange and its branches haven't approved any institution to engage in foreign exchange margin business either directly or on an agency basis. II. In accordance with the Circular on Sternly Investigating and Punishing Illegal Foreign Exchange Futures Transactions and Foreign Exchange Margin Trading Activities (Zhengjianfazi No. 165 [1994]), any unauthorized transaction of foreign exchange margin by an unapproved institution is illegal; it is also an offence for a client (organization or individual) to entrust an unapproved institution to conduct foreign exchange margin transactions (whether in foreign currency or renminbi as security deposit). III. The public should be fully aware of the risks involved in foreign exchange margin activities, improve risk prevention awareness and ability, and guard against property losses caused by illegal transactions. IV. The general public should actively report to the relevant authorities if they find clues of illegal and criminal activities. 2018-09-14/en/2018/0914/1530.html
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To implement the spirit of the 19th National Congress of the CPC, further promote the reform of “delegation, administration and service” and drive the healthy development of foreign exchange insurance market, the State Administration of Foreign Exchange (SAFE) recently issued the Circular on Further Facilitating Insurance Companies in Settlement of Foreign Exchange Capital (Huifa No. 17 [2019], “the Circular”), in a bid to promote the facilitation of the exchange of insurance-related foreign exchange funds. The Circular mainly contains the following contents. The first is to cancel the approval for settlement of foreign exchange capital of insurance companies and implement the discretionary foreign exchange settlement system. An insurance company may handle the settlement of foreign exchange capital and funds raised through overseas IPO with a financial institution engaging in foreign exchange business (“financial institution”) according to the actual operating requirements. The second is to allow insurance intermediaries to conduct foreign exchange settlement or purchase for indemnities under insurance-related collection and payments for clients. Financial institutions shall examine the authenticity of foreign exchange settlement or purchase. The insurance agencies and insurance brokers that meet the requirements of the competent insurance authorities may directly handle foreign exchange settlement of indemnities under the insurance-related collection and payment for clients with a financial institution provided that the recipient of indemnities presents a power of attorney for foreign exchange settlement. The third is to improve the ongoing and ex-post regulation of foreign exchange insurance business. Business compliance requirements for insurance institutions such as reporting on negative issues shall be refined. The Circular will come into force on July 1, 2019. 2019-06-05/en/2019/0605/1521.html
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The State Administration of Foreign Exchange (SAFE) held a press conference on Thursday, July 18, 2019 and answered press questions about the foreign exchange receipts and payments for the first half of 2019. Moderator Liu Fang: Good morning, friends from the media. Welcome to today's press conference on foreign exchange receipts and payments data for the first half of 2019. I’m Liu Fang, deputy director of the General Affairs Department, and I will host today's press conference. It is a great honor today to have Ms. Wang Chunying with us, who is the spokesperson, chief economist and director of Balance of Payments Department of the SAFE. Next, she will brief us on the foreign exchange receipts and payments data for the first half of 2019. 2019-07-18 10:23 Wang Chunying: Good morning, everyone. It’s a great pleasure for me to attend today's press conference. Now I would like to disseminate the information about China's foreign exchange receipts and payments for the first half of 2019 and then I will be taking your questions. 2019-07-18 10:23 Wang Chunying: In the first half of 2019, global economic growth slowed down and factors of instability and uncertainty increased. China's economy continued to operate within a reasonable range, maintained a steady and good momentum of development, and major economic indicators met expectations. The RMB exchange rate against the USD fluctuated in both directions, and the exchange rate expectation was relatively stable. Overall, in the first half of 2019, China's cross-border capital flows remained stable, and supply and demand in the domestic foreign exchange market were basically balanced. 2019-07-18 10:28 Wang Chunying: Banks settled foreign exchange in the amount of RMB 6.03 trillion (equivalent to USD 888.3 billion) and sold foreign exchange in the amount of RMB 6.25 trillion (equivalent to USD 921.6 billion) for the first half of 2019, with a deficit of RMB 224.8 billion (equivalent to USD 33.2 billion). The data on banks' foreign-related receipts and payments for customers show that banks' foreign-related receipts for customers amounted to RMB 11.80 trillion (equivalent to USD 1.74 trillion), and their external payments hit RMB 11.58 trillion (equivalent to USD 1.71 trillion), representing a surplus of RMB 210.8 billion (equivalent to USD 31.2 billion). 2019-07-18 10:29 Wang Chunying: China's foreign exchange receipts and payments present the following characteristics in the first half of the year: First, the deficit of foreign exchange settlement and sales by banks has narrowed, and the overall balance of foreign-related receipts and payments by banks for customers recorded a surplus. In the first half of 2019, banks registered a deficit of USD 33.2 billion in USD terms in foreign exchange settlement and sales, which narrowed by 52% from the average monthly deficit in the second half of 2018; Foreign-related receipts and payments of banks for customers registered a surplus of USD 31.2 billion in the first half of 2019, while the second half of 2018 recorded a deficit. 2019-07-18 10:30 Wang Chunying: Second, the supply and demand of foreign exchange market maintained basic balance. In the first half of this year, although the banks' foreign exchange settlement and sales were in deficit, if other supply and demand factors such as forward exchange settlement and sales as well as option transactions are taken into consideration, the supply and demand in the foreign exchange market were basically balanced. Based on the situations in May and June after the China-US economic and trade frictions were escalated, the foreign exchange settlement and sales of banks recorded an average monthly deficit of USD 6.6 billion, down by 44% from that of the second half of 2018, indicating that the supply and demand situations are satisfactory. The monthly fluctuations are mainly affected by foreign exchange settlement when RMB exchange rate is high and foreign exchange purchase when RMB exchange rate is at low level by market players, reflecting the overall stability of market expectations and the market-based adjustment function of price. 2019-07-18 10:31 Wang Chunying: Third, the foreign exchange sales rate remained stable, and enterprises' domestic foreign exchange loans and cross-border financing increased steadily. In the first half, the foreign exchange sales rate that measures the willingness to buy foreign exchange, or the ratio of foreign exchange purchased by customers from banks to the customer's foreign-related foreign exchange payments was 66.8%, a slight decrease of 0.3 percentage point from the second half of 2018. Meanwhile, the domestic and overseas foreign exchange financing of enterprises increased steadily on the whole. By the end of June 2019, the domestic foreign exchange loan balance of Chinese banks increased slightly by USD 2.9 billion from the end of the previous year, while the balance declined by USD 59.9 billion in the second half of 2018. In the first half of 2019, the balance of cross-border financing in foreign currencies for imports such as overseas payment on behalf of enterprises and usance letter of credit increased by USD 17.2 billion from the end of the previous year, while the balance in the second half of 2018 registered a decline of USD 13.2 billion. 2019-07-18 10:31 Wang Chunying: Fourth, the foreign exchange settlement rate remained basically stable, and market players' willingness to hold foreign exchange declined on the whole. In the first half, the foreign exchange settlement rate that measures the desire to settle foreign exchange, or the foreign exchange sold by customers to banks as a percentage of their foreign-related foreign exchange income, was 64%, a slight decrease of 0.9 percentage point from the second half of 2018. Foreign exchange deposits of enterprises and individuals declined. As of the end of June 2019, the balance of domestic foreign exchange deposits of banks dropped by USD 6.3 billion from the end of 2018. 2019-07-18 10:32 Wang Chunying: Fifth, banks’ forward settlement and sales of foreign exchange posted a big surplus. The contracted forward settlement and sales of foreign exchange of banks with customers registered a surplus of USD 77.7 billion in the first half of this year, but posted a deficit of USD 24.8 billion and USD 3.5 billion respectively in the first half and second half of 2018 respectively. Specifically, the contracted surplus of forward settlement and sales of foreign exchange was USD 34.5 billion and USD 43.2 billion in the first quarter and second quarter of 2019 respectively. 2019-07-18 10:32 Wang Chunying: Sixth, the overall balance of China's foreign exchange reserves rose on the whole. As at the end of June 2019, the balance of China's foreign exchange reserves was USD 3.1192 trillion, up by USD 46.5 billion from the end of 2018. 2019-07-18 10:32 Wang Chunying: These are the major statistical data I want to unveil regarding foreign exchange receipts and payments for the first half. Now I will answer your questions. 2019-07-18 10:33 CCTV News Center: How do you evaluate the situations of cross-border capital flows in China in the first half of this year? There are still many uncertainties in the external environment in the second half of the year. Then, what about the trend of cross-border capital flows in the second half of the year? 2019-07-18 11:08 Wang Chunying: In the first half of this year, despite the complex and volatile external environment, the operation of China's foreign exchange market was smooth on the whole, and cross-border capital flows through major channels showed a positive development trend. There are several comments as follows. First, the supply and demand in the foreign exchange market became more balanced. The main indicators of the foreign exchange market are all relatively stable, and the data I have just reported show this feature as well. For example, the deficit of banks in foreign exchange settlement and sales narrowed compared with that in the second half of 2018, cross-border receipts and payments posted a surplus on the whole, and foreign exchange reserves rose steadily. Second, the balance of payments maintained basic equilibrium. Based on the data we have released, the current account maintained a surplus of USD 49 billion in the first quarter of 2019, accounting for 1.5% of GDP, and the financial account excluding reserve assets registered a surplus of USD 48.8 billon in the first quarter. Third, overseas funds continued to show a net inflow. According to statistics from the Ministry of Commerce, in the first half of this year, China's actual utilization of foreign capital increased by 7% year on year, up by 6.1 percentage points from the same period in 2018. According to the SAFE, the net holdings of domestic bonds and listed stocks by foreign investors increased by USD 49.3 billion from January to June, including USD 41.6 billion in bonds and USD 7.8 billion in stocks. Fourth, outbound investment and profit repatriation of enterprises were stable and orderly. In the first half of this year, China's outbound direct investment increased slightly by 0.1% year on year, according to the statistics of the Ministry of Commerce. According to statistics of the SAFE, the cross-border payments under investment income of enterprises in the first half of this year was basically the same as that in the first half of 2018. Fifth, the foreign exchange settlement and sales for individuals was basically stable. In the first half of the year, the net purchase of foreign exchange by individuals fell by 23% year on year. Therefore, we could give the following overall evaluation of China's foreign exchange market, or the overall evaluation of cross-border capital flows in the first half of this year, i.e., despite the complex and volatile external environment, the operation of China's foreign exchange market remained stable, and the cross-border capital flows through major channels showed a positive development trend. 2019-07-18 11:08 Wang Chunying: It is expected that cross-border capital flows will remain stable in the second half of this year. There are still some uncertainties in the external environment, for example, with respect to the outlook for world economic growth, the World Bank recently lowered its forecast for global economic growth of this year from that of January; and there are unstable and uncertain factors such as global trade protectionism and geopolitical situations. However, in the current internal and external environment, there are still many factors that are conducive to the stability of China's cross-border capital flows. 2019-07-18 11:09 Wang Chunying: First, the international monetary environment is relatively loose. The FED is likely to cut interest rates, while central banks in Europe and Japan are also taking a looser stance on monetary policy. Recently, both developed and developing countries have made some moves to ease their monetary policy. Under such circumstances, the recent stabilization of the USD exchange rate and widening of the interest rate differential between China and the US provide more favorable conditions for the stability of China's foreign exchange market. 2019-07-18 11:10 Wang Chunying: Second, market expectations for the Chinese economy are stable. We observe some facts about the price of credit default swaps, or CDS, on Chinese government debts traded in the international market. The higher the CDS, the higher the market believes the default risk is, and the lower the price, the lower the market thinks the default risk is. Recently, the value is over 40, while it was 60+ at the end of last year, and it approached 150 at the beginning of 2016. Therefore, the current market expectation on the Chinese economy is relatively stable, and the international market is more optimistic about the Chinese economy on the whole. 2019-07-18 11:10 Wang Chunying: Third, the domestic market has become more open. Recently, China has introduced many policies and measures, such as the Foreign Investment Law, revised the negative list for foreign investment access, and issued the new Catalogue of Encouraged Industries for Foreign Investment etc. In addition, China has constantly promoted the liberalization and facilitation of investment and strengthened investment protection. Meanwhile, the capital market has become increasingly internationalized, and the domestic stock market and bond market are included in a broader range of international mainstream index, which reflects the recognition of the Chinese market by international investors. 2019-07-18 11:11 Wang Chunying: Fourth, the two-way fluctuations in the RMB exchange rate have played a role in fostering rational market expectations. Enterprises have become more adaptable to the exchange rate fluctuations, and the settlement and sales of foreign exchange by individuals has become more stable. 2019-07-18 11:12 Wang Chunying: Fifth, the framework for managing cross-border capital flows is increasingly mature. In recent years, we have gained abundant experience in macro-prudential management, and improved our management of overseas investment, onshore guarantees for offshore loans etc. Meanwhile, we have continued to crack down on violations of laws and regulations on foreign exchange, intensified efforts to report typical cases, and effectively maintained the sound order in the foreign exchange market. 2019-07-18 11:12 Wang Chunying: In the second half of this year, there are many factors conducive to the smooth operation of China's cross-border capital flows, both international and domestic. China has adequate internal and external conditions for the smooth operation of cross-border capital flows, and it can better cope with the impact of various external shocks. 2019-07-18 11:12 China News Service: As compared with the previous period, how has the impact and pressure of the recent China-US economic and trade frictions on our cross-border capital flow changed? 2019-07-18 11:29 Wang Chunying: We have been always paying close attention to and monitoring the China-US economic and trade frictions and assessing their impact on China's foreign exchange market, cross-border capital flows and balance of payments. We have compared the situations in May and June this year against that of the second half of 2018. According to the results, the impact of China-US economic and trade frictions on cross-border capital flows in China is controllable on the whole. It’s mainly reflected in the following two aspects: first, the sentiment in China's foreign exchange market and the behavior of market players are more rational and stable. After economic and trade frictions escalated in May this year, the depreciation range and depreciation expectations of the RMB exchange rate against the USD were both lower than that in the second half of last year. On this basis, the adjustment of market players' foreign-related receipts and payments was more stable. Based on the comprehensive situations of May and June, the monthly average deficit of bank's foreign exchange settlement and sales in these two months narrowed by 44% from that in the second half of 2018, and the monthly average deficit of bank's foreign-related receipts and payments for customers was also narrower by 38% than that in the second half of 2018. 2019-07-18 11:30 Wang Chunying: Second, despite the imposition of additional tariffs, China's overall balance of payments situation remains stable and controllable. From the second half of last year till now, the United States have gradually escalated measures to impose additional tariffs to China’s exports. However, China's balance of payments has remained stable on the whole. As we mentioned just now, the current account posted a surplus of USD 49 billion in the first quarter, while the average quarterly surplus of the second half last year was USD 38.9 billon. We could see that the surplus under the current account of the first quarter this year is much higher than the average quarterly surplus of the second half of last year. In the first quarter, the financial account excluding reserve assets registered a surplus of USD 48.8 billon. Direct investment, portfolio investment and other investments all recorded a surplus. The surplus of the financial account excluding reserve assets in the third quarter last year reached USD 14 billion, while the fourth quarter of last year registered a slight deficit of USD 12.3 billion. We also observed the behavior of micro players. From the perspective of micro players, first, the direct investment of the US enterprises in China has remained steady, indicating the close economic and trade ties between China and the United States. According to the statistics of the Ministry of Commerce, the direct investment of the United States in China in the first five months of this year was up by 4% from the same period last year. A recent survey by the American Chamber of Commerce in Shanghai found that more than 80 percent of the US enterprises are optimistic about their prospects in China in the next five years. Second, Chinese enterprises have actively responded to the impact of the additional tariffs and sought to diversify their exports. According to customs statistics, China's exports to Non-US countries accounted for 83% of total exports in the first six months of this year, up by 1.5 percentage points year on year. 2019-07-18 11:31 Wang Chunying: In general, China's foreign exchange market sentiment has become more stable against the backdrop of China-US economic and trade frictions. Meanwhile, China has continued to make innovation and improve macro control, attach importance to pre-emptive adjustment and fine-tuning of policies and measures, constantly deepen reform and open wider to the outside world. Domestic enterprises and other market players are also actively responding to relevant changes. In addition, the exchanges between Chinese and the US enterprises are still very active, and this close economic and trade exchanges are playing a positive role. All these show that we are confident to cope with the changing situations and maintain the stability of China's cross-border financial flows. 2019-07-18 11:32 Economic Daily: The current account continued to register a surplus in the first quarter of 2019. What are the main sources of the surplus? Could you brief us on situations of the second quarter? How do you view the future trend? 2019-07-18 11:33 Wang Chunying: China has maintained a surplus under the current account this year. As mentioned several times just now, the current account recorded a surplus of USD 49 billion in the first quarter of this year, or 1.5% of GDP, while the same period last year registered a slight deficit. For the main sources of the surplus under the current account in the first quarter, we can observe the changes in several major items. First, the surplus of trade in goods increased rapidly. In the first quarter, the surplus of trade in goods as recorded by balance of payments was USD 94.7 billion, up by 83% year on year. Second, the deficit of trade in services narrowed. In the first quarter, the deficit of trade in services was USD 63.4 billion, down by 14% year on year, of which, the deficit in tourism was USD 57.6 billion, down by 9%. Third, the primary income registered a surplus of USD 15.6 billion, mainly due to the surplus of investment income. Specifically, income of China's various outbound investments, such as profits, interests and dividends, totaled USD 62.9 billion, up by 31% year on year. We preliminarily estimate that the current account will remain in surplus in the second quarter. We publish the balance-of-payments figures on the SAFE’s official website for trade in goods and services on a monthly basis, and these two items can basically reflect the general situations of the current account. According to the data released by us in April and May, the surplus under the trade in goods totaled USD 70.7 billion, up by 30% year on year. The trade in services registered a deficit of USD 46.2 billion, down by 11% from a year earlier, including a 9% decline in the deficit in tourism, roughly the same as that in the first quarter. According to our preliminary judgment based on these data, the current account in the balance of payments remained in surplus in the second quarter of this year. 2019-07-18 11:33 Wang Chunying: The current account is expected to remain within a reasonable range for the whole year, and a small surplus is likely to continue. First of all, it should be noted that a small surplus or deficit under the current account is considered to be within a reasonable range of basic equilibrium. In the medium and long term, China's current account still has the basis and conditions to maintain a reasonable level. There are several supporting factors. First, the added value of China's manufacturing industry ranks the first in the world. Since the founding of the New China 70 years ago, especially since the reform and opening up 40 years ago, China has gradually formed a complete and independent industrial system. Moreover, the added value of high-tech manufacturing industry has been constantly increasing as a percentage of the total added value, up by 1.2 percentage points in 2018 from the 2017 level to reach 14%. It indicates that China's manufacturing transformation and upgrade is making steady progress, which is conducive to enhancing the competitiveness of export products. Second, China's position in the global industrial chain is relatively stable. Domestic industrial chain is very complete from upstream to downstream, the supporting facilities are adequate, skilled workers are sufficient, labor productivity has continued to improve, and the comparative advantage is still relatively strong. Third, although China's savings rate has fallen, it is still among the highest in major economies of the world. A high savings rate is conducive to maintaining a basically balanced current account. In addition, the current deficit under the trade in services has narrowed and investment income has improved, providing more support for maintaining the surplus under the current account this year. 2019-07-18 11:34 CBN Daily: What would you say about the external debt situation in China? In recent years, China's external debt has continued to increase, is there any risk? 2019-07-18 11:57 Wang Chunying: People are also concerned about the issue of external debt. First of all, we’d like to exchange with you our views on external debt from a broader perspective, and observe China's external claims and external debt in the meantime. 2019-07-18 11:57 Wang Chunying: With the increasingly close ties between China's economy and the global economy, the overall rise of external debt and external claims is a normal development process. Based on the data of international investment position in recent years, by the end of the first quarter of 2019, the balance of all China's external financial liabilities had increased by 12% from the end of 2014, among which the balance of full-scale external debt had increased by 11%. In the same period, the balance of external financial assets increased by 15%, indicating that China's economy is more deeply integrated into the global economy and the scale of cross-border investment and financing has been steadily increased. Overall, China continues to post net external assets, with the balance of net assets at the end of the first quarter up by 22% from the end of 2014. 2019-07-18 11:57 Wang Chunying: In terms of the external debt itself, the structure of China's external debt has been further optimized and become more stable. I'd like to share our observations from two perspectives. From the perspective of the term structure, at the end of the first quarter of 2019, the outstanding medium and long-term external debt increased by 49% from the end of 2014, accounting for 36% of the total external debt, up by 9 percentage points from the end of 2014. Over the same period, the outstanding short-term external debt fell by 4%. From the perspective of debt instruments, at the end of the first quarter, the outstanding debt securities tripled that at the end of 2014, accounting for 23%, and increased by 15 percentage points compared with that at the end of 2014. This reflects the need of overseas investors to diversify their asset allocation and the demand of overseas central bank institutions to increase their holdings of RMB reserve assets. According to recent data released by the International Monetary Fund, RMB assets accounted for 1.95% of foreign exchange reserves held by central banks of various countries at the end of the first quarter of 2019, the highest level since the release of RMB reserve assets data in 2016. At present, the proportion of holdings by overseas investors in the domestic bond and stock markets is relatively low, only about 2% or 3%. It will increase in the future, and the stability of debt securities will remain relatively high. Moreover, according to historical experience, there was a small increase in debt securities in 2015 when the external debt fell back. 2019-07-18 11:58 Wang Chunying: From the perspective of the main safety indicators of external debt, China's external debt risk is generally controllable. For example, the external debt ratio, i.e., the ratio of the outstanding external debt to GDP, was 14.4% at the end of 2018 in China, while the internationally accepted safe level was 20%. The debt ratio, i.e., the ratio of the outstanding external debt to the export income of goods and services in the balance of payments, is 74.1% in China while the internationally accepted safe level is 100%. The debt servicing ratio, which refers to the ratio of the total medium- and long-term external debt servicing amount to the export income of goods and services in the balance of payments, is 5.5% in China, while the internationally accepted safe level is 20%. Another indicator is the ratio of short-term external debt to foreign exchange reserves. This ratio is 41.4% in China while the internationally accepted safe level is 100%. Based on these safety indicators, China's current external debt indicators are all within the internationally accepted safe range, and these indicators are all lower than the overall level of developed countries and emerging market countries. 2019-07-18 12:00 China Securities Journal: At the G20 Osaka Summit, President Xi announced the important measures to further open up China to the outside world. In the second half of the year, what new ideas and measures will the SAFE introduce with respect to the foreign exchange administration reform and opening up? 2019-07-18 12:05 Wang Chunying: At the G20 Summit, President Xi proposed to move faster to open up to the outside world and strive to achieve high-quality development. The SAFE will earnestly implement the spirit of President Xi’s speech and adhere to two basic considerations in relevant work: The first is to deepen the reform of foreign exchange administration, promote the two-way opening up of financial markets and serve the new pattern of comprehensive opening up in China. The second is to maintain the stability of the foreign exchange market, guard against the risk of cross-border capital flows, safeguard the security, liquidity, value preservation and appreciation of foreign exchange reserves, and safeguard the national economic and financial security. Specifically, there are several major relevant measures. First, efforts will be made to further promote the liberalization and facilitation of cross-border trade and investment. Firstly, foreign exchange administration policies will be optimized and innovation in trade patterns will be given further support. Secondly, efforts will be made to further facilitate foreign-invested enterprises to transfer funds, and support qualified and capable Chinese enterprises to make authentic and compliant outbound investments. Thirdly, active support will be given to pilot free trade zones, the Guangdong-Hong Kong-Macao Great Bay Area and the XiongAn New Area for taking the lead in pilot implementation of foreign exchange administration reform, and efforts will be made to support Hainan in comprehensively deepening reform and opening up. 2019-07-18 12:05 Wang Chunying: Second, the opening up of capital accounts will be steadily promoted. We will take into account the requirements of economic development stage, financial market conditions and financial stability in a holistic manner, and coordinate transactions and remittance. With a focus on two-way opening up the financial market, we will promote the opening of non-convertible items in an orderly manner and improve the facilitation of convertible items. This is the basic principle and consideration for steadily promoting the opening up of capital account. There are special arrangements in several aspects. The first is to reform the QFII and RQFII, expand the scope of investment, and study ways to appropriately relax or even cancel the QFII quota management. The second is to support the healthy development of science and technology innovation board, and do a good job in cross-border fund management of depositary receipts under the Shanghai-London Stock Connect. The third is to promote the integration of open channels in the inter-bank bond market. 2019-07-18 12:06 Wang Chunying: Third, we need to improve the management framework of cross-border capital flows that combines macro-prudential management and micro-regulation. In terms of macro-prudential management, efforts will be made to improve the monitoring, early warning and response mechanisms for cross-border capital flows, enrich the policy toolbox for macro-prudential management of cross-border capital flows, and counter-cyclically regulate pro-cyclical fluctuations in the foreign exchange market in an open, transparent and market-based manner. With respect to micro regulation, we will continue to maintain the stability, consistency and predictability of regulatory policies across the cycle, crack down upon illegal and irregular activities in foreign exchange, and maintain a healthy and sound order in the foreign exchange market. 2019-07-18 12:06 Wang Chunying: Next, based on the thematic education activities on "remaining true to our original aspiration and keeping our mission firmly in mind" and under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the SAFE will further conduct surveys at the grassroots level and closely investigate the market to find out the actual situations and come out with practical measures, guarantee the implementation, unswervingly deepen the reforms in the foreign exchange field, and further open the foreign exchange market and serve the development of the real economy. Meanwhile, we will actively guard against risks from cross-border capital flows, maintain the healthy and sound order of the foreign exchange market as well as national economic and financial security. 2019-07-18 12:07 Moderator Liu Fang: This is the end of today's press conference. Thank you very much for your understanding of and support to our foreign exchange administration work, especially our press work all this time. Thank you. 2019-07-18 12:07 (The original text is available at www.people.com.cn) 2019-07-18/en/2019/0718/1538.html