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Pan Gongsheng, PBC Deputy Governor and SAFE Administrator Since 1994, especially since July 2005, China has been continuously pushing ahead with the reform of the RMB exchange rate formation mechanism. As a result, the RMB exchange rate has seen its formation and adjustment more and more marketized and its flexibility increasing. At the same time, financial institutions and market participants have become better adapted to RMB exchange rate fluctuations and adjustments, with risk hedging tools more diversified and RMB internationalization making constant progress. Although the US recently designated China as a so-called “currency manipulator”, the continuity and stability of China’s foreign exchange management policies will not be affected. Financial reform will continue to go deeper and financial opening-up will be further expanded. We will follow unswervingly, as always, the path of development with Chinese characteristics. I. The US designation of China as a so-called “currency manipulator”, essentially a political maneuver amid protectionism and unilateralism, will be remembered as a typical case of absurdity in international financial history. On August 5, in violation of common sense and professionalism in world trade and international finance, the US Treasury designated China as a “currency manipulator” for not intervening in Chinese currency devaluation. This move, in total disregard of the fact that the unilateral US tariff hikes prompted by protectionism had caused adjustment across the board on international financial markets, was also inconsistent with the conclusion of the Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States released by the US Treasury this May. It was part of the overall US strategy to trigger and escalate China-US trade frictions, fully demonstrating the lack of transparency and the arbitrariness of US policy assessment as well as the possibility that any price adjustment unwelcomed by the White House on international markets will be willfully attached a political tag of foreign government intervention. Former US Treasury Secretary Lawrence Summers wrote recently that China does not fit the template for a “currency manipulator”, and that the move of the US Treasury labeling China a “currency manipulator” and asking the International Monetary Fund (IMF) to intervene was unjustified, which would surely do grave damage to the credibility of the US government and Treasury. In the newly released report on the annual Article IV consultation with China, the IMF stood by the basic judgement it had held since 2015, reiterating that the RMB exchange rate was broadly in line with China’s economic fundamentals, which is ample proof that the US accusation is groundless and untenable. The short-term adjustments lately seen in the RMB exchange rate were spontaneous reactions of financial markets to the surprise US announcements of unexpected tariffs. Since April 2018, the US has triggered and kept escalating trade frictions with China, which have become the primary influence on short-term movements of the RMB exchange rate. On June 15, 2018, while China-US trade talks were making headway, the US announced abruptly tariff hikes on USD50 billion worth of imports from China, and three days later threatened to impose higher tariffs on an additional USD200 billion of Chinese imports, sending the RMB into dramatic adjustment against the US dollar, with the onshore CNY/USD spot rate posting a monthly fall of 3.4 percent. In December 2018, as trade tensions eased after Chinese and US leaders met during the G20 summit, the RMB resumed the upward trend. In May 2019, however, the US once again raised tariffs unexpectedly on Chinese goods, bringing down the onshore CNY/USD spot rate by 2.4 percent for the month. On August 2, the US further threatened to increase tariffs on the remaining USD300 billion of Chinese goods, leading to sharp fluctuations in the RMB exchange rate. After the start of trading on August 5, the offshore and onshore RMB weakened beyond 7 per US dollar successively. For the two trading days of August 2 and August 5, the onshore CNY/USD spot rate fell by 1.9 percent approximately. All these fluctuations, as we can see, were natural market responses to external impact on the RMB. II. The politicalized and capricious policies of unilateralism and protectionism of the US will be dark clouds over global financial markets. Since 2018, US protectionist measures on trade have triggered severe turmoil in the global financial market, leading to sharp fluctuations and rapid contagion not only in stock market and foreign exchange market, but also in prices of large-category assets. After the US imposed additional 10 percent tariffs on China’s USD200 billion imports in September 2018, the global stock market (MSCI Global Index) plummeted, with the biggest drop of 18.0 percent. After the US twice escalated tariff measures against China in May and August 2019, the biggest falls in the global stock market reached 6.3 percent and 4.4 percent respectively. Gold price has appreciated by 17.0 percent since May 2019, once exceeding USD 1,500 per ounce, which also revealed a sharp rise of global risk aversion. Since April 2018, the most significant weakening of the exchange rates of emerging market currencies recorded 14.8 percent. It’s evident that the unilateralism and capriciousness of the US policies is a major source of the highly intensified shocks in the financial market. Just as Mr. Larry Summers, former US Treasury Secretary, noted that “there is significant risk of a recession since the financial crisis in 2008”. The monetary policy of the FED is critical to the stability of the global financial markets. Nevertheless, the US government continuously imposes pressures on the Fed, seriously threatening the independence and professionalism of its monetary policy. Donald Trump changed the tradition that successive U.S. presidents did not comment publicly on monetary policy, repeatedly expressing dissatisfaction with the Fed’s monetary policy and a strong dollar and even openly threatening to fire current Chairman Jerome Powell, and attempted to influence FED’s decision by nominating new board members. As the 2020 US presidential election approaches, the frequency of Trump’s public comments on the Fed and the USD exchange rate has been on the rise. Since June 2018, he has lashed out at Fed’s policies or the USD exchange rate more than 30 times. In particular, after RMB weakened beyond 7 per US dollar in early August, aside from designating China as a currency manipulator, Trump denounced Fed for its non-action, and demanded for a cut by 100 basis points as soon as possible, implicitly pointing to the issue of USD exchange rate. Recently, four former chairs of Fed have released a joint declaration, stating that although it often occurred that politicians called for looser monetary policies around elections, monetary policies based on current political (rather than economic) needs would lead to worse economic performance in the long run, which could undermine public confidence of the central bank and result in unstable financial markets. They have called for maintaining Fed’s independence, and keeping monetary-policy decisions from short-term political pressures. III. The PBC will further enhance the flexibility of RMB exchange rate in the market oriented reform, and the foreign exchange market will gradually return to the fundamentals after absorbing short-term shocks. Although the RMB exchange rate was hit by trade frictions and the US designated China as a currency manipulator, our established policies of comprehensively deepening reforms and further opening up will not waver. We will continue to implement the managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies, persistently push forward market oriented exchange rate reform, and improve the RMB exchange rate formation mechanism, so as to keep the exchange rate basically stable at a reasonable and equilibrium level. As a responsible big country, China adopted a responsible attitude during the Asian financial crisis and global financial crisis, and made significant contributions to the gradual post-crisis recovery of the world economy. We will remain firmly committed to the previous G20 summits’ commitments including non-adoption of competitive devaluation and no use of the exchange rate as a tool to cope with international trade disputes. The resilience and potential of the Chinese economy provide a solid base for the stability of RMB exchange rate. Despite that the RMB exchange rate will be subject to trade frictions and other external shocks, we judge it will not depreciate in disorder, and the foreign exchange market will eventually return to fundamentals after a brief shock. Firstly, economic performance has been stable and is expected to firm going forward. The fundamentals for sound economic growth over the long term remain unchanged as economic growth is expected to outpace most major economies and the RMB remains a strong currency. According to Bank for International Settlements, from 2005 to June 2019, RMB appreciated by 38 percent in tems of nominal effective exchange rate, and 47 percent in terms of real effective exchange rate, topping all other G20 countries. Though there have been huge uncertainties in recent China-US trade frictions, the marginal effect of US tariffs on China has been declining. Since the beginning of 2019, with favorable fundamentals, the Chinese economy has on the whole maintained stability while making steady progress, and the major macroeconomic indicators have performed within a reasonable range. Achievements have been made in economic structural adjustments, with growth resilience enhanced and macro leverage ratio remaining basically stable. Secondly, cross-border capital flows are generally stable. As China gradually expanded areas of opening up and comprehensively implemented the management model of pre-establishment national treatment plus a negative list, the domestic business environment has been further improved and foreign direct investment still enjoys great development potential. In recent years, China has continuously promoted high-level opening up of the financial market, and created a favorable policy environment for foreign investors, including those from the US, to allocate more resources to RMB assets. So far, the sizes of Chinese bond market and stock market have been ranking high in the world, but only around 2 percent and 3 percent of the financial assets were held by foreign investors. With Chinese bond market and stock market more widely included in major international indices, given the relatively high yield in the Chinese bond market against the expansion of negative interest rates worldwide, there is still great potential for foreign investment. Thirdly, China’s external debt has been more stable. In recent years, China’s external debt growth is not high compared with its economic size. By end-2018, China’s external debt ratio (outstanding external debts/GDP), debt ratio (outstanding external debts/annual export proceeds in foreign exchange) and debt servicing ratio (external debt principal and interest repayment/annual export proceeds in foreign exchange) stood at 14.4 percent, 74.1 percent and 5.5 percent respectively, far lower than the internationally accepted alarm level. The structure of external debt continued to optimize, as foreign central bank investors continued to increase their holdings of Chinese bonds for medium- to long-term asset allocation. As a result, the proportion of debt securities in outstanding external debt increased continuously from 8 percent at end-2014 to 22 percent at end-2018. Such kind of capital is relatively stable, hence unlikely to be “deleveraged” in times of exchange rate changes. Fourthly, the RMB exchange rate showed more two-way fluctuations, and foreign exchange market entities became more adaptive and rational. Since the “8.11” exchange rate reform, the RMB exchange rate has been more flexible, with its fluctuation ratio approaching that of currencies of major developed economies. The two-way fluctuations of the RMB exchange rate have become regular, and the depreciation pressure has been timely released. At present, individual foreign currency purchases have been more stable, outbound direct investment by enterprises has been more reasonable and orderly, foreign currency stockpiling has been gradually disappearing, and enterprises’ awareness of exchange rate risk management has been further enhanced. IV. The PBC will maintain the continuity and stability of foreign exchange administrative policies, continuously enhance the liberalization and facilitation of cross-border trade and investment, and improve the cross-border capital flow management framework for opening-up at a higher level. The foreign exchange authorities will maintain policy continuity and stability to serve the new pattern of China’s comprehensive opening-up. We will implement the decisions and arrangements of the CPC Central Committee and the State Council, and fulfill our responsibilities by seizing the long-term trend while respecting market forces. We will firmly adhere to our commitments to reform and ensure supply of foreign currencies to enterprises and individuals with regular demands, thus supporting import and export, profit distribution, two-way cross-border investment and other production and operation activities of enterprises, as well as meeting individuals’ actual demands of travelling and studying abroad. Current account payments arising from our people’s real needs will remain unaffected. In addition, we will continue to vigorously promote the liberalization and facilitation of cross-border trade and investment, and further carry out pilot facilitation reforms including trade receipt and payment facilitation, electronization of tax filing for trade in services, and delegation of external debt cancellation to banks, with a view to better serve the real economy. We will continue to deepen the reform of “streamlining administration, delegating powers, strengthening regulation and improving services”, optimize the online system of “Internet Plus government services” released by the State Administration of Foreign Exchange (SAFE) in June, and foster a more open, fair and convenient business environment. We firmly believe that in the future, China’s foreign exchange administration will adapt to the opening-up in a more open environment; capital account opening-up, two-way opening-up of the financial market and the RMB internationalization will be promoted in a coordinated way at a higher level; and the liberalization and facilitation of cross-border trade and investment will be further advanced. We have the confidence and capability to effectively prevent risks arising out of external shocks, maintain stability of the foreign exchange market, and promote stable and sound development of the financial market and the financial system. (Source: China Financial News) 2019-08-12/en/2019/0812/1545.html
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On the morning of July 30, the State Administration of Foreign Exchange (SAFE) held a foreign exchange administration work conference for the second half of 2019. The participants earnestly studied and implemented the decisions and plans of the CPC Central Committee and the State Council for the economic and financial undertakings, summarized the work of the first half, analyzed the current situations of the foreign exchange market, and studied and made arrangements for key tasks of foreign exchange administration for the second half. Pan Gongsheng, secretary of the CPC Leadership and administrator of the SAFE, delivered a work report. Members of the CPC Leadership, chief accountants and chief economists of the SAFE attended the conference. The conference concluded that in the year to date, foreign exchange authorities, under the firm leadership of the CPC Central Committee and the State Council, have remained true to their original aspiration and mission, and based on serving the real economy to solidly further the reform and opening-up in the foreign exchange sector, effectively prevented and controlled external shocks and risks, and protected the foreign exchange market order and the country’s economic and financial safety in accordance with the arrangements of the Central Economic Working Conference and the Report on the Work of the Government. Hard efforts paid off and cultivated a good foreign exchange market environment for the steady operation of the national economy in the first half year of 2019. First, with political development as the top priority, foreign exchange authorities have made an all-out effort to enforce strict Party discipline. They have earnestly launched an educational activity themed with "remaining true to original aspiration and keeping mission firmly in mind". They have ensured strict implementation of the central government's "Eight-point Decision" and its implementing rules, and made unremitting efforts to correct the "four forms of decadence" including formalism, bureaucratism, hedonism and extravagance. Efforts have been made to strengthen the organizational work, and train a contingent of competent and professional officials who are loyal to the Party, have moral integrity, and demonstrate a keen sense of responsibility. Second, the foreign exchange administration reform has been deepened further. Foreign exchange authorities have stably promoted the liberalization of capital account, increased the quota for qualified foreign institutional investors (QFIIs), and supported the launch of the Science and Technology Innovation Board and the "Shanghai-London Stock Connect" programme. They have gone further in the reforms to delegate power, improve regulation, and upgrade services, increased the facilitation of trade and investment, and unveiled a number of facilitation measures for trade in goods, trade in services, insurers and multinational corporations. They have supported the trading and investing activities in countries and regions along the Belt and Road, and published the Overview of Foreign Exchange Administration Policies of the Belt and Road Countries in 2018. Third, the management framework of cross-border capital flows that combines macro-prudential management and micro-regulation has been further improved. Foreign exchange authorities have improved their regulation of banks' compliance in foreign exchange business and strengthened the management of high-risk fields of foreign exchange business. They have advanced the cooperation with regulators of other countries and cracked down upon the illegal behavior in the foreign exchange market. Fourth, the operation and management of foreign exchange reserves have been constantly improved. Foreign exchange authorities have done well in balancing the risk and return of reserve assets and organically combined the commercial use of foreign exchange reserves with the serving of national strategies. According to the conference, China’s economy remained within a reasonable range and carried forward an overall steady development trend featuring making progress while presenting stable performance in spite of a severe and complicated external environment in the first half year. This underpinned the continued stability of China’s foreign exchange market, basic equilibrium in the cross-border receipts and payments and in the supply and demand on the domestic foreign exchange market, and a stable rise of the foreign exchange reserve. Although the external environment is still complicated in the second half, China’s cross-border capital flows are expected to remain stable on a whole because of the stable expectations for Chinese economy, further widening of opening-up, more mature and rational foreign exchange market and good market order. The conference stressed that, in the second half, foreign exchange authorities must closely unite around the CPC Central Committee with Comrade Xi Jinping as the core, follow Xi Jinping thought on socialism with Chinese characteristics for a new era, maintain political integrity, think in terms of the big picture, follow the leadership core, and keep in alignment with the central Party leadership and have full confidence in the path, theory, system, and culture of socialism with Chinese characteristics, uphold the core position of General Secretary Xi Jinping in the CPC Central Committee and in the whole Party and uphold the authority of the Central Committee and its centralized, unified leadership, combine the educational activity themed with "remaining true to original aspiration and keeping mission firmly in mind" with the advancement of key work in foreign exchange administration, and carry out the plans of the CPC Central Committee and the State Council satisfactorily without any compromise. Foreign exchange authorities must adhere to the general work guideline of making progress while maintaining stability, make plans for and seek coordinated promotion of the foreign exchange administration work by putting it into the cycling of the entire national economy, further enhance the capability of serving the new pattern of China’s opening-up on all fronts, facilitate the reform and opening-up in key fields of foreign exchange, always think about worst-case scenarios, forestall and mitigate external financial shocks and risks, protect the safety of national economy and finance, and deliver a good result for the upcoming 70th anniversary of the founding of new China. The conference also set the working priorities for foreign exchange administration in the second half of 2019. The first is to unswervingly deepen comprehensive and strict exercise of Party self-discipline and develop the active and healthy political culture within the Party. Foreign exchange authorities should make the "remaining true to original aspiration and keeping mission firmly in mind" themed education go deeper and firmer with concrete measures, be problem-oriented, review and reflect on the problems and rectify them well to ensure the thematic education yields tangible results. They should strictly practice the standard that officials must have both ability and political integrity, and cultivate professional and high-quality officials teams who are loyal to the Party, have moral integrity, and demonstrate a keen sense of responsibility. The second is to further promote the liberalization and facilitation of trade and investment in a bid to cater to the needs of opening-up at a high level. Efforts should be made to advance capital account convertibility in a stable and orderly way, put into force the management of pre-establishment national treatment plus a negative list in direct investment fields, refine the system in relation to QFIIs and RQFIIs, and deepen the centralized operation and management of multinational corporations’ capital. More places should be included into the pilot of trade receipts and payments facilitation, and support should be given to prudent and compliant banks, which provide creditworthy enterprises with more facilitation services. Foreign exchange authorities should make plans from an overall perspective, strengthen top-level design, and support innovation in regional opening-up and construction of special zones. They should solidly carry out the work in connection with keeping employment, finance, foreign trade, foreign capital, investment and expectation stable. They should continue to deepen the reforms to delegate power, improve regulation, and upgrade services, launch the "Internet plus Regulation" system of the SAFE, and improve the "Online Application System of Government Services" of the SAFE. The third is to improve the management framework of "macro-prudence plus micro-regulation" for cross-border capital flows, and further strengthen the capability of preventing and controlling external shocks and risks. Foreign exchange authorities should step up monitoring and early warning of the foreign exchange market, and study how to diversify the macro-prudential management tools. They should continue to crack down on illegal acts in the foreign exchange market, particularly malignant breaches of laws and regulations such as underground banks and false and fraudulent transactions. The fourth is to consolidate the foundation of foreign exchange administration work. Foreign exchange authorities should improve the BOP statistics system, reinforce the capability of offsite regulation, develop and improve a digital regulatory platform. Taking the good opportunity of the establishment of the Foreign Exchange Research Center, they should further enhance the capability of doing researches in foreign exchange and the level of making decisions on foreign exchange services. The fifth is to improve the operation and management of foreign exchange reserves, safeguard the security, liquidity, value growth and maintenance of foreign exchange reserves. Efforts will be made to drive the high-quality development of diversified use of foreign exchange reserves. Heads of departments and units of the SAFE attended the meeting at the main venue. Relevant officials of the Discipline Inspection Group dispatched by the Central Commission for Discipline Inspection and the National Supervisory Commission to the People’s Bank of China, relevant departments and bureaus of the People’s Bank of China and Financial Audit Bureau I of the National Audit Office were invited to the conference. Members of the leaderships and department heads of SAFE branches (foreign exchange administrative departments) and central sub-branches were present at local venues. (End) 2019-07-30/en/2019/0730/1544.html
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The State Administration of Foreign Exchange (SAFE) has recently released its 2018 Annual Report. This was the first time for the report to disclose the results of foreign exchange reserve operations and data on currency composition. The report also made an introduction to the philosophy and risk management of investment with foreign exchange reserves, as well as the globalized operating platform. In this regard, the SAFE spokesperson and Chief Economist Wang Chunying answered media questions. Q1: What are the main considerations for disclosing information on foreign exchange reserve operations? A: As the largest holder of foreign exchange reserves in the world, China has long committed itself to enhancing the transparency of foreign exchange reserve information. In accordance with the Special Data Dissemination Standard (SDDS) of the International Monetary Fund (IMF), the People’s Bank of China (PBC) and the SAFE have begun to unveil the scale of foreign exchange reserves on a regular basis since July 2015. Meanwhile, the information on foreign exchange reserves are also published to the outside in many other forms, e.g. press conference, portal website of the SAFE and annual report of the SAFE. To further disclose the operation and management information of foreign exchange reserves caters to China’s demand for expanding openness on all fronts and is also conducive to boosting the international community’s confidence in the Chinese economy and finance. Q2: What philosophy do you uphold while making investment with foreign exchange reserves? A: China’s foreign exchange reserves act as an important participant and responsible long-time investor in the global financial market. We invest in the international financial market in line with the market-oriented principle, respect the rules of international market and industry practices, protect and promote the stability and development of international financial market. China always pursues diversification and decentralization in investing with foreign exchange reserves. We flexibly adjust and constantly optimize the currency composition and asset structure in light of the market conditions, control overall investment risks and ensure that the our foreign exchange reserves can preserve and increase value leveraging the trade-off between different currencies and different asset classes. Speaking of the currency composition, China’s foreign exchange reserves are seeing an increasingly diverse portfolio of currencies with the advancement of the national economy and trade, which is more decentralized than the average level of global foreign exchange reserves. This suits to the development demand of China’s outbound economy and trade and the international payment demand, and is consistent with the international trend of diversification in the currency composition of foreign exchange reserves. So, it helps to reduce the exchange rate risks of China’s foreign exchange reserves. Q3: What’s the investment and operation goal of China’s foreign exchange reserves? A: China always takes the security, liquidity, value preservation and growth as the objective for the operation of foreign exchange reserves. The core function is to maintain the equilibrium of balance of payments and stability of exchange rates and protect the country’s financial safety. All in all, the operation has brought about stable incomes over a long period of time, with the return staying at a good level among the world’s foreign exchange reserve administrations. Q4: What’s the main reason for China to hold more gold reserves? A: Gold reserve has been a key part of countries' diversified international reserves. With properties of financial assets and commodities, gold is conducive to adjusting and optimizing the overall risk and return characteristics of the portfolios of international reserves. From the long-term and strategic perspectives, we will dynamically adjust the portfolio allocation of international reserves when necessary, to ensure the security, liquidity, value preservation and appreciation of international reserves. Q5: How does China perform risk management of foreign exchange reserves? A: China always gives top priority to preventing risks arising from the operation of foreign exchange reserves. The country continues to perfect the risk management and internal control framework, to enhance the capabilities of identifying, assessing and managing risks, to diversify and improve the risk management tools and approaches, and to establish and improve the risk management system. Thanks to the country’s ceaseless efforts to step up prospective analysis and early warning of significant risk events, China’s foreign exchange reserves have weathered through a number of market shocks and challenges such as the international financial crisis and the European sovereign debt crisis flexibly and appropriately, thus not only succeeding in maintaining the overall security and liquidity of foreign exchange reserve assets but also making positive contribution to serving the country’s economic development, reform and opening-up, preventing and mitigating significant risks. 2019-07-28/en/2019/0728/1543.html
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The Chinese side expresses deep regret over this act. Such a label is not consistent with the quantitative criteria set by the U.S. Treasury itself for theso-called “Currency Manipulator”. A capricious act of unilateralism and protectionism, it will severely undermine international rules and have material impacts on the global economy and finance. The RMB exchange rate regime is a managed floating regime based on market supply and demand and with reference to a basket of currencies. There is nosuch issue as exchange rate manipulation, as by nature, the RMB exchange rateis determined by market supply and demand. Recent RMB depreciation since the beginning of August has been driven and determined by market forces andreflects shifts in market dynamics and volatilities in global foreign exchange markets amid global economic developments and escalating trade frictions. The PBC has been committed to maintaining the RMB exchange ratebasically stable at an equilibrium and adaptive level, and our efforts havebeen widely recognized by international partners. According to thedata of the Bank for International Settlements (BIS), during the period between the beginning of 2005 and June 2019, the RMB Nominal Effective Exchange Rate(NEER) and the Real Effective Exchange Rate (REER) appreciated by 38 percent and 47 percent respectively. The RMB has been the strongest currency among the G20 economies. The size of its appreciation is also among the largest in all currencies. The IMF has pointed out, in the just concluded Article IV consultation, that the RMB was broadly in line with the fundamentals. In the 1997 Asian Financial Crisis and 2008 Global Financial Crisis, China stayed true to its commitment of maintaining RMB stability, andlent strong support to the stability of the financial market and the global economic recovery. Though the U.S. has continued to escalate the trade dispute since early 2018, China has kept its promise of not carrying out competitive devaluation. China has never used and will not use RMBexchange rate as a tool to deal with the trade frictions. In total disregard of the facts, the US has designated China a currency manipulator. The Chinese side firmly opposes such an act as it harms the interests of both China and US. It will seriously undermine the international financial order and give rise to financial market volatility. Furthermore, it will obstruct international trade, cut into the recovery of the world economy, and ultimately hurt the self-interests of US. This unilateral act has undermined the multilateral consensus on exchange rate and will have negative and serious impacts on the stable functioning of international monetary system.The Chinese side urges the U.S. to rein in its horse at the edge of the cliff, turn back from this wrong path and return to a rational and objective track. China remains committed to the managed floating exchange rate regime based on market supply and demand and with reference to a basket of currency and keeping the RMB exchange rate basically stable at an equilibrium and adaptive level. 2019-08-06/en/2019/0806/1542.html
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Recently, market expectations have changed somewhat amid new developments in the global economy and trade frictions. As a result, many currencies have depreciated against theUS dollar since the beginning of August. The RMB exchange rate has also seen some fluctuations, which are driven and determined by market forces. As a responsible country, China will abide by exchange rate commitments made at G20 Leaders' Summits. China will remain committed to the market-based exchange rate regime, refrain from competitive devaluations, and will not target exchange rate for competitive purposes. Exchange rate will not be used as an instrument indealing with trade disputes or other external disruptions. The PBC has been strongly committed to maintaining the RMB exchange rate basically stable at an equilibrium and adaptive level, and we believe our efforts have been widely recognized. At present, China's economy is growing steadily. Its growth rate is one of the highest among major economies, reflecting the economy's strong resilience,potential, and room for adjustments. China's balance of payments are broadly in balance, and foreign exchange reserves remain abundant. An increasing number of firms are hedging their foreign exchange risks in theforeign exchange market. The interest rate spreads between China and other major economies are at an appropriate range. These factors are expected to support the RMB and ensure its broad stability. The PBC and SAFE will maintain the stability and continuity of the foreign exchange policy to meet the legitimate and reasonable demand of enterprises and individuals. Foreign exchange policy reform and opening-up will be deepened to further promote cross-border trade and investment facilitation, and to better serve the need to develop the real economy and fit the new landscape in opening-up at all fronts. Both China'seconomic fundamentals and market supply and demand support the assessment that the current RMB exchange rate is at an appropriate level. Despite of recent volatilities driven by external uncertainties, I am quite confident RMB will remain a strong currency. The PBC is fully equipped with the experiences andthe capacity to support smooth operation of the foreign exchange market, and keep the RMB exchange rate basically stable at an equilibrium and adaptive level. 2019-08-05/en/2019/0805/1541.html
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Q: The latest data on foreign exchange reserves disseminated by the State Administration of Foreign Exchange show that China's foreign exchange reserves as of the end of June 2019 rose by USD 18.2 billion month on month. Could you tell us why such a change occurred? What would you say about the future trends of foreign exchange reserves? A: As at the end of June 2019, China's foreign exchange reserves recorded USD 3.1192 trillion, up by USD 18.2 billion or 0.6% month on month. In June, the USD index fell and the asset price rose on the international financial market due to factors such as the global trade situations and monetary policies of central banks of major countries. Due to the combined impact of exchange rate translation and asset price changes, China’s foreign exchange reserves rose. Since the beginning of this year, despite increasing uncertainties and destabilizing factors in the external environment, China's economy has maintained overall stability and operated within a reasonable range. Supply and demand in the foreign exchange market are basically balanced, the cross-border capital flows through major channels have shown positive changes, and the foreign exchange reserves have steadily increased. Looking ahead, although the international economic and financial situations will remain complicated, China will continue to advance the high-quality economic development and actively implement the measures of opening up to the outside world in an all-around manner. The economic growth is expected to become more resilient and sustainable. All these will provide strong support for the stability of China's foreign exchange market and thus provide a solid foundation for the overall stability of the foreign exchange reserves. 2019-07-08/en/2019/0708/1536.html
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Banks as Market-Makers in the Trading of RMB-Forex on the Interbank Forex Market 2019-07-19/en/2019/0719/1535.html
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List of Banks Engaging in Derivative Businesses (Forwards and Swaps) for Clients 2019-08-02/en/2019/0802/1539.html
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In November 2019, China’s international trade in goods and services recorded receipts of RMB 1651 billion and payments of RMB 1490.6 billion based on statistics of balance of payments (BOP), registering a surplus of RMB 160.4 billion. Specifically, trade in goods registered receipts of RMB 1511.7 billion,payments of RMB 1222.4 billion, recording a surplus of RMB 289.3 billion; trade in services recorded receipts of RMB 139.3 billion,payments of RMB 268.2 billion, resulting in a deficit of RMB 128.9 billion. In the US dollar terms, in November 2019, China's BOP-based receipts and payments of international trade in goods and services were USD 235.3 billion and USD 212.4 billion respectively, registering a surplus of USD 22.8 billion. Specifically, the receipts and payments from trade in goods were USD 215.4 billion and USD 174.2 billion respectively, resulting in a surplus of USD 41.2 billion.Trade in services registered receipts and payments of USD 19.9 billion and USD 38.2 billion respectively, recording a deficit of USD 18.4 billion. (End) International Trade in Goods and Services of China (Based on the BOP statistics) November2019 Item In 100 million of RMB In 100 million of USD Goods and services 1,604 228 Credit 16,510 2353 Debit -14,906 -2124 1. Goods 2,893 412 Credit 15,117 2154 Debit -12,224 -1742 2. Services -1,289 -184 Credit 1,393 199 Debit -2,682 -382 2.1 Manufacturing services on physical inputs owned by others 77 11 Credit 80 11 Debit -3 0 2.2 Maintenance and repair services n.i.e 23 3 Credit 42 6 Debit -19 -3 2.3 Transport -350 -50 Credit 285 41 Debit -635 -90 2.4 Travel -992 -141 Credit 228 33 Debit -1,221 -174 2.5 Construction 21 3 Credit 78 11 Debit -56 -8 2.6 Insurance and pension services -38 -5 Credit 32 5 Debit -69 -10 2.7 Financial services 6 1 Credit 20 3 Debit -13 -2 2.8 Charges for the use of intellectual property -143 -20 Credit 35 5 Debit -178 -25 2.9 Telecommunications, computer and information services 34 5 Credit 187 27 Debit -153 -22 2.10 Other business services 96 14 Credit 394 56 Debit -298 -42 2.11 Personal, cultural, and recreational services -21 -3 Credit 4 1 Debit -25 -4 2.12Government goods and services n.i.e -3 0 Credit 8 1 Debit -11 -2 Notes: 1. The trade in goods and services in this table refers to the transactions between residents and non-residents, based on the same standard as that for BOP statement. The monthly data are preliminary and may be inconsistent with the quarterly data in the BOP statement. 2. The data on international trade in goods and services are prepared in USD, and the RMB data for the current month is derived by converting the USD data at the monthly average central parity rate of the RMB against the USD. 3. This table employs rounded-off numbers. Definition of Indicators: Goods and Services: refers to the trade in goods and services between residents and non-residents, which is based on the same standard as that for the BOP statement. 1. Goods:refers to transactions in goods whereby the economic ownership is transferred between the Chinese residents and non-residents. The credit side records export of goods, while the debit side records import of goods. The data of goods account are mainly from the customs statistics of imports and exports, but differ from the statistics of the customs mainly in the following aspects:first, the goods in the BOP statement only reflect the goods whose ownership has been transferred (e.g. goods under the trade modes such as general trade and processing trade with imported materials), while the goods whose ownershipis not transferred (e.g. manufacturing services with supplied materials or with exported materials) are included in the statistics of trade in services instead of the statistics of trade in goods; second, as required by the BOP statistics, the goods imported and exported are valued on the FOB basis, but as required by the customs, the goods exported are valued on the FOB basis, whereas goods imported are on the CIF basis. Therefore, for the purpose of the BOP statistics, the international transport and insurance premiums are taken out from the value of imported goods and included in the trade in services; and third, the data on net export of goods in merchanting which are not included in the customs statistics are supplemented. 2. Services:includes manufacturing services on physical inputs owned by others,maintenance and repair services n.i.e, transport, travel,construction, insurance and pension services, financial services, charges for the use of intellectual property, telecommunications, computer and information services, other business services, personal, cultural and recreational services, and government goods and services n.i.e. The credit side records services supplied, while the debit side records services received. 2.1 Manufacturing services on physical owned by others: processor only provides processing, assembly, packaging and other services and charges service fee from the owner, while the ownership of the goods isnot transferred between the owner and the processor. The credit side records the manufacturing services supplied by the Chinese residents on physical inputs owned by non-residents, and vice versa for debit side. 2.2 Maintenance and repair services: refer to the maintenance and repair services supplied by residents to non-residentsor vice versa on goods and equipment (such as vessel, aircraft, and other transportation facility) owned by the receiving party. The credit side records the maintenance and repair services supplied by the Chinese residents to non-residents, and vice versa for debit side. 2.3 Transport:refers to the process of transporting people and goods from one place to another, and the relevant supporting and auxiliary services, as well as postal and delivery services. The credit side records the international transport,postal and delivery services supplied by residents to non-residents, and vice versa for debitside. 2.4 Travel:refers to goods consumed and services purchased by travelers in various economies as non-residents. The credit side records the goods and services provided by the Chinese residents to non-residents who have stayed in China for less than one year, as well as non-residents studying abroad and seeking medical treatment for indefinite period of stay. The debit side records the goods and services purchased by the Chinese residents when traveling, studying or seeking medical services abroad from non-residents. 2.5 Construction services:refer to the establishment, renovation, maintenance or expansion of fixed assets in the form of buildings, land improvement, roads, bridges and dams and other engineering buildings of engineering nature, relevant installation, assembly,painting, pipeline construction, demolition and project management, as well as site preparation, measurement and blasting and other special services. The credit side records the construction services provided by the Chinese residents outside the economic territory. The debit side records the construction services received by the Chinese residents in the Chinese economic territory from non-residents. 2.6 Insurance and pension services: refers to various insurance services and commission to agents related with insurance transaction. The credit side records the life insurance and annuity, non-life insurance, reinsurance, standardized guarantee services and relevant supporting services supplied by the Chinese residents to non-residents, and vice versa for debit side. 2.7 Financial services: refer to financial intermediation and supporting services, excluding those covered by insurance and pension services. The credit side records the financial intermediation and supporting services supplied by the Chinese residents to non-residents, and vice versa for debit side. 2.8 Chargesfor the use of intellectual property:refer to licensed use of intangible, non-productive / non-financial assets and exclusive rights between residents and non-residents and the licensed use of existing original works or prototypes. The credit side records the intellectual property-related services supplied by the Chinese residents to non-residents, and vice versa for debit side. 2.9 Telecommunications, computer andinformation services: refer to communications services between residents and non-residents and transactions of services related to computer data and news, excluding commercial services delivered via telephone, computer and Internet. The credit side records the telecommunications, computer and information services supplied by residents to non-residents, and vice versa for debit side. 2.10 Other business services: refer to other types of services between residents and non-residents, including research and development services, professional and management consulting services,technical and trade-related services. The credit side records the other business services supplied by the Chinese residents to non-residents, and vice versa for debit side. 2.11 Personal,cultural and recreational services: refer to transactions of personal, cultural and recreational services between residents and non-residents, including audiovisual and related services (films,radio, television programs and music recordings) and other personal, cultural and recreational services (health, education, etc.). The credit side records the related services supplied by the Chinese residents to non-residents, and vice versa for debit side. 2.12 Government goods and services n.i.e:refer to various goods and services provided and purchased by governments and international organizations not included in other categories of goods and services. The credit side records the goods and services not included elsewhere and supplied by the Chinese residents to non-residents, and vice versa for debit side. 2019-12-26/en/2019/1226/1610.html
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As shown in the statistics of the State Administration of ForeignExchange (SAFE), in November 2019, the amount offoreign exchange settlement and sales by banks was RMB 1043 billion and RMB 1082.6 billion,respectively, with a deficit of RMB 39.6billion.In the US dollar terms，the amount of foreign exchange settlement and sales by banks wasUSD 148.6 billion and USD 154.3billion, respectively, with a deficit of USD 5.6billion. Inparticular, the amount of foreign exchange settlement and sales by banks forcustomers was RMB 981.2 billion and RMB 1013.1billion,respectively, with a deficit of RMB 31.9 billion; the amount of foreign exchange settlement andsales for banks themselves was RMB 61.8 billion and RMB 69.5billion,respectively, with a deficit of RMB 7.7 billion. During the period, newly signed contract amount of forward foreign exchange settlement and sales was RMB 134.9 billion and RMB 40 billion, respectively, with a net newly signedcontract amountof forward foreign exchange settlement of RMB 94.9 billion. At the end of November, outstanding amount of forward foreign exchange settlement and sales by the end of the current period was RMB 517 billion and RMB 436.7 billion, respectively, with a net outstanding amount of forward foreign exchange settlement of RMB 80.2billion;the net Delta exposure of outstanding options was RMB -264.3billion. During January to November 2019, theaccumulative amount of foreign exchange settlement and sales by banks was RMB 11502.6 billion and RMB 11902.5 billion, with an accumulative deficit of RMB399.9 billion. In the US dollarterms，the accumulative amount of foreign exchangesettlement and sales by banks was USD 1669.5 billion and USD 1727.8 billion, with an accumulative deficit of USD 58.2 billion. In particular, the accumulative amount offoreign exchange settlement and sales by banks for customers was RMB 10602.6 billion and RMB 10925.4 billion, respectively, with an accumulativedeficit of RMB 322.8 billion; the accumulative amount of foreignexchange settlement and sales for banks themselves was RMB 900 billion and RMB 977.1 billion, respectively, with an accumulative deficit ofRMB 77.1 billion. During the period, newly signed contract amount of forward foreign exchange settlement and sales was RMB 1408.5 billion and RMB 516.9 billion, respectively, with a net newly signedcontract amountof forward foreign exchange settlement of RMB 891.7 billion. In November 2019, the amount of cross-border receiptsand payments by non-banking sectors was RMB 2193.1 billion and RMB 2196.4billion, respectively, with a deficit of RMB 3.2 billion.During January to November2019, the amount of cross-border receipts and payments by non-banking sectorswas RMB 22287.3 billion and RMB 22203.5 billion, respectively, with a surplusof RMB 83.7 billion. In the US dollar terms, in November 2019, theamount of cross-border receipts andpayments by non-bankingsectors was USD 312.5 billion and USD 313.0 billion, respectively, with a deficit of USD 0.5 billion.DuringJanuary to November 2019, the amount of cross-border receipts and paymentsby non-banking sectorswas USD 3235.5 billion and USD 3222.5 billion, respectively, with a surplus of USD 13.0 billion. Addendum:Glossary and relevant definitions Balance of payments (BOP)refers to all economic transactions between residents and non-residents. Foreignexchange settlement and sales by banks refers to settlement and sale transaction that bank executes for customersand for the banks themselves, including statistic data onsettlements of forward contracts for foreign exchange settlementand sales and the exercises of option, and excludingthe transactions in the interbank foreign exchange market. The statistic reporting date of Foreign exchangesettlement and sales by banks should be the trade day of theForeignexchange settlement and sales transaction. By definition, foreignexchange settlement means foreign exchange holders sell foreignexchange to designated foreign exchange bank, and foreignexchange sales means designated bank sells foreign exchange to foreign exchange buyers. The net position of foreign exchange settlement andforeign exchange sales could be position squared throughtransactions on the inter-bank foreign exchange market, and it is one ofthe major contributors to the country’sforeign exchange reserve fluctuation, though it is not equal to netchange in foreign exchange reserves during the same period Unlike theprinciple of balance-of-payments statistics, which cover the transactionsbetween residents and non-residents, foreign exchange settlement and sales bybanks only cover transactions of RMB and foreign currencies between banks and customers or on banks for themselves. Thenewly signed contract amount of forward foreign exchange settlement and sales refers to the binding forward contract between designated foreignexchange bank and client that predetermines foreign exchange currency, amount,exchange rate and tenor which to be executed upon maturity. Thenewly signed forward contract enables corporate to lock inadvance the exchange rate for the purchase or sale of a currency on a futuredate to manage relevant foreign exchange risk arising fromRMB volatility. In general, bank will hedge its foreign exchange risk exposures arise from the newly signed forward contract in the Interbank foreign exchange market. For example,when bank has net foreign exchange long position, bankwill short the equivalent amount of foreign exchange in the Interbank foreignexchange market in advance, or vice versa. Therefore, the newly signedcontract amount of forward foreign exchange settlement and sales is also one of contributors to China’s foreign exchange reserve fluctuation. Theunwind amount of forward foreign exchange settlement and sales refers to, where client is unable to perform the original forwardcontract due to change in its real demand, client to fully or partially closeits forward position by executing another deal with opposite direction to theoriginal contract. Therolling amount of forward foreign exchange settlement and sales refers to client to adjust the settlement date of original contract dueto change in its real demand. Theoutstanding amount of forward foreign exchange settlement and sales by the endof the current period refers to the total amount of forwardcontracts accumulated from all non-matured forward contracts with client. Thenewly signed contractamount and the outstanding amount should satisfy the equationthat: theoutstanding amount of forward foreign exchange settlement and sales by the endof the current period = theoutstanding amount of forward foreign exchange settlement and sales at the endof the previous period + the newly signed contract amount of forward foreignexchange settlement and sales for the period - settlements of forwardcontracts for foreign exchange settlement and sales for the period - the unwindamount of forward foreign exchange settlement and sales for the period. The net Deltaexposure of outstanding options refers to the implied foreignexchange spot risk exposure from outstanding option contracts that bank executedwith client. Bank shall hedge such risk in the foreign exchange market for risk management during deal life cycle. The cross-border receipts and payments by non-banking sectors refers to the receipts and payments betweendomestic non-banking sectors (including institutional and individual residents) andnon-residents through domestic banks, excludingreceipts and payments in cash. In particular, the statistics includescross-border receipts and payments between non-banking sectors andnon-residents through domestic banks (including RMB and foreign currency), and domestic receipts andpayments between non-banking sectors and non-residents through domestic banks(temporarily excluding domestic receiptsand payments in RMB between individual residents and non-resident individuals).Data are collected when customers conductreceipts and payments withnon-resident counterparties at domestic banks. Specifically, the receiptsrefer to the capital of non-banking sectors received from non-residents via domesticbanks; the payments refer to the capital of non-banking sectors paid tonon-residents via domestic banks. The cross-borderreceipts and payments bynon-banking sectors is basedon cash basis, different from the accrual basis required by the Balance of Payments Statistics. The statistics merely reflectsthe cash flows between non-bankingsectors and non-residents and doesnot include barter transactions or transactions with non-residents conducted by the banks themselves. Therefore, the scope of the statistics is narrower than thatof the Balance of Payments Statistics. 2019-12-20/en/2019/1220/1607.html