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Q11: Will China use its foreign exchange reserves as a trump card or as an atomic weapon? A: We have always emphasized our role as a responsible long-term investor. During the investment and operations of our foreign exchange reserves, we will strictly follow the rules of the market and the laws and regulations of the country concerned. Meanwhile, we will use the reserves as a financial investor and will not seek control over those investments. The investment and operations of foreign exchange reserves must be mutually beneficial; therefore, we let things run their natural course, so to speak, which means we will actively cooperate with those countries that welcome our investment. But if any country is doubtful, we will slow down and try to reach agreement through communications. As has been proven by the facts, the above concerns and worries are completely ungrounded. Q12: We know that the US fiscal deficit is surging, but what does that mean for the US dollar? A: Any prediction on trends for the US dollar must be based on the economic situation not only in the US, but also that in other countries. In the wake of the financial crisis, the US launched massive financial bailout initiatives, resulting in a mounting fiscal deficit and worries about a further depreciation of the dollar. However, we must bear in mind that the weakening of the dollar is also related to the currencies of other countries and regions, which have their own problems. Countries in Europe, for example, are deep in debt. As can be seen from recent developments, the US dollar is strengthening against some currencies, including the euro. From the end of 2009 to May 2010, for instance, the US dollar rose 20 percent against the euro. Going forward, whether the dollar will go up or down will depend on the prospects for an economic recovery in the US and the entire world, as well as on the economic policies of the major economies including those of the US. We hope that major global issuers of currency, the US in particular, will adopt responsible policy measures, fully take into account fiscal deficit pressures and threats of inflation, appropriately arrange an exit mechanism for the loose monetary policies, reduce reliance on debt expansionary policies, shoulder the responsibility and obligation to maintain currency stability, and protect the interests of investors. Q13: Will more or less of Chinas foreign exchange reserves go into US treasuries? A: The US treasury market is the largest of its kind in the world. Given its safety, liquidity, large market volume, and comparatively low transaction costs, for a long time it has been favored not by only domestic investors (over 50 percent of government debt is bought within the US), but also by international investors, including the major central banks throughout the world. As Chinas management of its foreign exchange reserves emphasizes safety, liquidity, as well as maintenance and added value, based on our needs and judgments, we tend to diversify our allocation of assets on international financial markets and the US treasury market is an important market. For a long time, there has been speculation whether China will buy more or less US treasuries with her foreign exchange reserves. It has even been stated that Chinas massive holdings of US dollar assets constitute a threat to the US. The truth is that using foreign exchange reserves to buy American treasury bonds is an investment behavior on the market, and the same is true for an increase or decrease in holdings. Fluctuations in economic cycles and changes in supply and demand, among other factors, can lead to ups and downs in treasury debt prices, and changes in other asset prices can also affect the comparative attractiveness of treasuries. Based on these observations, we have been closely following and analyzing various changes in the market and constantly making dynamic optimization and operational adjustments. This should not be interpreted politically. The outbreak of the recent financial crisis prompted the US to adopt monetary and fiscal stimulus policies, resulting in a sharp increase in the fiscal deficit and a greater share of outstanding national debt in GDP, hence producing worries about the safety of assets in the US. Chinas foreign exchange reserves are engaged in long-term diversified investment, with dynamic changes among different assets, in order to effectively control the overall risks, to allow sufficient liquidity, and to achieve overall stability of value. Meanwhile, China has been calling on the US to act as a responsible power by taking concrete measures to safeguard US and global economic sustainability, to protect the interests of investors, and to uphold their confidence. Q14: Are foreign exchange reserves mainly invested in relatively high-grade treasury bond assets? A: Foreign exchange reserves are mainly invested in financial products with relatively stable investment income and low risks, which mainly include assets related to governments, institutions, international organizations, and corporations in the developed and major developing countries, and mutual funds and various other products such as inflation-protected bonds and asset-backed securities. We need to take into consideration many factors in the allocation of our foreign exchange reserves and we do not merely buy products with high-grade investments. China now has more than two trillion dollars of foreign exchange reserves. With so much capital, many factors are taken into consideration when purchasing financial products, such as the market capacity of the invested products. If the treasury bonds of a nation enjoy high credibility and repayment capability, but are only several hundred million or several billion US dollars, and are traded mainly on the domestic market and are seldom available on the international financial market, then such products can hardly satisfy our investment demands. In addition, whether the assets risk-return characteristics and related functions can meet our portfolio investment needs and requirements for risk diversification, and efficiently withstand inflation are all important factors that need to be considered. Our foreign exchange reserves are a stable, responsible, and long-term investment in the international financial market and we never engage in speculation. Active speculators in the international financial market go after arbitrage opportunities, and some of them even take the initiative to create them. In contrast, foreign exchange reserves seek to maintain or increase the value of assets, putting the safety of the reserve assets at top of the agenda. All of these operational ideas are conducive to the stability of the international financial market. Q15: Are foreign exchange reserves invested in higher-risk financial products such as stocks and private equity? What is the size of such investments? A: We have strict investment standards and risk management procedures for the various assets that can be invested with foreign exchange reserves. When choosing varieties of investment, it is imperative to consider their safety, liquidity, long-term and short-term returns on investment, and other characteristics. Meanwhile, it is also necessary to take into account the correlations with other assets. Putting low correlated or negative correlated assets in the same portfolio can offset each other at different stages of the economic cycle, which is conducive to reducing the overall risk and to enhancing the flexibility of asset allocation and risk management. We do not rule out any investment products. But strict risk assessment and control are needed to decide upon which product we should invest in. In other words, according to the above-mentioned standards, it is necessary to determine whether the products are in line with the principles of safety, liquidity, and maintenance and increments of value of the foreign exchange reserves, and whether they can achieve the effect of risk diversification. As soon as they meet these standards, they will be included in our decision-making and risk management procedures. Q16: Is China considering further increasing its gold holdings? And when? A: Gold has many advantages, such as high international recognition, a good capability to maintain value, and an ability to make emergency payments. Meanwhile, investment in gold is subject to certain restrictions, which makes it impossible for gold to become our main channel for foreign exchange reserve investment. First, gold has a very limited market capacity. Annual global gold output is only 2,400 tons, and current demand and supply is basically balanced. If we buy gold on a large scale, the international price of gold will definitely be pushed up. When Chinese people go shopping malls to buy commodities like gold jewelry, they would be faced with rising prices, which would end up hurting the interests of our domestic consumers. Chinas gold price is generally in line with that of the world market. Second, gold prices fluctuate considerably. As the international price of gold is subject to the impact of the geopolitics of interest rates, supply-demand relations, and speculation, they often fluctuate sharply. In addition, gold does not bring interest income and bears the costs of storage, transportation insurance, and so forth. Based on the history of the past thirty years, the risk-return characteristics of gold are not that good. Gold is protected from inflation, but many other assets have this characteristic as well. Last, increasing gold holdings does not have a notable overall effect on the diversification of foreign exchange reserves. During the past several years, China has increased its holdings of gold reserves by over 400 tons, reaching total holdings of 1,054 tons. Even if this were to be doubled, it would only disperse thirty to forty billion US dollars of our foreign exchange reserves, raising the proportion of gold reserves by merely one to two percentage points. In general, we will take a prudent approach when considering whether to increase or decrease our gold reserves according to demand and the market. (To be continued) 2010-07-07/en/2010/0707/939.html
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In order to prevent and crack down on hot money and other kinds of cross-border fund inflows in violation of the regulations, to maintain the healthy and steady operation of the foreign exchange market, and to ensure the economic and financial security of the state, since the latter half of February 2010, the State Administration of Foreign Exchange (SAFE) has launched special campaigns to struggle against hot money and other kinds of fund inflows in violation of the regulations in some provinces (regions and cities) with massive inflows of foreign exchange funds. To date, 197 cases of foreign exchange transactions in violation of the regulations have been disclosed, involving a total amount of USD7.34 billion. At the beginning of October 2010, the SAFE launched a new round of special inspections to combat foreign exchange fund inflows in violation of the laws and regulations. In total, 3 head offices of commercial banks, 33 branches of Chinese-funded banks, and 9 branches of foreign-funded banks have been inspected, covering areas such as foreign exchange settlement and sales, short-term external debt, offshore financing, sources and utilization of foreign exchange funds, and so on. The inspections show that with constant efforts to improve financial services, the majority of the banks have enhanced their awareness of business compliance, and as a result overall compliance has improved. However, it was also found that some banks had operated in violation of the relevant regulations. The major forms of violations include: the amount of the short-term debt exceeding the quota, illegal foreign exchange settlement of capital and settlement and sale of foreign exchange by individuals, fund collections and payments under the current account and the capital account in violation of the regulations on the administration of foreign exchange accounts, failure to conduct authenticity examinations when offering foreign exchange transaction services for clients, and so forth. By complying with the relevant laws, the SAFE has dealt with the said cases in a centralized manner and has imposed severe punishments. Since October 2010, the SAFE has imposed penalties on banks conducting business in violation of the regulations in 20 regions, including Guangdong, Jiangsu, Beijing, Shanghai, and so forth. The entities involved include 79 branches of 16 incorporated banks, such as the Industrial and Commercial Bank of China (ICBC), the Agricultural Bank of China (ABC), the Bank of China (BOC), China Construction Bank (CCB), China CITIC Bank, Shanghai Pudong Development Bank (SPDB), Xiamen International Bank, and Yamaguchi Bank. Penalties have been imposed in the form of fines, suspensions of certain kinds of foreign exchange businesses, punishment of senior management, and so forth. In order to warn and educate the banks and their branches, to further enhance the banks awareness of business compliance, and to create social synergy to struggle against the hot money,the SAFE circulated information about the cases of non-compliance in various batches. The first batch of typical cases, involving banks that illegally conducted foreign exchange business and were penalized, was announced on October 28, 2010. Now information about the second batch of cases is being circulated as follows according to the progress of the relevant inspections: In January 2009, the sub-branch of the ICBC in Yanbu county of Foshan city failed to scrutinize the vouchers for foreign exchange settlement and handled a foreign exchange settlement deal involving capital totaling USD26.32 million for a real estate company in Foshan, which violated the regulations on the administration of foreign exchange settlement of capital. According to the Regulations of the Peoples Republic of China on Foreign Exchange Administration (hereinafter referred to as the Regulations), the SAFE imposed fines on the said sub-branch and suspended its capital settlement business for 3 months. Meanwhile, fines were imposed on two senior managers in the said sub-branch. During the period from January to December 2009, the sub-branch of the ICBC in Hanjiang county of Yangzhou city failed to scrutinize the vouchers for the settlement of foreign exchange and concluded 22 deals of foreign exchange settlement of capital for three foreign-invested enterprises, including a textile company in Yangzhou, involving a total amount of USD19.174 million. Such behavior was deemed to be in breach of the relevant regulations on the administration of foreign exchange settlement of capital. Therefore, the SAFE imposed fines on the said sub-branch and suspended its capital settlement business for 3 months pursuant to the regulations. In November 2009, the Liuli sub-branch of the CCB in Shanghai failed to scrutinize the vouchers for the settlement of foreign exchange and completed one deal of foreign exchange settlement of capital totaling HKD63.1166 million for a shopping company. Furthermore, the inspection revealed that no vouchers were issued for HKD26.7212 million of the total amount. This violated the regulations on the administration of foreign exchange settlement of capital. In light of this, the SAFE imposed fines on the sub-branch and suspended its capital settlement business for 3 months pursuant to the regulations. In September 2009, the Sanyuan sub-branch of the CCB Beijing branch failed to examine vouchers in the amount of USD1.73 million for foreign exchange settlement when handling foreign exchange settlement business for individuals in excess of the annual total limit. Such behavior was deemed to be in violation of the relevant regulations on the administration of foreign exchange settlement of capital. The SAFE thereby imposed fines on the said sub-branch and suspended its foreign exchange settlement and sale business for 6 months pursuant to the regulations. In April 2009, the Baoan sub-branch of the CCB Shenzhen branch settled USD2.3 million-worth of short-term loans in foreign exchange for an instrument company in Shenzhen. Such behavior was deemed to be in violation of the relevant regulations on the administration of foreign exchange settlement under the capital account. The SAFE thereby imposed fines on the sub-branch and suspended its foreign exchange settlement business for capital projects for 3 months according to the regulations. During the period from March 2008 to May 2010, the Fuzhou branch of the Xiamen International Bank handled 33 foreign exchange settlement deals without using the information system for the administration of foreign exchange settlement and sale for individuals, involving a total amount of HKD 17.2842 million. This violated the relevant regulations on the administration of individual foreign exchange. The SAFE thereby imposed fines on the said branch and suspended its foreign exchange settlement business for individuals for 6 months according to the regulations. During the period from February to October 2009, the Zhongxing sub-branch of the SPDB in Ningbo city handled 56 foreign exchange settlement deals for a person surnamed Dong and 55 other domestic individuals by splitting large sums of foreign exchange into smaller parts, involving a total amount of USD2.7659 million. In accordance with the regulations, the SAFE imposed fines on the said sub-branch. In May, July, and August 2010, the business department of the Dalian branch of the China CITIC Bank had USD1.3779 million-worth of capital settled through 3 petty cash deals for a real estate company in Dalian. The department failed to scrutinize the vouchers for the foreign exchange settlement, resulting in a violation of the relevant regulations on the administration of capital settlement business. The SAFE thereby imposed fines on the department and suspended its capital settlement business for 3 months pursuant to the regulations. In December 2009, the Jiangnan Sub-Branch of the ICBC in Yulin city completed 14 foreign exchange settlement deals in cash for individuals by splitting large sums of money into smaller parts, involving a total amount of USD67, 000. In May 2010, the business department of the ICBC Yulin branch concluded 5 deals of spot exchange settlement for individuals by splitting large sums of money into smaller parts, totaling HKD 2.3 million. Such behavior was deemed to be in violation of the relevant regulations on the administration of individual foreign exchange, and the SAFE thereby imposed fines on the said sub-branch and branch and suspended their foreign exchange settlement and sale business for 3 months pursuant to the regulations. The designated foreign exchange banks, as the major channels for conducting foreign exchange business, should firmly embrace the philosophy of scientific development and fulfill their social responsibilities in an earnest manner and in strict compliance with the regulations on foreign exchange administration. The banks referred to in this circular should attach great importance to their violations, examine their business operations, and rectify any acts of non-compliance. Other banking institutions should draw lessons from the above-mentioned cases so as to strengthen their internal management and to operate their businesses according to the laws and regulations. The foreign exchange authorities will continue to improve financial services to facilitate the operation of market entities; meanwhile, they will intensify supervision of the foreign exchange business of banks, enhance the approaches for foreign exchange inspections, and crack down severely on hot money and other kinds of cross-border fund flows that do not comply with the law, thus promoting the healthy development of the foreign-related economy and finance. 2010-12-29/en/2010/1229/973.html
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To ensure the economic and financial security of the state, crack down strongly on the cross-border flow of hot money, and maintain order in the foreign exchange market, on November 1, 2010 the State Administration of Foreign Exchange (hereinafter referred to as the SAFE) announced a first batch of cases involving some enterprises and individuals that carried out illegal foreign exchange transactions and were subjected to penalty. Now a second batch of such cases, based on the progress in the relevant inspections, is announced as follows: From early 2009 to March 2010, Xinya Electronic Technology Co., Ltd. in Dongguan city, Guangdong province, collected 65 advance payments worth USD4.8313 million but the verification and writing-off formalities were six months overdue, which violated the relevant provisions on the administration of the verification and writing-off of export proceeds in foreign exchange. In light of this, the SAFE rendered a decision to impose a fine as an administrative penalty upon said company pursuant to the Regulations on the Administration of the Foreign Exchange System of the Peoples Republic of China (hereinafter referred to as the Regulations). In September 2009, Dading Handbags Co., Ltd. in Zengcheng city, Guangdong province, was found holding 2 payments totaling USD1.05 million in foreign exchange for the processing of imported materials, but the verification and writing-off formalities were six months overdue, which violated the relevant provisions on administration of the verification and writing-off of export proceeds in foreign exchange. In addition, the said company overcharged in foreign currency for the processing of imported materials and used some amounts of Renminbi settled thereof for stocks and securities investments. In light of this, the SAFE rendered a decision to impose a fine as an administrative penalty upon said company pursuant to the Regulations. In May 2009, Feihua Textiles Co., Ltd. in Haimen city, Jiangsu province, due to a fake purchase and sales contract signed with Meidan Construction Materials Trading Co., Ltd. in Haimen city, had USD3.0679 million-worth of foreign exchange from foreign investors settled through 11 transactions, and Meidan Construction Materials Trading Co., Ltd. in Haimen city transferred the settled capital in the amount of RMB20.9103 million via online banking to the account of a personal debit card. This case was deemed to be in violation of the relevant provisions on the administration of settlement of foreign exchange, and the SAFE thereby rendered a decision to impose a fine as an administrative penalty upon said company pursuant to the Regulations. From February to May 2008, Wanrong (Liaocheng) Gardening Engineering Co., Ltd. in Shandong province handled the settlement of USD63.32 million-worth of foreign exchange from foreign investors in payment for a construction project. Of the Renminbi resulting therefrom, the said company transferred RMB147.89 million to the account of its wholly-owned property subsidiary through different channels, used RMB15 million to purchase real estate outside of Shandong province, and lent RMB279.5 million to other domestic enterprises. Such behavior was deemed to be in violation of the relevant regulations on the administration of settlement of foreign exchange, and the SAFE thereby rendered a decision to impose a fine as an administrative penalty upon said company pursuant to the Regulations. From September to December, 2009, Qian An VV Lan Shan Building Materials Company in Tangshan city, Hebei province, settled EUR614,400-worth of foreign investment capital based on invalid documents, and then transferred the RMB6 million resulting therefrom to the Renminbi account of Qian An Lanshan Cement Co., Ltd., a shareholder in the Chinese party thereof. Such behavior was deemed to be in violation of the relevant provisions on administration of the settlement of foreign exchange capital, and the SAFE thereby rendered a decision to impose a fine as an administrative penalty upon said company pursuant to the Regulations. From November to December 2008, a person surnamed Huang, a local citizen of Jinhua city, Zhejiang province, based on 18 cargo declarations for export, for which the verification and writing-off of the export proceeds in foreign exchange had been completed, handled a settlement of USD1.7485 million through a personal foreign exchange account thereof. Such behavior was deemed to be in violation of the Regulations. According to the Regulations, the SAFE rendered a decision to impose a fine on Huang as an administrative penalty. In December 2006, after having had USD7.5 million worth of capital settled through two transactions, Guangdong Credit Orienwise Guarantee Ltd. used RMB58.6365 million resulting therefrom to purchase funds. Such behavior was deemed to be in violation of the relevant provisions on the administration of settlement of foreign exchange, and the SAFE thereby rendered a decision to impose a fine as an administrative penalty upon said company pursuant to the Regulations. In June, 2010, Tianming (Shenyang) Alcohol Co., Ltd. in Liaoning province owed overseas institution(s) SGD37.6 million resulting from the performance of an external guarantee under the item of a domestic loan, but failed to register the foreign debt with the foreign exchange authorities within the prescribed time limit. Such behavior was deemed to be violation of the relevant provisions on the administration of foreign debts, and the SAFE thereby rendered a decision to impose a fine as an administrative penalty upon said company pursuant to the Regulations. From February to June 2007, Yestock Technology (Shenzhen) Co., Ltd., based on a fake purchase and sales contract for GPS terminals signed with Shenzhen Chuangtou Electronic Information Technology Co., Ltd., settled HKD10.6495 million through three transactions and injected RMB9.9 million resulting therefrom into the stock market. The companys behavior was deemed to be in violation of the relevant provisions on the administration of settlement of foreign exchange, and the SAFE thereby rendered a decision to impose a fine as an administrative penalty upon said company pursuant to the Regulations. On August 13, 2007, Qingmao Paper Industry Co., Ltd. in Shaxian county, Fujian province, settled HKD14.075 million based on a purchase and sales contract for machinery and equipment signed with Fujian Changfa Trading Co., Ltd. Thereafter, the said company required Fujian Changfa Trading Co., Ltd. to remit RMB13.6 million resulting therefrom to Fuzhou Huicheng Real Estate Co., Ltd. under the pretext that it was unable to start up the project immediately. The said companys behavior was deemed to be in violation of the relevant provisions on the administration of settlement of foreign exchange, and the SAFE thereby rendered a decision to impose a fine as an administrative penalty upon said company pursuant to the Regulations. When conducting economic activities, all market entities shall foster an awareness of their social responsibilities and develop their business in a sound and scientific manner in strict compliance with all policies concerning the administration of foreign exchange. The penalized enterprises and individuals shall regard this as a warning and shall firmly establish an awareness of law-abiding operations. All other enterprises and individuals shall also draw lessons from the above-mentioned cases to strengthen their self-discipline, and to operate their businesses in strict accordance with the law. The SAFE shall step up efforts to facilitate the process of trade and investment and to enhance a service-oriented awareness so as to meet the legitimate demands of enterprises and individuals for foreign exchange; meanwhile, it shall strengthen supervision and inspection of the compliance of the foreign exchange business conducted by market entities and continue to crack down on hot moneywith intensified efforts, thereby effectively maintaining the safety of China's foreign-related economy and finance. December 10, 2010 2010-12-10/en/2010/1210/970.html
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In Q3 of 2010 the current account and the capital and financial account continued to post a "twin surplus" and international reserves maintained a growing momentum. The surplus under the current account totaled USD102.3 billion, a year-on-year increase of 103 percent as calculated on a comparable basis (the same below). Specifically, according to the statistical coverage of the balance of payments, the surpluses in goods, income, and current transfers reached USD81.4 billion, USD14 billion, and USD10.8 billion, respectively, whereas the deficit in trade in services amounted to USD3.9 billion. Meanwhile, China's surplus under the capital and financial account totaled USD15.2 billion, a decrease of 65 percent year on year. In particular, the net inflows of direct investments and portfolio investments amounted to USD24.6 billion and USD14.1 billion respectively, whereas the net outflows of other investments reached USD24.5 billion. International reserves assets posted an increase of USD108 billion, a rise of 31 percent. Specifically, transactions in foreign exchange reserves assets registered an increase of USD107.3 billion (exclusive of the influence of changes in the value of non-transaction factors, such as exchange rates and prices) and the reserve position in the IMF registered an increase of USD700 million. In the first three quarters of 2010, China's surplus under the current account totaled USD203.9 billion, an increase of 30 percent year on year; China's surplus under the capital and financial account totaled USD130.1 billion, an increase of 2 percent; and international reserves assets posted an increase of USD286 billion, an increase of 7 percent. Chinas Balance of Payments Statement Q3 of 2010 Unit: USD100 million Items # Balance Credit Debit I. Current Account 1 1,023 5,315 4,292 A. Goods and Services 2 776 4,759 3,983 a. Goods 3 814 4,307 3,493 b. Services 4 -39 452 491 1.Transportation 5 -73 96 169 2.Travel 6 -16 118 134 3.Communication Services 7 0 3 3 4.Construction Services 8 24 38 14 5.Insurance Services 9 -36 6 42 6.Financial Services 10 -2 4 5 7.Computer and Information Services 11 18 25 7 8.Royalties and Licensing Fees 12 -29 2 30 9.Consulting Services 13 20 57 38 10.Advertising and Public Opinion Polling 14 2 7 5 11.Audio-visual and Related Services 15 0 0 1 12. Other Business Services 16 54 95 41 13. Government Services, n.i.e. 17 0 2 2 B. Income 18 140 433 293 1.Compensation of Employees 19 33 37 4 2.Investment Income 20 107 396 289 C. Current Transfers 21 108 123 15 1.General Government 22 -1 0 1 2.Other Sectors 23 108 123 14 II. Capital and Financial Account 24 152 2,717 2,565 A. Capital Account 25 9 9 0 B. Financial Account 26 143 2,708 2,565 1. Direct Investment 27 246 501 254 1.1 Abroad 28 -181 22 203 1.2 In China 29 427 478 51 2. Portfolio Investment 30 141 201 59 2.1 Assets 31 -6 36 41 2.1.1 Equity Securities 32 -3 25 28 2.1.2 Debt Securities 33 -3 10 13 2.1.2.1 Bonds and Notes 34 -3 10 13 2.1.2.2 Money Market Instruments 35 0 0 0 2.2 Liabilities 36 147 165 18 2.2.1 Equity Securities 37 154 158 3 2.2.2 Debt Securities 38 -7 7 15 2.2.2.1 Bonds and Notes 39 -7 7 15 2.2.2.2 Money Market Instruments 40 0 0 0 3. Other Investment 41 -245 2,006 2,251 3.1 Assets 42 -694 64 758 3.1.1 Trade Credits 43 -182 0 182 Long-term 44 -13 0 13 Short-term 45 -169 0 169 3.1.2 Loans 46 -259 1 260 Long-term 47 -138 0 138 Short-term 48 -122 1 122 3.1.3 Currency and Deposits 49 -270 46 316 3.1.4 Other Assets 50 17 17 0 Long-term 51 0 0 0 Short-term 52 17 17 0 3.2 Liabilities 53 449 1,942 1,493 3.2.1 Trade Credits 54 133 133 0 Long-term 55 9 9 0 Short-term 56 124 124 0 3.2.2 Loans 57 140 1,500 1,360 Long-term 58 20 50 31 Short-term 59 121 1,450 1,329 3.2.3 Currency and Deposits 60 177 303 127 3.2.4 Other Liabilities 61 -1 6 7 Long-term 62 -1 0 1 Short-term 63 0 6 6 III. Reserves Assets 64 -1,080 0 1,080 3.1 Monetary Gold 65 0 0 0 3.2 Special Drawing Rights 66 0 0 0 3.3 Reserves Position in the Fund 67 -7 0 7 3.4 Foreign Exchange 68 -1,073 0 1,073 3.5 Other Claims 69 0 0 0 c. Net Errors and Omissions 70 -94 0 94 Note: 1. This statement employs rounded-off numbers. 2. As of the third quarter of 2010, in accordance with international standards, the undistributed profits and the profits that have been distributed but not remitted shall be recorded in the Balance of Payments statement. Chinas Balance of Payments Statement For the First three Quarters of 2010 Unit: USD100 million Items # Balance Credit Debit I. Current Account 1 2,039 13,983 11,944 A. Goods and Services 2 1,555 12,597 11,042 a. Goods 3 1,711 11,370 9,659 b. Services 4 -156 1,227 1,383 1.Transportation 5 -214 247 461 2.Travel 6 -42 337 379 3.Communication Services 7 0 8 8 4.Construction Services 8 61 100 38 5.Insurance Services 9 -101 13 114 6.Financial Services 10 1 8 7 7.Computer and Information Services 11 45 66 21 8.Royalties and Licensing Fees 12 -90 6 96 9.Consulting Services 13 53 159 106 10.Advertising and Public Opinion Polling 14 6 20 15 11.Audio-visual and Related Services 15 -2 1 3 12. Other Business Services 16 129 255 127 13. Government Services, n.i.e. 17 -1 7 8 B. Income 18 182 1,035 853 1.Compensation of Employees 19 84 95 11 2.Investment Income 20 98 940 842 C. Current Transfers 21 302 351 49 1.General Government 22 -2 0 2 2.Other Sectors 23 304 351 47 II. Capital and Financial Account 24 1,301 7,751 6,450 A. Capital Account 25 34 36 2 B. Financial Account 26 1,266 7,715 6,449 1. Direct Investment 27 865 1,449 584 1.1 Abroad 28 -375 52 427 1.2 In China 29 1,240 1,396 157 2. Portfolio Investment 30 68 394 325 2.1 Assets 31 -78 201 279 2.1.1 Equity Securities 32 -77 78 155 2.1.2 Debt Securities 33 -1 123 124 2.1.2.1 Bonds and Notes 34 10 98 88 2.1.2.2 Money Market Instruments 35 -11 25 36 2.2 Liabilities 36 146 193 46 2.2.1 Equity Securities 37 158 186 27 2.2.2 Debt Securities 38 -12 7 19 2.2.2.1 Bonds and Notes 39 -12 7 19 2.2.2.2 Money Market Instruments 40 0 0 0 3. Other Investment 41 333 5,873 5,540 3.1 Assets 42 -1,075 445 1,520 3.1.1 Trade Credits 43 -616 5 621 Long-term 44 -43 0 43 Short-term 45 -573 4 578 3.1.2 Loans 46 -199 126 326 Long-term 47 -198 0 198 Short-term 48 -2 126 128 3.1.3 Currency and Deposits 49 -360 213 573 3.1.4 Other Assets 50 100 101 0 Long-term 51 0 0 0 Short-term 52 100 101 0 3.2 Liabilities 53 1,409 5,428 4,020 3.2.1 Trade Credits 54 583 583 0 Long-term 55 41 41 0 Short-term 56 542 542 0 3.2.2 Loans 57 441 4,183 3,742 Long-term 58 74 178 104 Short-term 59 367 4,005 3,638 3.2.3 Currency and Deposits 60 389 649 260 3.2.4 Other Liabilities 61 -4 13 17 Long-term 62 -4 0 5 Short-term 63 1 13 13 III. Reserves Assets 64 -2,860 0 2,860 3.1 Monetary Gold 65 0 0 0 3.2 Special Drawing Rights 66 -1 0 1 3.3 Reserves Position in the Fund 67 -17 0 17 3.4 Foreign Exchange 68 -2,843 0 2,843 3.5 Other Claims 69 0 0 0 c. Net Errors and Omissions 70 -480 0 480 Note: 1. This statement employs rounded-off numbers. 2. The data for the first three quarters of 2010 are the sum total of the data for Q3 and for H1 of 2010. 3. As of the third quarter of 2010, in accordance with international standards, the undistributed profits and profits that have been distributed but not remitted shall be recorded in the Balance of Payments statement; the data for the previous two quarters have been adjusted accordingly. 2010-12-28/en/2010/1228/972.html
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At the end of September 2010, China's outstanding external debt (excluding that of Hong Kong SAR, Macao SAR, and Taiwan Province) reached USD546.449 billion. Specifically, the outstanding registered external debt reached USD326.549 billion and the balance of trade credit totaled USD219.9 billion. With respect to terms, outstanding long- and medium-term external debt (with the remaining term) was USD177.008 billion, accounting for 32.39 percent of the outstanding external debt. Outstanding short-term external debt (with the remaining term) was USD369.441 billion, accounting for 67.61 percent of the outstanding external debt. Specifically, the outstanding registered short-term external debt (with the remaining term) was USD149.541 billion and the balance of trade credit was USD219.9 billion. In terms of the composition of the debt, trade credit and trade financing (e.g., credit support to foreign trade provided by banks) accounted for 59.52 percent and 18.65 percent of the outstanding short-term external debt 2010 (the remaining term) respectively at the end of September. The trade credit and trade financing accounted for 78.17 percent of the outstanding short-term external debt (the remaining term). The data are closely associated with the dramatic growth of Chinas foreign trade during recent years. Because trade credit and trade financing are conducted against a real foreign trade background, they generally will not result in extra external debt risks. In terms of the types of debtors, the outstanding debt of Chinese-funded financial institutions was USD133.679 billion, accounting for 40.94 percent of the total outstanding registered external debt; the outstanding debt of foreign-funded enterprises was USD101.038 billion, accounting for 30.94 percent; the outstanding debt of foreign-funded financial institutions was USD46.971 billion, accounting for 14.38 percent; the outstanding sovereign debt borrowed by ministries under the State Council was USD38.571 billion, accounting for 11.81 percent; the outstanding debt of Chinese-funded enterprises was USD5.901 billion, accounting for 1.81 percent; and the outstanding debt of other institutions was USD389 million, accounting for 0.12 percent. In terms of the types of debt, the balance of international commercial loans amounted to USD254.591 billion, accounting for 77.96 percent of the outstanding registered external debt, with the proportion rising by 3.54 percentage points compared with that at the end of 2009. The balance of foreign government loans and loans granted by international financial organizations amounted to USD71.958 billion, accounting for 22.04 percent. In terms of the currency structure, debt in US dollars accounted for 71.91 percent of the outstanding registered external debt, representing an increase of 4.15 percentage points compared with that at the end of 2009. Debt in Japanese yen accounted for 10.29 percent, representing a decline of 1.6 percentage points compared with that at the end of 2009. Debt in euro accounted for 4.32 percent, a decline of 2.06 percentage points compared with that at the end of 2009; other kinds of debt, including SDRs and HKD, accounted for 13.48 percent, a decline of 0.49 percentage point compared with that at the end of 2009. In terms of the sectors in which the debts are invested, with reference to the Industrial Classification of the National Economy, USD43.821 billion was invested in the manufacturing sector, accounting for 21.45 percent of the medium- and long-term outstanding registered external debt (based on contract terms); USD25.778 billion was invested in the transportation, warehousing, and postal service sectors, accounting for 12.91 percent; USD17.907 billion was invested in the production and supply of electricity, coal gas, and water, accounting for 8.97 percent; USD12.05 billion was invested in the information technology service sector, accounting for 6.04 percent; USD10.687 billion was invested in the real estate sector, accounting for 5.35 percent. From January to September 2010, medium- and long-term external borrowing totaled USD27.847 billion, an increase of USD14.002 billion or 101.13 percent over that during the same period of 2009; repayment of the principal was USD17.904 billion, a decrease of USD8.055 billion, or 31.03 percent, over that during the same period of 2009. Interest payments totaled USD2.031 billion, a decrease of USD532 million, or 20.76 percent. Addendum: Definition of terms and interpretations Trade credit refers to external liability arising from directly extending credit between the seller and buyer of goods transactions, specifically transactions between residents in Mainland China and foreign non-residents (including non-residents in Hong Kong SAR, Macao SAR, and Taiwan Province), i.e., debt incurred due to the difference between the time of payment and the time of the transfer of ownership of the goods. Trade credit includes credit directly provided by the supplier (e.g., the overseas exporter) for commodity transactions and services, and advance payments by buyers (e.g., overseas importers) for goods, services, and on-going business (or business to be undertaken). Trade financing refers to a loan related to trade extended by a third party (e.g., banks) to an exporter or importer--for instance, a loan extended by a foreign financial institution or an export credit agency to a buyer. Trade-related credit is a broad concept. In addition to trade credit, it also involves other kinds of credit provided for trade activities. As it is defined, trade-related credit includes trade credit, trade financing, short-term notes related to trade, and so forth. 2011-01-19/en/2011/0119/978.html
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In order to regulate foreign exchange receipts and payments associated with cross-border trade of environmental equities such as CO2 emissions reductions, the State Administration of Foreign Exchange recently promulgated the Circular of the General Affairs Department of the State Administration of Foreign Exchange on the Handling of Foreign Exchange Business Associated with the Trade of Environmental Equities Such as Carbon Dioxide Emissions Reductions (Hui Zong Fa [2010] No. 151), hereinafter referred to as the Circular). The Circular will come into force as of the date of promulgation. The Circular mainly covers three areas: (1) When handling the procedures for receipts from cross-border trade of environmental equities, such as carbon dioxide emissions reductions, banks may handle the settlement of foreign exchange for domestic institutions or open a capital account foreign exchange account for the trade of environmental equities to preserve the relevant categories of foreign exchange earnings after examining the materials proving the authenticity of the relevant business according to the regulations and based on the needs of domestic institutions; (2) Domestic institutions such as environmental exchanges, emissions rights exchanges, and forest ownership exchanges may, upon approval of the State Administration of Foreign Exchange, open a foreign exchange account for the collateral of special tradefor deposits of collateral, to-be-paid commissions, and taxes by intended transferees, foreign exchange margins that should be refunded to intended transferees in cases of failure of payment, and collateral transferred to sellers and commissions and taxes deducted by the exchanges after conclusion of the relevant transactions; (3) The relevant requirements for the examination of materials, submission of information, registration of basic information, declaration of BOP statistics, and so forth are specified. Promulgation of the Circular will play an active role in facilitating cross-border trade of environmental interests such as CO2 emissions reductions as well as in promoting the healthy development of a low carbon economy. 2010-12-31/en/2010/1231/976.html
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In order to increase the efficiency of the use of funds by domestic enterprises, to further promote the facilitation of trade, and to support the going globalmove of domestic enterprises, the State Administration of Foreign Exchange recently promulgated the Circular on the Implementation of Administration of Overseas Deposits of Export Proceeds (Hui Fa [2010] No.67, hereinafter referred to as the Circular) in accordance with the relevant provisions in the Regulations of the Peoples Republic of China on Foreign Exchange Administration, in which it is decided that as of January 1, 2011 the SAFE will implement on a nationwide scale the Interim Measures for the Administration of Overseas Deposits of Export Proceeds from Trade in Goods and the instructions for operations based on the results of a pilot operation. The Circular covers four principal areas: (1) implementing an account-opening registration system for overseas deposits of export proceeds by domestic enterprises. Domestic enterprises that meet the requirements regarding the sources of export proceeds, have a need for overseas payments, and have operated in compliance with the foreign exchange administration regulations over the past two years may apply to the local foreign exchange authorities to make overseas deposits of their export proceeds; (2) implementing scaled management of overseas deposits of export proceeds by domestic enterprises. The scale of export proceeds deposited overseas shall be submitted by the domestic enterprises to the local foreign exchange authorities based on their actual needs, and the latter shall register and put on file the relevant scales; (3) streamlining the procedures for export verification and writing-off, online inspections, and so forth, and implementing an ex post reporting system; (4) carrying out off-site monitoring of the receipts and payments in overseas accounts of domestic enterprises, and implementing on-site inspections of abnormal circumstances. The launch of the policy represents a significant move on the part of the SAFE to further satisfy needs for the development of a market-oriented economy, deepen the reform of the foreign exchange administration system, and promote the facilitation of trade. The policy will play an active role in balancing cross-border fund flows under trade, facilitating cross-border fund operations by domestic enterprises, and bolstering the going globalmove by domestic enterprises. The policy will play a positive role for enterprises with frequent receipts and payments from cross-border trade to reduce the costs of cross-border transfers of foreign exchange funds and the costs of currency conversion. The policy will also play a positive role for enterprises to have greater involvement in international competition and stronger ability for group management, to raise the efficiency of the use of funds, lower the costs of overseas fundraising, and further sharpen the competitive edge of enterprises on the international markets. 2010-12-31/en/2010/1231/975.html
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According to the statistical data released by the State Administration of Foreign Exchange (SAFE), in November 2010 the amount of foreign exchange settlements and foreign exchange sales by banks on behalf of clients amounted to USD129.7 billion and USD84.4 billion respectively. The foreign exchange settlement and sales surplus was USD45.3 billion. In the month of November, foreign-related receipts and payments of domestic banks on behalf of clients amounted to USD183.5 billion and USD151.8 billion respectively; and the foreign-related receipts and payments surplus reached USD31.7 billion. 2010-12-24/en/2010/1224/971.html
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According to the statistical data released by the State Administration of Foreign Exchange (SAFE), in October 2010 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD125.3 billion and USD67.7 billion respectively. The surplus of foreign exchange settlement and sales amounted to USD57.6 billion. During the month, foreign-related receipts and payments by domestic banks on behalf of clients amounted to USD166.4 billion and USD127.2 billion respectively. The surplus of foreign-related receipts and payments reached USD39.2 billion. 2010-11-30/en/2010/1130/969.html
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The SAFE recently released China ’s International Investment Position as of the end of June 2012. The statistics reveal that as of the end of June 2012 external financial assets hit USD4946.2 billion, external financial liabilities reached USD3197.4 billion, and net external financial assets totaled USD1748.8 billion. Among the external financial assets, direct investments abroad totaled USD392.3 billion, portfolio investments USD 259.3 billion, other investments USD979.8 billion, and reserve assets USD3314.8 billion, respectively accounting for 8 percent, 5 percent, 20 percent, and 67 percent of the total. In terms of external financial liabilities, foreign direct investments totaled USD1903.2 billion, portfolio investments USD301.1 billion, and other investments USD993.2 billion, respectively accounting for 60 percent, 9 percent, and 31 percent of the total. The International Investment Position (hereinafter referred to as the IIP) is a statistical statement reflecting the stocks of financial assets and liabilities of one country or region to other countries or regions in the world at one specific point; together with the Balance of Payments Statement (BOP Statement) it constitutes the complete international accounts system, indicating the country’s or region’s trade flows. China’s International Investment Position Unit: 100 million US dollars Item # End-June, 2012 Net Position 1 17,488 A. Assets 2 49,462 1. Direct Investments Abroad 3 3,923 2. Portfolio Investments 4 2,593 2.1 Equity Securities 5 1,006 2.2 Debt Securities 6 1,587 3. Other Investments 7 9,798 3.1 Trade Credits 8 3,101 3.2 Loans 9 2,671 3.3 Currency and Deposits 10 3,577 3.4 Other Assets 11 448 4. Reserve Assets 12 33,148 4.1 Monetary Gold 13 542 4.2 Special Drawing Rights 14 118 4.3 Reserve Position in the Fund 15 88 4.4 Foreign Exchange 16 32,400 B. Liabilities 17 31,974 1. Foreign Direct Investments 18 19,032 2. Portfolio Investments 19 3,011 2.1 Equity Securities 20 2,469 2.2 Debt Securities 21 542 3. Other Investments 22 9,932 3.1 Trade Credits 23 2,901 3.2 Loans 24 4,110 3.3 Currency and Deposits 25 2,580 3.4 Other Liabilities 26 341 Note: 1. This IIP employs rounded-off numbers. 2. Net position refers to assets minus liabilities, “+” refers to net assets, and “-” refers to net liabilities. Compiling Principles and Indexes for the IIP I. Compiling Principles for the IIP In accordance with the standards of the Balance of Payments Manual (Fifth Edition) published by the International Monetary Fund (IMF), the IIP is a statistical statement which reflects the stocks of financial assets and liabilities of one country or region to other countries or regions in the world at a specific point. Changes in the IIP can be caused by changes in transactions, prices, or exchange rates, as well as by other adjustments during a specific period. The IIP is consistent with the BOP Statement with regard to the principles of valuation, measurement, and conversion, and together with the BOP Statement constitutes a complete international accounts system of the country or region. China ’s IIP is a statistical statement which reflects at a specific point the stocks of financial assets and liabilities of China (excluding that of Hong Kong SAR, Macao SAR, and Taiwan Province ) to other countries or regions in the world. II. Explanation of the Major IIP Indexes According to IMF standards, items on the IIP are categorized according to assets and liabilities. Assets are divided into direct investments abroad, portfolio investments, other investments, and reserve assets, and liabilities are divided into foreign direct investments, portfolio investments, and other investments. The net position refers to external assets minus external liabilities. The items are specifically defined as follows: 1. Direct investments: refer to external investments whereby an investor of one country operates an enterprise located in another country with the aim of acquiring effective control over the enterprise. They consist of direct investments abroad and foreign direct investments. Direct investments abroad include the stocks of direct investments abroad conducted by China ’s non-financial sectors, the stocks of capital and working capital allocated by domestic banks to set up branches overseas, as well as the stocks of loans between parent companies and subsidiaries both in China and abroad, and the stocks of other receivables and payables. Foreign direct investments include the stocks of foreign direct investments absorbed by China’s non-financial sectors, the stocks of direct investments overseas absorbed by the financial sectors (including foreign investments attracted by branches of foreign financial sectors and Chinese-funded financial sectors, and investments by foreign parties in joint financial sectors), as well as the stocks of loans between parent companies and subsidiaries both in China and abroad, and the stocks of other receivables and payables. 2. Portfolio investments: include some types of investments, such as shares, long- and medium-term bonds, and money-market instruments. Portfolio investment assets refer to negotiable securities, such as shares, bonds, money-market instruments, and derivative financial instruments, which are held by Chinese residents but issued by non-resident enterprises. Portfolio investment liabilities refer to shares and bonds held by non-resident enterprises but issued by resident enterprises. 2.1 Equity securities: consist of securities in the form of stocks. 2.2 Debt securities: include long- and medium-term bonds, short-term (one year or less) bonds, and money-market instruments or transferable debt instruments, such as short-term treasury notes, commercial papers, and large-sum short-term negotiable certificates of deposits. 3. Other investments: refer to all financial assets and liabilities, including trade credits, loans, currency, and deposits, as well as other assets and liabilities, but excluding direct investments, portfolio investments, and reserve assets. Long term refers to a contract period for the relevant financial assets/liabilities that is longer than one year, whereas short term refers to a contract period that is one year or less. 3.1 Trade credits: refer to direct business credits arising from the import and export of goods between China and other countries. Assets refer to the receivables of China 's exporters and the advance payments by China ’s importers, and liabilities refer to the payables of China ’s importers and the advance receipts of China 's exporters. 3.2 Loans: refer to the external assets held by domestic institutions by providing loans and lending to overseas institutions; and liabilities refer to loans borrowed by domestic institutions, such as loans from foreign governments, loans from international institutions, loans from foreign banks, and sellers’ credit. 3.3 Currency and deposits: Assets refer to the funds deposited abroad and the foreign cash in stock held by China 's financial institutions; and liabilities refer to overseas private deposits and short-term funds from foreign banks absorbed by China ’s financial institutions, as well as other short-term funds, for instance, loans from foreign exporters and individuals. 3.4 Other assets or liabilities: refer to investments other than trade credits, loans, currency, and deposits, for example, capital paid by non-currency international institutions and other receivables and payables. 4. Reserve assets: refer to external assets that can be used at any time and that are effectively controlled by the PBOC, consisting of monetary gold, special drawing rights (SDRs), the reserve position in the fund, and foreign exchange. 4.1 Monetary gold: refers to the gold held by the PBOC as reserve. 4.2 Special drawing rights: is a type of ledger asset, which is allocated by the IMF according to the capital share of its members; it can be used to repay debt to the IMF and can make up for a deficit in the balance of payments between the governments of member countries. 4.3 Reserve position in the fund: refers to assets in the ordinary accounts of the IMF that can be freely used. 4.4 Foreign exchange: refers to current assets and liabilities that are retained by the PBOC and that can be used as a means of international compensation. 2012-09-18/en/2012/0918/1069.html