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Question: The SAFE recently published preliminary data on China ’s balance of payments (BOP) in the first three quarters of 2012. Could you please introduce the current status of China ’s BOP? Answer: According to the preliminary data, China ’s BOP status continued to improve this year. First, receipts and payments under the current account maintained a basic equilibrium. In the third quarter, the current account surplus was USD70.6 billion. For the first three quarters, the cumulative surplus was USD147.8 billion, accounting for 2.6 percent of GDP during the same period, a drop of 0.3 percent compared with the same period of the last year, which continued to be within the internationally accepted reasonable level. Second, the capital account and financial account (including errors and omissions) was characterized by a net outflow. In the third quarter, the capital account and financial account witnessed a deficit of USD71 billion, after a deficit in the second quarter. For the first three quarters, the cumulative deficit was USD85.4 billion; however, the same period of the last year witnessed a surplus of USD234.1 billion. Third, growth of foreign exchange reserves slowed down significantly. In the third quarter, foreign exchange reserve assets calculated on the basis of the BOP coverage (setting aside the influence of changes in non-trade value, such as the exchange rate, and prices) increased only by USD0.3 billion. For the first three quarters, the total increase of such assets was USD64 billion, with the increment decreasing by 83 percent compared with the same period of the last year. Question: Both the second and third quarters of this year witnessed deficits in China ’s capital and financial account, and the first three quarters as a whole also witnessed a deficit. What is your opinion about this? Answer: From the beginning of this year, China ’s capital account and financial account witnessed deficits, which were mainly influenced by factors such as the international financial crisis and the slowdown in domestic economic growth. From the fourth quarter of 2011 to the end of the third quarter of this year, China ’s supply and demand in foreign exchange market witnessed a basic equilibrium, and foreign exchange reserves maintained basic stability. In such a situation, the current account surplus inevitably was accompanied by the deficits in the capital account and the financial account. At present, the deficits in the capital account and financial account of China have three major characteristics: First, the deficits reflect the process of “foreign exchange to be held by the people,” that is to say, the holder foreign exchange assets is shifted from the central bank to domestic institutions and individuals. For the first three quarters, the balance of foreign exchange deposits of market players such as enterprises increased by USD138.8 billion. The banks themselves increased the foreign exchange position by more than USD12 billion, part of which was used for domestic foreign exchange loans and the remainder of which was used by the banks for overseas loans and investments. Second, the deficits indicate an accelerating pace of the “Going Out” strategy by domestic enterprises. For the first three quarters, the amount of overseas direct investments by China ’s non-financial sector was USD52.5 billion, an increase of 29 percent compared with the same period of the last year. Third, the deficits reflect an orderly debt deleveraging process by the enterprises. For the past few years, domestic enterprises paid in foreign exchange for their imports as late as possible, by such means as the Import Bill Advance by Overseas Banks, and accumulated a lot of USD short positions under the trade account. The original strategy of incurring liabilities in foreign currency began to be adjusted after the bi-directional fluctuation of the exchange rate, and, in particular, under the regulation of relevant policies; with respect to the imports of enterprises, the debt balance under the Import Bill Advance By Overseas Banks dropped by more than USD40 billion. Question: Some media have recently said that USD200 to USD300 billion of capital has fled from China . Is this true? Answer: We think this is not true. The scale of capital flight referred to by some media is the estimated result of the reduction of such accounts as trade and direct investments due to changes in the foreign exchange reserves, and the concept and method for such calculations are not scientific. The capital account and financial account of the BOP statements are usually used internationally to measure the condition of cross-border capital flows. On the basis of such coverage, for the first three quarters of this year, the USD85.4 billion in deficits in the capital account and financial account of China (including errors and omissions) mainly due to the fact that under the recent basic stability of foreign exchange reserves, the assets in foreign exchange acquired by China from current account transactions such as trade were no longer held by the central bank. Rather, they were mainly held by domestic institutions and separate individuals, and such assets held by domestic institutions and individuals inevitably were used outside of China by such means as overseas investments, loans, and deposits, which presented an outflow of the capital account and the financial account but was not equal to capital flight. 2012-10-29/en/2012/1029/1073.html
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According to the statistical data released by the State Administration of Foreign Exchange (SAFE), in August 2012 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD127.8 billion and USD134.2 billion respectively. The deficit of foreign exchange settlement and sales amounted to USD6.3 billion. During the same period, the total amount involved in contracts for forward settlement of foreign exchange by banks on behalf of clients was USD14.5 billion, the total amount involved in contracts for forward sale of foreign exchange was USD15.7 billion, and net forward exchange sales totaled USD1.2 billion. During the first eight months of 2012, the cumulative amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD1000.4 billion and USD976.8 billion respectively. The surplus of foreign exchange settlement and sales was USD23.6 billion. During the same period, the cumulative amount involved in contracts for forward settlement of foreign exchange by banks on behalf of clients was USD110.2 billion, the cumulative amount involved in contracts for forward sale of foreign exchange was USD120.2 billion, and the cumulative amount of net forward sale of foreign exchange by banks on behalf of clients was USD10 billion. In August 2012, both foreign-related receipts and external payments by domestic banks on behalf of clients reached USD223.8 billion, thereby reaching an equilibrium of foreign-related receipts and payments. During the first eight months of 2012, the cumulative foreign-related receipts and payments by banks on behalf of clients amounted to USD1667.5 billion and USD1579.6 billion respectively; and the surplus of the cumulative foreign-related receipts and payments reached USD87.9 billion. Addendum: Glossary and relevant definitions The Balance of Payments refers to all economic transactions occurring between residents and non-residents in China , including all financial transactions and barter arrangements resulting in changes in the assets and liabilities of residents and non-residents Foreign exchange settlement and sales by banks refers to settlement and sales conducted by designated foreign exchange banks for their clients or for themselves, excluding transactions on the inter-bank foreign exchange market. Foreign exchange settlement and sales by banks on behalf of clients (including foreign exchange settlement and sales by the banks themselves) refers to settlement and sales by designated foreign exchange banks for their clients. The time of conversion between RMB and the foreign currency is regarded as the time-point for the statistics on the foreign exchange settlement and sales by the banks. Specifically, foreign exchange settlement refers to the sale of foreign exchange to designated foreign exchange banks by owners of foreign exchange; foreign exchange sales refers to the sale of foreign exchange by designated foreign exchange banks to users of foreign exchange. The differences between foreign exchange settlement and foreign exchange sales are regarded as an offset balance. Such differences, which will be offset by the banks through transactions on the inter-bank foreign exchange market, are a major factor resulting in changes in the country’s foreign exchange reserves. But they are not equivalent to the net change in foreign exchange reserves during the same period. The principle for transactions between residents and non-residents does not apply to the preparation of statistics on foreign exchange settlement and sales by banks on behalf of clients; such statistics only cover transactions of RMB and foreign currency between banks and their clients, namely, exchange transactions between RMB and foreign currency that fall outside the category of the balance-of-payments statistics. Contracts for forward settlement and sales of foreign exchange refers to the contracts for forward settlement (sales) of foreign exchange executed between banks and their clients through consultation, in which the foreign currency, amount, exchange rate, and term for the forward settlement (sale) of foreign exchange are agreed upon; where the foreign exchange is to be received (paid), the foreign exchange settlement (sale) is to be handled on the basis of the amount of foreign currency and the exchange rate specified in such contracts. The forward foreign exchange settlement and sales business enables enterprises to lock into the exchange rate in advance for future foreign exchange settlement or sales and to effectively avoid the risk of RMB exchange rate changes. Generally, banks will hedge the risk exposure arising from the forward foreign exchange settlement and sales business through the inter-bank foreign exchange market. For example, where the total amount involved in contracts for forward settlement of foreign exchange executed by banks is more than that in the contracts for forward sales of foreign exchange, the banks will generally sell an equivalent amount of foreign exchange in advance on the inter-bank foreign exchange market, and vice versa. Therefore, the forward settlement and sales of foreign exchange business is also a factor that affects changes in the foreign exchange reserves in China . Foreign-related receipts and payments by banks on behalf of their clients refers to receipts and payments occurring between domestic non-bank resident institutions/individuals (collectively called the “non-bank sector”) and non-resident institutions/individuals through domestic banks, exclusive of the receipts and payments in cash and foreign-related receipts and payments by the banks themselves. In particular, they include cross-border receipts and payments between non-bank sectors and non-residents through domestic banks (including RMB and foreign exchange), and domestic receipts and payments between non-bank sectors and non-residents through domestic banks (temporarily excluding receipts and payments in RMB between domestic individual residents and domestic non-resident individuals). Statistics are collected at the time when the clients conduct the foreign-related receipts and payments at the domestic banks. Specifically, foreign-related receipts of banks on behalf of clients refers to funds collected by non-bank sectors from non-residents via domestic banks; external payments by banks on behalf of clients refers to funds paid by non-bank sectors to non-residents through domestic banks. Although the foreign-related receipts and payments by banks on behalf of clients are an integral part of the balance-of-payments statistics, the accounting method for the statistics, different from the accrual basis of accounting required by the balance-of- payments statistics, is based on a cash basis. In addition, it merely reflects capital flows between the non-bank sectors and non-residents and does not include barter transactions or foreign transactions conducted by the banks themselves. Furthermore, the scope of the statistics on foreign-related receipts and payments of banks on behalf of clients is smaller than the scope of the balance-of-payments statistics. 2012-09-18/en/2012/0918/1070.html
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At the end of September 2012, China’s outstanding external debt (excluding that of Hong Kong SAR, Macao SAR, and Taiwan Province, the same below) reached USD770.833 billion. Specifically, the outstanding registered external debt totaled USD471.333 billion and the balance of trade credit between enterprises totaled USD299.5 billion. In terms of structure, the outstanding long- and medium-term external debt (with the remaining term) was USD198.017 billion and the outstanding short-term external debt (with the remaining term) was USD572.816 billion. Specifically, trade credit between enterprises and bank trade financing accounted for 52.29 percent and 21.12 percent respectively. Together, the two accounted for 73.41 percent of the outstanding short-term external debt (with the remaining term). In terms of type of debtor, the outstanding debt of Chinese-funded financial institutions was USD229.579 billion, accounting for 48.71 percent of the outstanding registered external debt; the outstanding debt of foreign-funded enterprises was USD 145.578 billion, accounting for 30.89 percent; the outstanding debt of foreign-funded financial institutions was USD53.316 billion, accounting for 11.31 percent. In terms of types of debt, the balance of international commercial loans amounted to USD404.921 billion, accounting for 85.91 percent of the outstanding registered external debt. The balance of foreign government loans and loans granted by international financial organizations amounted to USD66.412 billion, accounting for 14.09 percent. In terms of the currency structure, USD debt accounted for 77.45 percent, Euro debt accounted for 7.30 percent, and JPY debt accounted for 7.27 percent of the outstanding registered external debt; other kinds of debt including SDRs and HKD accounted for 7.98 percent of the outstanding registered external debt. In terms of the sectors in which the debt was invested, with reference to the Industrial Classification of the National Economy, the outstanding medium- and long-term registered external debt (based on contract terms) was mainly invested in the manufacturing sector, accounting for 28.92 percent, the transportation, warehousing, and postal sector, accounting for 14.01 percent, and the electric power, coal, gas, and water production and supply sector, accounting for 7.36 percent. In the first nine months of 2012, China newly borrowed USD30.987 billion of medium- and long-term external debt, repaid USD23.426 billion of principal of the long- and medium-term external debt, and paid USD1.749 billion of interest. Net inflows under the outstanding long- and medium-term external debt were USD5.812 billion, down 48.14 percent on a year-on-year basis. (End.) Addendum: Definitions of terms and explanations Classification of the term structure of external debt. There are two classification methods for the classification of external debt in terms of the term structure. First, classification on the basis of contract terms, i.e. classified as medium- and long-term external debt in cases of the contract term being over one year, and classified as short-term external debt in cases of the contract term being one year or less; second, classification on the basis of the remaining term, i.e., on the basis of the above classification method, the medium- and long-term external debt due within one year is classified as short-term external debt. For the convenience of differentiating between the two classification methods, in this news release indication of the classification method, i.e., contract term or remaining term, follows the medium- and long-term external debt and the short-term external debt. Trade credit between enterprises refers to the external liability arising from directly extending credit between the seller and buyer of goods, specifically transactions between residents in mainland China and foreign non-residents (including non-residents in Hong Kong SAR, Macao SAR, and Taiwan Province), i.e., debt incurred due to the difference between the time of payment and that of the transfer of the goods ownership. Trade credit between enterprises includes credit directly provided by the supplier (e.g., the overseas exporter) for commodity transactions and services, and advance payments made by buyers (e.g., overseas importers) for goods, services, and on-going business (or business to be undertaken). Bank trade financing refers to loans extended by a third party (e.g., banks) related to trade with exporters or importers, for instance, loans extended by foreign financial institutions or export credit agencies to buyers. Trade-related credit is a broad concept. In addition to trade credit between enterprises, it also includes other kinds of credits provided for trade activities. According to the definition, trade-related credit includes trade credit between enterprises, bank trade financing, short-term notes related to trade, and so forth. 2012-12-27/en/2012/1227/1075.html
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As of the end of June 2012, China ’s outstanding external debt (excluding that of Hong Kong SAR, Macao SAR, and Taiwan Province ) reached USD785.172 billion. Specifically, the outstanding registered external debt reached USD495.072 billion and the balance of trade credit between enterprises totaled USD290.1 billion. With respect to the term structure, outstanding long- and medium-term external debt (with the remaining term) was USD196.95 billion and outstanding short-term external debt (with the remaining term) was USD588.222 billion. Specifically, trade credit between enterprises and bank trade financing respectively accounted for 49.32 percent and 24.57 percent of the total. The two accounted for 73.89 percent of the outstanding short-term external debt (with the remaining term). In terms of the type of debtor, the outstanding debt of Chinese-funded financial institutions was USD253.215 billion, accounting for 51.15 percent of the outstanding registered external debt; the outstanding debt of foreign-funded enterprises was USD141.54 billion, accounting for 28.59 percent; and the outstanding debt of foreign-funded financial institutions was USD57.284 billion, accounting for 11.57 percent. In terms of the types of debt, the balance of international commercial loans amounted to USD428.575 billion and the balance of foreign government loans and loans granted by international financial organizations amounted to USD66.497 billion. In terms of the currency structure, USD debt accounted for 77.77 percent, Euro debt 7.51 percent, and JPY debt 6.99 percent of the outstanding registered external debt. In terms of the sectors in which the debt is invested, with reference to the Industrial Classification of the National Economy, the outstanding medium- and long-term registered external debt (based on contract terms) invested in the manufacturing sector accounted for 23.67 percent, the transportation, storage, and postal sector 13.31 percent, and the electric power, coal, gas, and water production and supply sector 6.90 percent. In the first half of 2012, China newly borrowed USD21.255 billion in medium- and long-term external debt, repaid USD14.779 billion in principal of long- and medium-term external debt, and paid USD1.198 billion in interest. The net inflows under the outstanding long- and medium-term external debt were USD5.278 billion, down 25.24 percent on a year-on-year basis. Addendum: Definition of terms and interpretations Classification of the term structure of external debt. There are two classification methods for the classification of external debt in terms of the term structure. First, classification on the basis of the contract term, i.e., it is classified as medium- and long-term external debt in cases where the contract term is more than one year, and it is classified as short-term external debt in cases where the contract term is one year or less; second, classification on the basis of the remaining term, i.e., on the basis of the above classification method, medium- and long-term external debt due within one year will be classified as short-term external debt. In order to differentiate between the two classification methods, in this news release any indication of the classification method, i.e., the contract term or remaining term, follows the definitions of the medium- and long-term external debt and the short-term external debt. Trade credit between enterprises refers to the external liability arising from directly extending credit between the seller and buyer of goods, specifically transactions between residents in Mainland China and foreign non-residents (including non-residents in Hong Kong SAR, Macao SAR, and Taiwan Province), i.e., the debt incurred due to the difference between the time of payment and that of the transfer of ownership of the goods. Trade credit between enterprises includes credit directly provided by the supplier (e.g., the overseas exporter) for commodity transactions and services, and advance payments made by buyers (e.g., overseas importers) for goods, services, and on-going business (or business to be undertaken). Bank trade financing refers to loans related to trade extended by a third party (e.g., banks) to exporters or importers, for instance, loans extended by foreign financial institutions or export credit agencies to buyers. Trade-related credit is a broad concept. In addition to trade credit between enterprises, it also includes other kinds of credit provided for trade activities. According to the definition, trade-related credit includes trade credit between enterprises, bank trade financing, short-term notes related to trade, and so forth. 2012-09-14/en/2012/0914/1068.html
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The SAFE recently released Preliminary Data on China’s Balance of Payments Statement for the Third Quarter of 2012. In the third quarter of 2012, the surplus under the current account totaled USD70.6 billion. Specifically, the surplus in trade in goods and current transfers reached USD102.7 billion and USD1.4 billion, respectively, whereas the deficit in trade in services and income amounted to USD29.9 billion and USD3.6 billion, respectively. Meanwhile, China’s deficit under the capital and financial account (including net errors and omissions) totaled USD71.0 billion. In particular, net inflows of direct investments amounted to USD37.2 billion. International reserve assets (exclusive of the influence of non-transaction changes in value, such as exchange rates and prices) registered a drop of USD400 million. Specifically, foreign exchange reserve assets registered an increase of USD300 million, and special drawing rights and the reserve position in the IMF experienced a drop of USD800 million. For the first three quarters of 2012, the surplus under the current account was USD147.8 billion and the deficit under the capital and financial account was USD85.4 billion, while international reserve assets registered an increase of USD62.4 billion. Balance of Payments1 (Preliminary Data) Unit: USD100 million Item 2 # Q3 of 2012 First 3 quarters, 20123 I. Current Account 1 706 1478 A. Goods and Services 2 728 1453 a. Goods 3 1027 2155 Credit 4 5434 15011 Debit 5 4407 12856 b. Services 6 -299 -702 Credit 7 475 1378 Debit 8 775 2080 1.Transportation 9 -118 -348 Credit 10 105 289 Debit 11 223 637 2.Tourism 12 -191 -409 Credit 13 122 360 Debit 14 313 769 3.Communication Services 15 -2 1 Credit 16 4 13 Debit 17 6 12 4.Construction Services 18 26 72 Credit 19 36 97 Debit 20 10 26 5.Insurance Services 21 -45 -129 Credit 22 6 23 Debit 23 52 152 6.Financial Services 24 -1 -2 Credit 25 2 6 Debit 26 2 8 7.Computer and Information Services 27 23 76 Credit 28 35 105 Debit 29 12 28 8.Royalties and Licensing Fees 30 -39 -123 Credit 31 2 6 Debit 32 40 129 9.Consulting Services 33 33 100 Credit 34 85 241 Debit 35 51 142 10.Advertising and Promotions 36 5 14 Credit 37 12 34 Debit 38 7 21 11.Movies, Audio-visual products 39 -1 -3 Credit 40 0 1 Debit 41 2 4 12.Other Business Services 42 12 52 Credit 43 64 196 Debit 44 52 144 13.Government Services, n.i.e. 45 -1 -1 Credit 46 2 7 Debit 47 3 8 B. Income 48 -36 -19 C. Current Transfers 49 14 44 II. Capital and Financial Account2 50 -710 -854 Of which, Direct investments 51 372 1272 III. Reserves Assets 52 4 -624 3.1 Monetary Gold 53 0 0 3.2 Special Drawing Rights 54 5 4 3.3 Reserves Position in the Fund 55 3 11 3.4 Foreign Exchange 56 -3 -640 3.5 Other Claims 57 0 0 Note: 1. This statement employs rounded-off numbers. 2. Other items refer to the differences, except for those marked by "Credit" and "Debit." 3. The preliminary data for the first 3 quarters of 2012 in this statement are the sum of the total of the official data for H1 2012 and the preliminary data for Q3 of 2012. 4. The data under the capital and financial accounts in this statement are the balance between the current account balance and the amount of change in reserve assets, including net errors and omissions. 2012-10-29/en/2012/1029/1074.html
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Q: Sources report that the SAFE has made vigorous efforts to explore ways to carry out innovative utilization of foreign exchange reserves, and an office has been assigned to deal with the related tasks. Could you please brief us on the progress in this work? A: During recent years, China’s economy has been forging ahead steadily and national economic strength has witnessed significant growth. The capabilities of enterprises have also been on a steady rise and, on the whole, economic operations are now better off. Meanwhile, global economic integration has been further deepened and economic exchanges and ties have constantly been strengthened. The long-term development of the economy and society requires an acceleration in the transformation of economic development patterns and implementation of the “going-global” strategy, so as to further open up to the outside world and better capitalize on markets and resources both at home and abroad. The People’s Bank of China and the SAFE have attached great importance to the role of the foreign exchange market in sustaining national economic and social development. In recent years, in addition to doing a good job in regulating monetary policy and foreign exchange administration, we have constantly made innovations in the utilization of foreign exchange reserves to support the economic development of the service entities of financial institutions and the “going-global” strategy. In addition, we have established the SAFE Co-Financing Office within the foreign exchange reserves operations and administration organization to take charge of the work of making innovations in the utilization of foreign exchange reserves. Innovation in the utilization of foreign exchange reserves is an integral part of foreign exchange reserve operations and administration. The relevant operations are all conducted in compliance with market principles and conditions. Furthermore, all arrangements are in compliance with general industry practices, and we respect market choice and maintenance and promotion of fair competition in the market. Since the launch of the co-financing business, we have provided a sound foundation and financing environment for China’s financial institutions and players in the foreign exchange market by means of regulating fund supply and demand in the foreign exchange market. We have thus promoted national economic and social development, expanded the scope and fields of investment of foreign exchange reserves, and further facilitated the diversified operations and administration of the reserves. In addition, by prioritizing risk prevention we have maintained and increased the value of our foreign exchange reserves. 2013-01-14/en/2013/0114/1076.html
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The SAFE recently released the official data on China’s Balance of Payments Statement for Q2 and H1 of 2012. In Q2 of 2012, the surplus under China’s current account totaled USD53.7 billion. Specifically, according to the statistical coverage of the balance of payments, the surplus in goods and current transfers reached USD90.9 billion and USD600 million respectively, whereas the deficit in trade in services and income amounted to USD22.2 billion and USD15.6 billion respectively. Meanwhile, the deficit under the capital and financial account totaled USD41.2 billion. In particular, net inflows of direct investments, portfolio investments, and net outflows of other investments amounted to USD41.1 billion, USD11.1 billion, and USD94.4 billion respectively. International reserve assets (exclusive of the influence of non-transaction changes in value, such as exchange rates and prices) registered a drop of USD11.8 billion. Specifically, transactions in foreign exchange reserve assets registered a drop of USD11.2 billion, and special drawing rights and the reserve position in the IMF experienced a drop of USD500 million. In the first half of 2012, China’s surplus under the current account totaled USD77.2 billion. The ratio of the surplus under the current account to GDP during the same period was 2.1 percent. Meanwhile, China’s surplus under the capital and financial account totaled USD14.9 billion. China’s international reserve assets posted an increase of USD62.9 billion. In addition, in order to facilitate understanding of the data and analysis of China’s balance of payments among all social groups, the BOP Analysis Team of the SAFE released China’s Balance of Payments Report for the First Half of 2012. 2012-08-31/en/2012/0831/1065.html
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According to statistical data released by the State Administration of Foreign Exchange (SAFE), in September 2012 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD137.4 billion and USD131.1 billion respectively. The surplus of foreign exchange settlement and sales amounted to USD6.3 billion. During the same period, the total amount involved in contracts for forward settlement of foreign exchange with banks on behalf of clients was USD13.3 billion, the total amount involved in contracts for forward sale of foreign exchange was USD18.9 billion, and net forward exchange sales equaled USD5.7 billion. In the first nine months of 2012, the cumulative amount of foreign exchange settlement and foreign exchange sales by banks on behalf of clients amounted to USD1137.8 billion and USD1107.8 billion respectively. The surplus of foreign exchange settlement and sales was USD30 billion. During the same period, the cumulative amount in contracts for forward settlement of foreign exchange with banks on behalf of clients was USD123.5 billion, the cumulative amount in contracts for forward sale of foreign exchange was USD139.1 billion, and the cumulative net forward sale of foreign exchange with banks on behalf of clients was USD15.7 billion. In September 2012, foreign-related receipts and payments of domestic banks on behalf of clients amounted to USD219.7 billion and USD228.6 billion respectively, and the deficit of foreign-related receipts and payments reached USD8.9 billion. In the first nine months of 2012, the cumulative foreign-related receipts and payments of banks on behalf of clients amounted to USD1887.3 billion and USD1808.1 billion respectively, and the cumulative surplus of foreign-related receipts and payments reached USD79.1 billion. 2012-10-22/en/2012/1022/1072.html
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Question: At the end of last year, against the background of the more serious international financial turmoil, in the fourth quarter China experienced capital outflows, with a current account surplus but a capital account deficit in terms of the balance of payments. What is the situation this year? Answer: In the first quarter of this year, the situation of the fourth quarter of last year, whereby China had a current account surplus but a capital account deficit in terms of the balance of payments, was changed, and there was a return of the “twin surplus,” i.e., there was a current account surplus as well as a capital account surplus. However, the status of the overall balance of payments more closely approached equilibrium, mainly embodied in the following respects: First, the current account surplus was narrowed, accounting for a lesser proportion of GDP. According to preliminary estimates, the current account surplus in the first quarter was USD 24.7 billion, a decrease of 14 percent compared with that during the same period of last year, and the proportion of the current account surplus to GDP in the same quarter was 1.4 percent, a decrease of 1.4 percent compared with last year. Second, once again there was a capital account surplus. The size of net inflows of capital (including errors and omissions, the same below) in the first quarter was USD 49.9 billion, a decrease of 56 percent compared with the same period of last year, whereas there was a deficit of USD 48.1 billion in the fourth quarter of 2011. Third, the trend of increasing foreign exchange reserves further slowed down. After adjusting for the change in the exchange rate and asset prices, foreign exchange reserves calculated on the basis of the coverage of the balance of payments in the first quarter increased by USD 74.8 billion (including foreign exchange reserve earnings in the current period), a 46 percent decrease in the increment compared with the same period of last year. In other words, although since the beginning of this year net inflows of foreign exchange rebounded somewhat compared with the end of last year, there were still on a downward trend compared with the same period of last year. This is consistent with our earlier basic judgment that China ’s balance of payments was expected to maintain a surplus, but the size of the surplus would decrease significantly. Question: According to data published by the People’s Bank of China (PBC), there was a new increase of USD 123.8 billion in foreign exchange reserves in the first quarter of this year. Does this mean that China will again face pressures of massive capital inflows? Answer: This does not mean that China will again face pressures of massive capital inflows. First of all, although the data published by the PBC show there was a new increase of more than USD 120 billion in the balance of foreign exchange reserves in the first quarter, this was an increase in the book value of the reserve assets mainly arising from such factors as exchange rate and asset price changes, and it does not reflect actual cross-border capital flows. Second, the increment in the foreign exchange reserves included the operating earnings of the reserves. In view of the large size of operations and management of foreign exchange reserves in China, the operating earnings of the reserves play a significant role in the increase in the balance of foreign exchange reserves. Third, according to the data published by the PBC, in March there was a large increase in outstanding foreign exchange funds, but this does not lead to the conclusion that there is current a large net inflow of capital, mainly because there are differences in the concept and coverage between the outstanding foreign exchange funds and the increment in foreign exchange reserves. Fourth, net inflows of capital rebounded the first quarter, mainly because the environment for international markets improved, the appetite for global investment risks increased, and capital flowed back to the emerging markets. However, the net inflows of cross-border capital in the first quarter still decreased by more than 50 percent compared with the same period of last year. Finally, because the European sovereign debt crisis is still developing and evolving, and the world is still in the process of financial deleveraging, the risks of massive cross-border capital flows are increasing. Question: The PBC announced that the range of fluctuations in the RMB exchange rate against the USD would be expanded as of April 16. What effect will this have on China ’s foreign exchange situation? Answer: This is a major move to further deepen the reform of the RMB exchange rate formation mechanism under the circumstances that China ’s balance of payments situation has gradually improved, the RMB exchange rate has approached a reasonable equilibrium, and development of the foreign exchange market has matured. Since the expansion of the fluctuation range of the exchange rate, in terms of appreciation and depreciation expectations of market transaction participants and actual transactions, the RMB exchange rate fluctuated moderately, and therefore expectations were stable, foreign exchange transactions and investments became more active, and the self-balancing capability of the foreign exchange market was further strengthened. Overall, deepening the reform of the RMB exchange rate mechanism is conducive to allowing market supply and demand play a larger role in the formation of the exchange rate and allowing the RMB exchange rate to approach a reasonable equilibrium level, promoting China’s balance of payments status to develop toward an equilibrium, improving the self-balancing capability of the foreign exchange market, and slowing down the accumulation of foreign exchange reserves. 2012-05-15/en/2012/0515/1051.html
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According to statistical data released by the State Administration of Foreign Exchange (SAFE), in March 2012 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD132.7 billion and USD124.8 billion respectively. The surplus of foreign exchange settlement and sales amounted to USD7.8 billion. During the same period, the total amount involved in contracts for forward settlement of foreign exchange with banks on behalf of clients was USD21.2 billion, the total amount involved in contracts for forward sales of foreign exchange was USD17.9 billion, and the net forward exchange settlement totaled USD3.3 billion. For the first three months of 2012, the cumulative amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD370.2 billion and USD338.6 billion respectively. The surplus of foreign exchange settlement and sales was USD31.6 billion. During the same period, the cumulative amount in the contracts for forward settlement of foreign exchange with banks on behalf of clients was USD48.8 billion, the cumulative amount in the contracts for forward sales of foreign exchange was USD36.3 billion, and the cumulative net forward settlement of foreign exchange with banks on behalf of clients was USD12.5 billion. In March 2012, foreign-related receipts and payments of domestic banks on behalf of clients amounted to USD214.1 billion and USD199.2 billion respectively, and the surplus of foreign-related receipts and payments totaled USD14.9 billion. For the first three months of 2012, cumulative foreign-related receipts and payments of banks on behalf of clients amounted to USD590.6 billion and USD535.4 billion respectively, and the surplus of the cumulative foreign-related receipts and payments reached USD55.1 billion. Annex: Glossary and relevant definitions Balance of Payments refers to all economic transactions occurring between residents and non-residents in China , including all financial transactions and barter exchanges resulting in changes in the assets and liabilities of residents and non-residents. Foreign Exchange Settlement and Sales by Banks refer to settlement and sales conducted by designated foreign exchange banks for their clients or for themselves, excluding data on inter-bank foreign exchange market transactions. Foreign exchange settlement and sales by banks on behalf of clients refer to, including the foreign exchange settlement and sales by banks for themselves, those conducted by designated foreign exchange banks for their clients. The time of conversion between the RMB and the foreign currency is regarded as the time-point for the statistics on the foreign exchange settlement and sales by banks. Specifically, foreign exchange settlement refers to the sale of foreign exchange to designated foreign exchange banks by owners of foreign exchange; foreign exchange sales refer to the sale of foreign exchange by designated foreign exchange banks to users of foreign exchange. The difference between the foreign exchange settlement and sales is regarded as an offset balance. Such differences, which will be offset by the banks through transactions on the inter-bank foreign exchange market, function as a major force resulting in changes to the country’s foreign exchange reserves. However, this is not equivalent to the net change in the foreign exchange reserves during the same period. The principle for transactions between residents and non-residents does not apply to the preparation of statistics on foreign exchange settlement and sales by banks on behalf of clients, and such statistics only cover RMB and foreign currency transactions between banks and their clients, namely, exchange transactions between RMB and foreign currencies, which fall outside the category of the balance- of-payments statistics. Contracts for Forward Settlement and Sales of Foreign Exchange refer to the contracts for forward settlement (sales) of foreign exchange executed between banks and clients through consultation, in which the foreign currency, amount, exchange rate, and term for the forward settlement (sales) of foreign exchange are agreed upon; where the foreign exchange is due to be received (paid), the foreign exchange settlement (sales) is to be handled on the basis of the foreign currency, amount, and exchange rate specified in such contracts. The forward foreign exchange settlement and sales business enables enterprises to lock up the exchange rate in advance for future foreign exchange settlement or sales, and to effectively avoid the risk of changes in the RMB exchange rate. In general, the banks will hedge the risk exposure arising from the forward foreign exchange settlement and sales business on the inter-bank foreign exchange market. For example, where the total amount involved in the contracts for forward settlement of foreign exchange executed by banks is more than that of the contracts for forward sales of foreign exchange, the banks generally will sell an equivalent amount of foreign exchange in advance on the inter-bank foreign exchange market, and vice versa. Therefore, the forward settlement and sales of foreign exchange business is also a factor that affects changes in China ’s foreign exchange reserves. Foreign-related Receipts and Payments by Banks on Behalf of Clients refers to receipts and payment occurring between domestic non-bank resident institutions/individuals (collectively referred to as the “non-bank sector”) and non-resident institutions/individuals through domestic banks, exclusive of the receipts and payments in cash and foreign-related receipts and payments by the banks themselves. In particular they include cross-border receipts and payments between non-bank sectors and non-residents through domestic banks (including RMB and foreign exchange), and domestic receipts and payments between non-bank sectors and non-residents through domestic banks (temporarily excluding receipts and payments in RMB between domestic individual residents and domestic non-resident individuals). Statistics are collected at the time the clients conduct the foreign-related receipts and payments at the domestic banks. Specifically, foreign-related receipts of banks on behalf of clients refer to funds collected by non-bank sectors from non-residents via domestic banks; external payments by banks on behalf of clients refer to funds paid by non-bank sectors to non-residents through domestic banks. Although the foreign-related receipts and payments of banks on behalf of clients are an integral part of the balance-of-payments statistics, the accounting method for the statistics, unlike the accrual basis of accounting required by the balance of payments statistics, is based on a cash basis. In addition, they merely reflect fund flows between non-bank sectors and non-residents, and do not include barter transactions and foreign transactions conducted by the banks themselves. The scope of the statistics on the foreign-related receipts and payments of banks on behalf of clients is smaller than the scope of the balance-of-payments statistics. 2012-05-15/en/2012/0515/1049.html