-
The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on bank’s foreign exchange settlement and sales as well as their foreign-related receipts and payments for customers for 2018. The SAFE spokesperson and Chief Economist Wang Chunying answered media questions on relevant issues. Q1: Could you brief us on the new characteristics of China’s foreign exchange receipts and payments situations in 2018? A: In 2018, China’s cross-border capital flow was stable on the whole, and foreign exchange supply and demand was basically balanced. Below are the major characteristics: First, banks registered a small deficit in foreign exchange settlement and sales as well as foreign-related receipts and payments for customers, which narrowed substantially as compared with that of 2017. In 2018, in dollar terms, foreign exchange settlement by banks was up by 15% year on year, and foreign exchange sales by banks, up by 11%, indicating a deficit of USD 56 billion, shrinking by 50%; banks' foreign-related receipts for customers were up by 16% year on year, and the payments up by 14%, leading to a deficit of USD 85.8 billion, shrinking by 31%. Specifically, foreign-related foreign exchange receipts and payments posted a deficit of USD 10.6 billion, narrowed by 48% from the 2017 level. Overall, due to the small deficit recorded by foreign exchange settlement and sales as well as foreign-related receipts and payments in 2018, combined with other foreign exchange trading factors on the inter-bank foreign exchange market, China’s foreign exchange market maintained basic equilibrium in terms of supply and demand, which served as the foundation of the overall stability of China’s foreign exchange reserves. Second, foreign exchange fund flow maintained slight bi-directional fluctuations, reflecting the stability of China's foreign exchange market operation. In 2018, according to statistics on banks’ foreign exchange settlement and sales, the first quarter witnessed a deficit of USD 18.3 billion, which turned into a surplus of USD 32 billion in the second quarter. A deficit of USD 41.8 billion was posted for the third quarter, which narrowed to USD 27.9 billion in the fourth quarter. Specifically, A deficit of USD 7.1 billion was recorded in December, narrowed down by 60% month on month; Statistics on bank’s foreign-related foreign exchange receipts and payments for customers indicated a surplus of USD 15.8 billion in the first quarter, a surplus of USD 4.6 billion in the second quarter, a deficit of USD 37.7 billion in the third quarter and a surplus of USD 6.8 billion in the fourth quarter. Specifically, a surplus of USD 8.2 billion was recorded in December. Third, foreign exchange sales rate was unchanged from 2017, while cross-border corporate financing remained relatively stable. In 2018, the foreign exchange sales rate that measures the willingness to buy foreign exchange, or the ratio of foreign exchange purchased by customers from banks to the customer's foreign-related foreign exchange payments was 65%, basically the same as in 2017. The sales rate was 64%, 63%, 68% and 67% respectively from the first quarter to the fourth quarter. Besides, the cross-border financing of enterprises was relatively stable, with the balance of cross-border financing for imports such as refinancing and usance letter of credit as of the end of 2018 witnessing a slight increase of 0.2% from the end of 2017. Fourth, the foreign exchange settlement rate rose, indicating market players' willingness to hold foreign exchange was weakened. In 2018, the foreign exchange settlement rate that measures the willingness to settle foreign exchange, or the ratio of the foreign exchange sold by customers to banks to the customers' foreign-related foreign exchange receipts was 65%, up by 2 percentage points from 2017. From the first to the fourth quarter of the year, the foreign exchange settlement rate was 62%, 70%, 68% and 62% respectively. As of the end of 2018, the balance of domestic foreign exchange deposits of banks dropped by USD 73 billion from the end of 2017. Fifth, in recent months, banks’ forward foreign exchange settlement and sales of banks turned into a surplus, and market expectations become more stable. In 2018, the value of contracts signed between banks and customers in respect of forward settlement of foreign exchange rose by 44% year on year, and the value of contracts signed between banks and customers in respect of forward sales of foreign exchange went up by 38%, indicating a deficit of USD 28.3 billion, slightly up by 9%. Since September, the forward foreign exchange settlement and sales contracts have maintained surplus continuously, with the surplus growing month by month to reach USD 9.6 billion in December. Q2: How do you view China's foreign exchange market operation in 2018 under the complex international situations? How do you judge the trends in 2019? A: China’s foreign exchange market remained basically balanced under the complex circumstances in 2018. In the past year, China’s foreign exchange market operated in a stable and orderly manner in spite of major changes in international environment and increased turbulence in emerging markets. It’s mainly reflected in the following aspects. Firstly, the RMB exchange rate is relatively stable as compared with other emerging market currencies. Due to the 4.4% rise in the US Dollar Index in 2018, the exchange rate of most non-USD currencies against the USD showed a downward trend. The emerging market currency index dropped by over 10%, the middle rate of RMB against USD depreciated by 4.8%, and that against the CFETS basket of currencies declined slightly by 1.7%. Secondly, cross-border capital flows were stable on the whole, and foreign exchange supply and demand maintained basic equilibrium. In 2018, the deficit of foreign exchange settlement and sales as well as foreign-related receipts and payments narrowed remarkably from the 2017 level, the domestic foreign exchange supply and demand was basically balanced on the whole and foreign exchange reserves maintained overall stability. Thirdly, the expectations and trading behaviors of market players were rational and orderly, and a sound market order was maintained. In 2018, enterprises’ utilization of foreign capital, investment abroad, cross-border financing as well as onshore guarantees for offshore loans remained basically stable. Foreign exchange purchases by individuals continued to remain stable with a slight decline in 2018, down by 7% from the 2017 level. In 2019, China’s foreign exchange market operation is expected to maintain the development trend of overall stability. Overall, the stable operation of China’s foreign exchange market in 2018 is mainly attributed to the sound foundations in terms of economy, policy and market, and such situations are expected to remain in 2019. Firstly, China’s good economic prospects in the long run will not be changed. China’s economy is still resilient enough and has great potential. China’s economic growth rate is expected to remain high with a larger base of economic aggregate, which will provide a solid economic foundation for effectively coping with changes in the external environment. Secondly, China's course of promoting all-around opening-up will remain unchanged. In 2019, China will provide greater support and more facilities in terms of market access, intellectual property rights protection, trade and investment facilitation as well as capital market opening, which will provide a solid foundation for overseas capital investment in the domestic market. Thirdly, the trend that China’s foreign exchange market operation mechanism will become increasingly mature will not be changed. Presently, the bi-directional floating of RMB exchange rate has been intensified, which is conducive to strengthening a more diversified and rational market expectation; Integrating macro-prudential and micro-regulatory approaches for cross-border capital flow can help maintain the healthy order of foreign exchange market, which will lay a sound market foundation for promoting the autonomous equilibrium of the balance of payments. Q3: What's your view of the impact of the Fed interest rate hike on China's foreign exchange market and cross-border capital flows? What will be the impact of a slowdown in Fed rate hike in 2019? A: In the past several years, external environment has undergone major changes such as adjustments in monetary policies by major developed economies, but China’s foreign exchange market has withstood such ordeals and has gradually improved its capabilities to make adjustment and take countermeasures. Since the Fed pulled out of the quantitative easing policy in the second half of 2014 and raised interest rates for the first time at the end of 2015, the monetary policy adjustments of the Fed has indeed created a strong spillover effect. Emerging economies in general are affected, especially those with fragile fundamentals, where their currency depreciation is large and capital outflow is aggravated. In some periods, China’s foreign exchange market and cross-border capital flow underwent apparent fluctuations as well. However, thanks to the high growth rate of China’s domestic economy, overall social stability, tremendous market potential, sustained advancing of opening-up and reform, as well as the proactive and effective macro-prudential and micro-regulatory measures, China successfully coped with challenges brought about by external shocks and achieved outstanding performance on the whole among emerging markets and even on a global scale. In recent years, China’s foreign exchange market has become more mature in the process of continuous development, making adjustments and coping with various situations. The expectations and behaviors of market players have become more rational, and their experience of taking countermeasures has been accumulated and enriched. In 2019, China’s foreign exchange market still has the solid internal foundation for smooth operation, and the slowdown in Fed interest rate hike and other external factors are also expected to provide more favorable conditions. In 2018, the Fed raised interest rates four times consecutively, which pushed up USD interest rate and exchange rate, making some emerging economies suffer considerable shocks. In 2019, if the Fed slows down its pace of interest rate hike, the marginal increase of USD interest rate will surely be reduced. In this scenario, monetary policy divergence between the US and other major developed economies may weaken, and the USD exchange rate will tend to stabilize as well. Of course the monetary policy adjustment of the Fed only constitutes one aspect of external environment, and there are many other factors which will influence the international environment in 2019. However, China’s economy will maintain sound development trend in the long run, efforts will be made to further advance reform and opening-up unswervingly, and the foreign exchange market is expected to become more mature and rational, thus better adapting to any changes in external environment. Q4: The structure of China’s balance of payments changed substantially in 2018. The surplus under the current account fell and the surplus under the financial account (excluding reserve assets) increased. How do you comment on this change? What would you say about the future trends? A: In 2018, China’s balance of payment presented a pattern of autonomous equilibrium. Based on preliminary statistics, China’s current account showed surplus of a certain scale in 2018 on the whole. Quarterly changes show that, although the current account posted a deficit in the first quarter, it maintained a surplus from the second quarter to the fourth quarter, which increased quarter by quarter. As a result, the surplus under the current account still remained within a reasonable range for the whole year. Meanwhile, the current account and financial account (excluding reserve assets) maintained autonomous equilibrium. Under this structure of balance of payments, China’s reserve assets remained basically stable in 2018 on the whole, and the RMB exchange rate throughout the year held relatively steady on a global scale. In the future, China is expected to maintain the development trend of basic equilibrium of current account and autonomous equilibrium of balance of payments. China’s current account balance will still remain within a reasonable range. Firstly, the domestic manufacturing industry boasts of mature infrastructure, complete industrial chain, and a large number of skilled workers. Coupled with continuous promotion of transformation and upgrade, the above advantages can facilitate relevant products to maintain strong international competitiveness and continue to own big market both at home and abroad. Secondly, with the improvement of domestic product quality, ecological environment, education and other soft power, domestic residents’ cross-border consumption will become more rational and stable, which is conducive to the smooth operation of current account. The overall stability of cross-border capital flows will remain relatively high, and capital inflows for medium- and long-term investment under the capital account have a large room for improvement. Based on data from the first three quarters of 2018, among all types of foreign capital inflows, the net inflow from FDI accounted for 36%, up by 9 percentage points year on year. With the further expansion of China’s opening-up areas and increasing importance of the domestic market, China will still have big potential in attracting direct investment. According to statistics of the United Nations Conference on Trade and Development (UNCTAD), China’s stock of FDI was 12% of GDP at the end of 2017, while the global average was 39%, and the average of developing countries was 33%. Besides, in the first three quarters of 2018, the net inflow from foreign securities investment in China accounted for 37%, representing an increase of 11 percentage points year on year. Specifically, debt securities investment increased more, which included inflow of funds from foreign central banks and other institutions for the purpose of medium- and long-term asset allocation. At present, the proportion of foreign investors in the domestic capital market is on the low side. In the future, with the policy of further opening-up and facilitation, China will become an important destination for the diversified asset allocation of international capital. Q5: What are the priorities of foreign exchange administration work in 2019? What measures will be taken in foreign exchange administration system reform, liberalization of the capital account and the management of cross-border capital flow? A: In 2019, the foreign exchange authorities will carry out the decisions and deployment of the CPC Central Committee and the State Council in an all-around manner, adhere to the key guideline of seeking progress in stability, stick to the structural reform on the supply side as the main line, persist in deepening market-oriented reform, expand high-level opening-up, deepening the reform of “delegation, regulation and service”, and thoroughly advance opening-up and reform in foreign exchange area according to the requirements of the “Six Stabilities”, so as to vigorously serve the sustained and sound development of the real economy. On the one hand, we will deepen reform and opening-up in the foreign exchange area. Efforts will be made in a steady and orderly manner to advance liberalization of the capital account, further improve qualified foreign institutional investor system, and make research on the foreign exchange administration framework for foreign-invested enterprises under the management system based on pre-establishment national treatment and negative list. The SAFE will further open up the foreign exchange market in both directions, enrich trading instruments, broaden trading entities, and build an open and competitive foreign exchange market. Efforts will be made to deepen foreign exchange administration reform of “delegation, regulation and service”, optimize foreign exchange administration services, promote trade and investment liberalization and facilitation at a higher level, further support the development of pilot free trade zones and Guangdong-Hong Kong-Macao Greater Bay Area, and support Hainan in deepening reform and opening-up in an all-around manner. On the other hand, the capabilities of preventing and resolving risks from cross-border capital flow should be enhanced. Efforts will be made to improve the two-pronged administration framework featuring macro-prudential and micro-regulatory approaches for cross-border capital flow, and adjust foreign exchange market fluctuations in a market-based and counter-cyclical manner, so as to maintain the stability, consistency and predictability of foreign exchange micro-regulation across the cycles. The SAFE will reinforce foreign exchange administration inspection and enforcement, crack down upon all kinds of illegal and irregular conducts, carry forward construction of digital foreign exchange administration” and “secure foreign exchange administration", improve foreign exchange reserve operation and management, so as to ensure the security, liquidity, value preservation and appreciation of foreign exchange reserves, maintain a sound order of the foreign exchange market and safeguard the national economic and financial security. 2019-01-18/en/2019/0118/1489.html
-
The State Administration of Foreign Exchange (SAFE) has recently released data on banks' foreign exchange sales and settlement and their foreign-related receipts and payments for customers forOctober 2018. The SAFE press spokesperson Wang Chunying answered media questions on cross-border capital flow situations in October. Q: What would you say about China's cross-border capital flows in October? A: China’s deficit in foreign-related receipts and payments narrowed substantially, with cross-border capital flows remaining stable on the whole, and supply and demand on the foreign exchange market maintained basic equilibrium. In this month, banks posted deficit of USD2.9 billion in foreign exchange settlement and sales, down by 83% from September. The non-banking sectors such as domestic enterprises registered a deficit of USD7.4 billion in foreign-related receipts and payments, narrowing by 73% on a month-by-month basis. Specifically, foreign exchange receipts and payments turned from deficit in September to a surplus of USD4.6 billion. The deficit in foreign exchange settlement and sales and foreign-related receipts and payments in October fell significantly, indicating that China’s cross-border capital flows are still showing two-way fluctuations and overall steady development. In the first ten months of this year, banks' deficit in foreign exchange settlement and sales declined 72% year on year, while foreign-related receipts and payments decreased 43% on a year-on-year basis. Foreign exchange transactions of market players are stable and rational, and foreign exchange market has been operating normally and orderly. First, the settlement of FDI increased steadily, with the settlement of FDI capital in October increasing by 11% year on year. Second, the foreign exchange purchase by enterprises forODI is rational and stable. In October, the purchase of foreign change with ODI capital was basically the same with that of the same period last year. Third, foreign exchange purchase with investment income fell seasonally and declined on the whole. In October,relevant foreign exchange purchase decreased by 55% month on month, while the figure of the first ten months this year fell by 16% on a year-on-year basis. Fourth, the foreign exchange settlement and sales of individuals remained rational. In October, net purchase of foreign exchange by individuals was stable with slight decline, down by 6% from September. Fifth, the contracts for forward settlement and sales of foreign exchange showed a slight surplus of USD2.8 billion, up from a surplus of USD300 million in September. At present, the global economic and financial operation is confronted with some uncertainties, and China still has some advantages in coping with them. First of all, in the complex and changing international environment, China’s stable economic and political patterns have become more prominent, the intensity of reform and opening-up has been more highlighted, and the huge market potential has become more attractive. China will persist in advancing structural reform at the supply side and doing a good job in stabilizing employment, finance, foreign trade, foreign investment, investment and expectations, which is expected to effectively cope with changes in external environment and lay a solid foundation for the overall stability of China’s foreign exchange market.Secondly, the two-way floating elasticity of RMB exchange rate has been enhanced in recent years, and market players have become more rational in the face of changes in foreign exchange market situations. Meanwhile, China has accumulated rich practical experience and adequate policy tools in coping with such situations, and can play a more flexible role in macro-prudential regulation to maintain stability of the foreign exchange market. 2018-11-15/en/2018/1115/1473.html
-
The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on banks' foreign exchange settlement and sales as well as their foreign-related receipts and payments for customers for January 2019. The SAFE spokesperson and Chief Economist Wang Chunying answered media questions on foreign exchange receipts and payments for January 2019. Q: Could you brief us on China's foreign exchange receipts and payments for January? A: Since the beginning of 2019, China's foreign exchange market has been running more smoothly. In January, banks' foreign exchange settlement and sales and foreign-related receipts and payments both showed a surplus. Based on relevant statistics, firstly, the balance of banks' foreign exchange settlement and sales turned from deficit to surplus. In January, banks' foreign exchange settlement increased by 9% on a month-on-month basis, while their foreign exchange sales fell by 2%, resulting in a surplus of USD 12.1 billion in foreign exchange settlement and sales. Secondly, the surplus of banks' foreign-related receipts and payments for customers was further expanded. In January, non-bank sectors such as enterprises and individuals registered a month-on-month increase of 6% in foreign-related receipts, and a decrease of 6% in foreign-related payments, resulting in a surplus of USD 41.3 billion, representing significant rise from a surplus of USD 300 million in December 2018. Thirdly, the balance of foreign exchange reserves continued to rise. Generally, the supply and demand of the domestic foreign exchange market remained basically balanced in January. The exchange rate of non-USD currencies rose against the US dollar, and the price of major financial assets increased to certain extent, which jointly boosted the balance of foreign exchange reserves of the month by USD 15.2 billion. The foreign exchange market is expected to further improve, with positive changes witnessed in cross-border capital flows through major channels. Since the beginning of 2019, the willingness of market players to settle foreign exchange has increased, while their willingness to purchase foreign exchange has continued to decline. In January, the settlement rate that measures the willingness to settle foreign exchange, or the ratio of the foreign exchange sold by customers to banks to the customers' foreign-related foreign exchange receipts was 63%, up by 3 percentage points month on month. The selling rate that measures customers' willingness to buy foreign exchange, or the ratio of foreign exchange purchased by customers from banks to the customer's foreign-related foreign exchange payments was 64%, down by 1 percentage point from the previous month. Under such circumstances, the foreign exchange receipts and payments of main channels presented positive changes in January. First, the surplus in banks' foreign exchange settlement and sales under trade in goods for customers and the surplus in foreign-related foreign exchange receipts and payments increased by 96% and 2.9 times respectively on a month-on-month basis. Second, the foreign exchange settlement and sales under direct investment and foreign-related receipts and payments has maintained a big surplus. Third, foreign exchange settlement and sales under portfolio investment turned from deficit to surplus, and the surplus of foreign-related receipts and payments posted a month-on-month growth of 70%. Fourth, foreign exchange purchase by individuals maintained stable with a slight decline, down by 11% year on year. Fifth, the contracts for forward settlement and sales of foreign exchange maintained surplus for five consecutive months. Since the beginning of this year, China's macro policies have intensified counter-cyclical adjustment and continued to pursue a proactive fiscal policy and a prudent monetary policy, which has further boosted market confidence and helped stabilize the foreign exchange market. Next, China will further advance the structural reform on the supply side, vigorously promote the all-around opening-up, keep the economy operating within a reasonable range, which is conducive to consolidating the foundation for stable operation of China's foreign exchange market. 2019-02-22/en/2019/0222/1493.html
-
The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on banks' foreign exchange settlement and sales as well as their foreign-related receipts and payments for customers for November 2018. The SAFE spokesperson and Chief Economist Wang Chunying answered media questions on foreign exchange receipts and payments for November. Q: What would you say about the foreign exchange receipts and payments in China in November? A: Supply and demand in the domestic foreign exchange market maintained basic equilibrium in November. The supply and demand of China’s foreign exchange market mainly consists of two parts: one is the difference in foreign exchange settled and sold by banks. The other is foreign exchange transactions of domestic banks, overseas clearing banks and other market entities in the inter-bank foreign exchange market. For example, in November, the changes in the forward settlement and sales of foreign exchange for customers made the banks increase foreign exchange supply to the market by USD 11.2 billion, which achieved a basic balance between supply and demand with the deficit of banks' foreign exchange settlement and sales. Under the combined effect of basic balance of supply and demand, exchange rate conversion and asset price changes in the domestic foreign exchange market, China’s foreign exchange reserves stood at USD 3,061.7 billion at the end of November 2018, up by USD 8.6 billion from the end of October. Currently, the foreign exchange market expectations are stable. First of all, with the change of market environment, the RMB exchange rate against the US dollar has appreciated on the whole since November, and the exchange rate expectations of market players have been reasonably differentiated. As a result, the value of foreign exchange contracted for forward settlement and sales by banks in November has maintained a surplus for the third month consecutively, pushing the banking sector to supply more foreign exchange to the market. Secondly, enterprises’ utilization of foreign capital, investment abroad, cross-border financing as well as onshore guarantees for offshore loans remained basically stable. The purchase of foreign exchange by individuals continued to maintain stable with slight decline. The scale of foreign exchange purchases by individuals in October and November was at a low level this year, with a year-on-year decline of 9% in November. In recent years, the international environment has been complex and external pressure has continued to exist. However, China’s foreign exchange market displays a pattern of two-way fluctuation and basic stability, with no trend change. On the one hand, this indicates the fundamental impact of China’s stable economic operation; on the other hand, it also shows that the players in the foreign exchange market are becoming more sensible and their ability to adapt to changes in the external environment has been constantly improving. In the future, China will continue to deepen market-oriented reform, expand high-level opening-up and maintain sustained and healthy economic development, which will be conducive to further consolidating the foundation for the stability of China’s foreign exchange market. 2018-12-20/en/2018/1220/1480.html
-
Q: According to the latest data on foreign exchange reserves released by the People’s Bank of China, as of the end of October, China’s foreign exchange reserves decreased by USD33.9 billion from the end of September. Could you tell us why the change occurred? What’s the trend of foreign exchange reserves in the future? A: By the end of October 2018, China’s foreign exchange reserves stood at USD3,053.1 billion, down by USD33.9 billion or 1.1% from the end of September. In October, China’s cross-border capital flows were generally stable and the balance of payments basically maintained equilibrium. Affected by monetary policies of major countries, global trade situations, geopolitical situations, among others, fluctuations on the international financial market have intensified. The US dollar index has risen by over 2 percent, and asset prices in major countries witnessed adjustment. Due to the combined impact of exchange rate translation and asset price changes etc, the foreign exchange reserves declined slightly. Since the beginning of this year, the international environment has been complex, with apparent rising of uncertainty in the global economic and financial market. China’s economy has maintained overall stability and steady progress, continued to remain within the reasonable range, and the foreign exchangemarket has been running smoothly. According to preliminary statistics, banks showed a small deficit of about USD3 billion in foreign exchange settlement and sales in October, narrowing by over 80% from September. Specifically, net purchase of foreign exchange by individuals was stable with a slight decline, both on a year-on-year basis and month-on-month basis. Looking ahead, although there are many uncertain external factors, China's economic fundamentals are still robust, with strong resilience and adaptability. Meanwhile, with China’s economic transformation and upgrade as well as further opening-up, there are still adequate conditions which are conductive to steady operation of cross-border capital flow, and China’s foreign exchange reserves are expected to stay stable amid fluctuations. 2018-11-07/en/2018/1107/1479.html
-
The State Administration of Foreign Exchange (SAFE) has recently released the Balance of Payments (BOP) for the third quarter of 2018 and the International Investment Position (IIP) as of the end of September 2018. The SAFE spokesperson and Chief Economist Wang Chunying answered media questions on relevant issues. Q: What are the characteristics of China’s balance of payments in the third quarter of 2018? A: In the third quarter of 2018, China’s current account and financial account excluding reserve assets both registered surplus and the balance of payments basically maintained equilibrium. First, the surplus under the current account increased. In the third quarter of 2018, the surplus under the current account was USD 23.3 billion, up by 338% quarter-on-quarter. Specifically, the trade in goods in the BOP registered a surplus of USD 100.8 billion; the trade in services recorded a deficit of USD 80.9 billion, with travel, transport and intellectual property fees remaining the main deficit items of trade in services. Second, the financial account excluding reserve assets maintained surplus, and the cross-border capital continued its net inflow trend since 2017. In the third quarter of 2018, there was a surplus of USD 14 billion in financial account excluding reserve assets. In particular, net inflows of USD 33.9 billion came from securities investment. Direct investment remained basically balanced, with a net outflow of USD 25.1 billion for ODI, and a net inflow of USD 25.2 billion from FDI. Q: Could you tell us about China's international investment position (IIP) for the third quarter of 2018? A: At the end of September 2018, China’s overall international investment position remained stable, and its reserve assets continued to be the largest in the world. Firstly, the total size of external financial assets increased slightly. At the end of September 2018, China’s external assets reached USD 7,047.3 billion, up by 0.1% from the end of June. Specifically, ODI assets totaled USD 1,542 billion, up by 1.3%; external securities investment assets registered USD 528.8 billion, up by 2.0%; other external investment assets registered USD 1,793.6 billion, up by 0.8%; and reserve assets stood at USD 3,177.1 billion, still remaining the largest in the world. Secondly, external liabilities increased. At the end of September 2018, China's external debt reached USD 5,354.5 billion, up by 1.1% from the end of June, mainly affected by exchange rate changes and revaluation. Specifically, FDI liabilities registered USD 2,960.3 billion, up by 0.3%; external securities investment liabilities stood at USD 1,133.1 billion, up by 0.4%; and other external investment liabilities registered USD 1,253 billion, up by 3.4%. 2018-12-28/en/2018/1228/1482.html
-
The State Administration of Foreign Exchange (SAFE) has recently disseminated the preliminary data in the Balance of Payments for the fourth quarter and the whole year of 2018. The SAFE spokesperson and chief economist Wang Chunying answered media questions on relevant issues. Q: Could you brief us on China's balance of payments for 2018? A: In 2018, China's BOP found an adaptive equilibrium. Both current account and financial account (excluding reserve assets) were in surplus and reserve assets rose. The surplus under the current account remained within a reasonable range. In 2018, China's current account surplus was USD 49.1 billion. Although there was a deficit in the first quarter, it maintained surplus from the second quarter to the fourth quarter and the scale of surplus expanded quarter by quarter. In the fourth quarter, the current account surplus was USD 54.6 billion, up by 135% quarter on quarter, which was mainly attributed to a surplus of USD 139.1 billion, or a quarter-on-quarter increase of 38% under trade in goods in the Balance of Payments. The deficit of trade in services was USD 64.1 billion, down by 21% quarter on quarter. Financial account (excluding reserve assets) remained in surplus, and cross-border capital registered net inflow. In 2018, financial account (excluding reserve assets) posted a surplus of USD 60.2 billion (including net errors and omissions for the fourth quarter). Among which, direct investment registered a net inflow of USD 107.4 billion, up by 62% year on year. Specifically, the net outflow of ODI was USD 96.1 billion, down by 6%, and the net inflow of FDI into China registered USD 203.5 billion, up by 21%. Reserve assets rose. In 2018, China's reserve assets increased by USD 18.9 billion due to the BOP transactions (excluding the impact of non-transaction factors such as exchange rate and price), among which, foreign exchange reserves increased by USD 18.2 billion. Thanks to China's sustained and sound economic development and long-term good prospects, the cross-border capital flows in the future will maintain overall stability and China's balance of payments will also remain basically balanced. 2019-02-15/en/2019/0222/1491.html
-
The State Administration of Foreign Exchange (SAFE) has recently released the data on external debt as at the end of September 2018. The SAFE spokesperson and Chief Economist Wang Chunying answered media questions on relevant issues. Q: Could you brief us on China's external debt for the third quarter of 2018? A: China witnessed growth in external debt for the third quarter of 2018. As at the end of September, China's full-scale outstanding external debt (including foreign currencies) amounted to USD 1.9132 trillion, up by USD 42.7 billion or 2.3% from the end of June, mainly due to the growth of the balance of trade credit and prepayment and of debt securities. Q: What are the main reasons for the growth of China’s outstanding external debt in the third quarter? A: First, the scale of China’s import and export trade increased steadily in the third quarter. In particular, the import trade increased by nearly 19% from the same period last year, and the balance of trade financing increased accordingly. Second, in recent years, with the gradual acceleration of China’s bond market opening to the outside world, foreign investors have continued to increase their holdings of domestic bonds, and the proportion of debt securities in China’s full-scale external debt has been rising steadily. As of the end of September 2018, the proportion of debt securities was 22.4%. As the global economic situation faces many uncertainties in the future, the SAFE will continue to closely monitor changes in external debt situations, guard against risk of cross-border capital flows and safeguard national economic and financial security. 2018-12-28/en/2018/1228/1481.html
-
Q: The latest data on foreign exchange reserves disseminated by the People's Bank of China show that China's foreign exchange reserves by the end of November 2018 rose by USD 8.6 billion month on month. My question is what caused such changes in foreign exchange reserves and how the foreign exchange reserves will change in the future? A: By the end of November 2018, China's foreign exchange reserves stood at USD 3,061.7 billion, up by USD 8.6 billion or 0.3% from the end of October. In November, China's balance of payments continued to maintain steady operation. Affected by change in expectation of US monetary policies and fluctuations of international oil prices, bond prices of major countries rose slightly on the whole, while the US dollar index increased marginally amid fluctuations. Due to the combined impact of exchange rate translation and asset price changes etc., the foreign exchange reserves witnessed an increase. Since the beginning of this year, the instabilities and uncertainties in the external environment have increased remarkably. However, China's economy has maintained overall stability and made steady progress. The RMB exchange rate has showed an increased two-way floating elasticity, supply and demand in the foreign exchange market has maintained basic equilibrium, and cross-border capital flows have been stable on the whole. Looking ahead, although there are many uncertainties in the global economy and finance, the long-term positive fundamentals of China's economy has remained unchanged. As China continues to expand reform and opening-up, the impetus and momentum for China's economic development will be further strengthened, thus laying a solid foundation for the overall stability of the foreign exchange market. Under the combined impact of internal and external factors, China's foreign exchange reserves are expected to remain stable amid fluctuations. 2018-12-07/en/2018/1207/1477.html
-
The State Administration of Foreign Exchange (SAFE) held a press conference on the foreign exchange receipts and payments for the first half of 2018 in the State Council Information Office on Thursday, July 19, 2018 at 10 am and answered press questions. Moderator Hu Kaihong: Good morning, ladies and gentlemen. Welcome to the press conference held by the State Council Information Office. Today we are very glad to invite Ms. Wang Chunying, Director of the Department of Balance of Payments of the State Administration of Foreign Exchange (SAFE). First of all, let’s welcome Director Wang to make an introduction. 2018-07-19 10:00:00 Wang Chunying: Good morning, everyone. Welcome to today's conference. I would first like to unveil foreign exchange receipts and payments for the first half of this year, and then answer your questions. In the first half of 2018, the global economic recovery has slowed down but maintained overall stability, and the fluctuation of the international financial market has increased.China's economic operation has maintained an overall stable trend with improved development. The results in transformation and upgrading have been outstanding and quality and efficiency have continued to improve. The exchange rate of RMB against US dollar fluctuates in both directions, and the exchange rate is expected to be basically stable. The SAFE adheres to the general tone of steadiness with progress, and further deepens the reform and opening-up of foreign exchange administration around promoting the formation of a new pattern of comprehensive opening-up. Overall, in the first half of 2018, China's cross-border capital flows were generally stable, and supply and demand in the domestic foreign exchange market were basically balanced. 2018-07-19 10:01:30 Wang Chunying: Banks settled foreign exchange in the amount of RMB 5.91 trillion (equivalent to USD 928.2 billion) and sold foreign exchange in the amount of RMB 5.82 trillion (equivalent to USD 914.4 billion) for the first half of 2018, with a surplus of RMB 88 billion (equivalent to USD 13.8 billion). The data on banks' foreign-related receipts and payments for customers show that banks' foreign-related receipts for customers amounted to RMB 10.86 trillion (equivalent to USD 1.71 trillion), and their external payments hit RMB 10.94 trillion (equivalent to USD 1.72 trillion), representing a deficit of RMB 74.6 billion (equivalent to USD 12.1 billion). China’s foreign exchange receipts and payments for the first half of the year present the following characteristics: First, banks’ foreign exchange settlement and sales turned from deficit to surplus, and deficit of foreign-related receipts and payments declined.In the first half of 2018, in US dollar terms, foreign exchange settlement by banks was up by 20% year on year, and foreign exchange sales by bank was up by 6%, resulting in a surplus of USD13.8 billion, from a deficit of USD93.8 billion in the same period last year;banks' foreign-related receipts for customers were up by 23% year on year, and the payments up by 17%, leading to a deficit of USD 12.1 billion, representing a decrease of 86% year on year. 2018-07-19 10:01:48 Wang Chunying: Second, the supply and demand of foreign exchange market maintained basic balance.Based on data on banks' foreign-related foreign exchange receipts and payments for customers, the first quarter and second quarter of 2018 registered a surplus of USD15.8 billion and USD4.6 billion respectively. Except for February and March, all other months achieved surplus;The foreign exchange settlement and sales registered a deficit of USD18.3 billion in the first quarter, which turned into a surplus of USD32 billion in the second quarter.Overall, China’s foreign exchange supply and demand maintained basic equilibrium in the first half of this year. 2018-07-19 10:03:54 Wang Chunying: Third, the foreign exchange sales rate dropped while foreign exchange financing of enterprises maintained general stability.In the first half of 2018, the foreign exchange sales rate which measures the willingness to buy foreign exchange, or the ratio of foreign exchange purchased by customer from banks to customer’s foreign-related foreign exchange payments was 64%, down by 4 percentage points from the same period last year. The ratio for the first quarter and the second quarter was 64% and 63% respectively, indicating that the willingness of enterprises to buy foreign exchange declined as a whole while foreign exchange financing became more stable.At the end of June 2018, the balance of cross-border trade financing denominated in foreign currencies for imports such as refinancing and forward L/C etc. of enterprises rose by USD12.6 billion from the end of last year, while banks’ balance of foreign exchange loans in China maintained basically stable as compared with that at the end of last year. Fourth, the foreign exchange settlement rate climbed, indicating market players were less willing to hold foreign exchange.In the first half, the foreign exchange settlement rate that measures the wiliness to settle foreign exchange, or the ratio of foreign exchange sold to banks by customers to their foreign-related foreign exchange receipts was 66%, up by 3 percentage points year on year. To be specific, the ratio was 62% and 70% respectively for the first and second quarter, indicating rising wiliness of market players to settle foreign exchange. At the end of June, the balance of domestic foreign exchange deposits of banks decreased by USD19.3 billion from the end of last year, while the same period last year registered an increase of USD41.4 billion. 2018-07-19 10:04:46 Wang Chunying: Fifth, bank’s forward foreign exchange settlement and sales registered a small deficit. In the first half of 2018, the value of forward foreign exchange settlement contracted by banks for customers was up by 91% year on year, while that of forward foreign exchange sales contracted was up by 163%, leading to a deficit of USD 24.8 billion in forward foreign exchange settlement and sales contracted with banks. Specifically, forward foreign exchange settlement and sales contracts posted a deficit of USD17.8 billion in the first quarter, a deficit of USD7 billion in the second quarter, with deficit narrowed by 60% quarter-on-quarter. Sixth, foreign exchange reserve maintained overall stability. As of the end of June 2018, affected by non-trading factors such as exchange rate conversion and asset price changes, the balance of China’s foreign exchange reserves stood at USD3,112.1 billion, down by USD27.8 billion from the end of 2017. These are the data unveiled and characteristics of China’s foreign exchange receipts and payments in the first half year. 2018-07-19 10:05:45 ModeratorHu Kaihong: Thank you, Director Wang. Please mention the news organization you represent before you ask questions. 2018-07-19 10:08:01 CCTV reporter: What changes have taken place in the situation of cross-border capital flows in the first half of this year? Could you tell us something about this change and how do you evaluate it? 2018-07-19 10:08:45 Wang Chunying: Thank you for your question. This year, especially since the second quarter, the international financial market has changed considerably. We see that the US dollar exchange rate has changed its previous downward trend, and the US dollar interest rates have also risen, some emerging economies have been relatively impacted, global trade frictions have intensified, risk aversion of markets has increased, and fluctuation of international capital markets has increased.Therefore, the complexity, fluctuation and uncertainty of the external environment have increased significantly. However, under this context, the domestic economy in the first half of the year has remained stable, opening-up has continued to deepen, the foreign exchange market has maintained a relatively stable pattern, and the overall performance has been outstanding. We can make two comparisons and share with you the situation of cross-border capital flows in China in the first half of this year. First of all, from the vertical comparison, China's foreign exchange market operation in the first half was more stable and balanced than that of previous years.On the one hand, there was a surplus in the banks' foreign exchange settlement and sales and cross-border foreign exchange receipts and payments, while there were relatively large deficit in the same period before.In the first half of this year, the surplus of banks' foreign exchange settlement and sales was USD13.8 billion, while for the first half of 2015 to 2017, the deficits were USD105.4 billion, USD173.8 billion and USD93.8 billion respectively.In the first half of this year, the surplus of banks' foreign-related receipts and payments for customers was USD20.4 billion while for the first half of 2015 to 2017, the deficits were USD22.8 billion, USD25.9 billion and USD14.3 billion respectively.From this perspective, both the foreign exchange settlement and sales and the cross-border foreign exchange receipts and payments witness surpluses, which have changed greatly compared with previous years. 2018-07-19 10:10:06 Wang Chunying: On the other hand, viewed from the vertical comparison, the two-way fluctuation of RMB exchange rate has intensified, market expectations have been reasonably differentiated, and the trading behaviors of market players have become more diversified.In the first half of this year, the exchange rate of RMB against the US dollar showed a two-way fluctuation of rising first and falling afterwards. The banks’ foreign exchange settlement and sales and cross-border receipts and payments in different months witnessed alternation of slight surplus and deficit, rather than the previous one-way change, which reflects the fact that market players tend to decide and arrange their cross-border receipts and payments as well as foreign exchange settlement and sales in light of their actual demands. 2018-07-19 10:21:12 Wang Chunying: Horizontal comparison shows that China's foreign exchange market and RMB exchange rate are relatively stable across the globe.In the first half of this year, the US dollar index rose by 2.7%, indicating that the currencies of major developed economies fell by 2.7% against the US dollar. EMCI fell by 7.3%; meanwhile the middle rate of RMB against the US dollar slightly fell by 1.2% and the CFETS of RMB slightly increased by 0.9%. During the turbulent period of emerging markets, because of the stable economic fundamentals, good balance of payments, the level of external liabilities within the safety range, and relatively abundant foreign exchange reserves, China has effectively responded to external shocks, and our cross-border capital flows have not been greatly affected. Therefore, both from vertical and horizontal comparisons, in the first half of the year, when the external environment fluctuation rises, cross-border capital flows in China have been generally stable, supply and demand in the foreign exchange market have been basically balanced, and the two-way fluctuation of RMB exchange rate has intensified. 2018-07-19 10:25:03 Reporter of People's Daily Overseas Edition: Under the background of Sino-US trade friction, will our pressure of cross-border capital outflow increase in the future?At the same time, how will the operation of the foreign exchange market be affected? 2018-07-19 10:30:32 Wang Chunying: Sino-US trade friction is a matter of great concern to all of us. We are also very concerned about it whose future evolution needs to be continuously observed.As regards impact on cross-border capital flows and foreign exchange market operation as you just mentioned, I would like to make a few comments. Firstly, from the perspective of China's economic fundamentals, China's economic resilience, adaptability and large space for maneuver are the solid foundation for the smooth operation of the foreign exchange market. At present, China's economic growth has shifted from mainly industry driven to industry and services driven, from mainly investment driven to investment and consumption driven, and from a major exporting country to a major exporting and importing country. All these changes have enhanced the stability and resilience of China's economy.Moreover, China's economy is now entering a stage of high-quality development, especially as the manufacturing industry chain is complete, and the transformation and upgrading is steadily advancing, China’s comparative advantage in the world will continue to exist and further consolidate. In the first half of this year, the national fixed assets investment (excluding farmers) increased by 6.0% year on year, of which the investment on high-tech manufacturing industry increased by 13.1% year on year, whose growth rate was 7.1 percentage points faster than that of the total investment.This is also directly related to the fact that we are in the high-quality development stage and our focus is on the upgrading of the manufacturing industry.In addition, the domestic market has huge potential, financial risks are generally controllable, foreign exchange reserves are sufficient, space for policy regulation is large, and we have conditions, capabilities and confidence to meet various challenges. 2018-07-19 10:31:38 Wang Chunying: Secondly, from the perspective of fundamentals of China's policy, adhering to the goal of reform and opening-up will create favorable conditions for the balanced flow of cross-border capital in China. This year marks the 40th anniversary of China's reform and opening up. When President Xi Jinping attended the Boao Forum in Asia in April, he once again demonstrated China's determination to expand its opening up. Recent relevant measures have been actively promoted. For example, in early June, the State Council issued a circular on the utilization of foreign capital, putting forward six measures: investment liberalization, facilitation, investment promotion and protection, regional opening up optimization, and promoting innovation and upgrading of national development zones, so as to further create a fair, transparent, convenient and more attractive investment environment.Moreover, for example, the 2018 version of Negative List of Foreign Investment Access issued at the end of June has reduced items from 63 to 48, and a series of major opening up measures have been introduced, including a substantial expansion of the opening up of services in the fields of finance, infrastructure, transportation, trade and circulation, a basic opening up of manufacturing industries and easing access to fields like agriculture and energy resources.In addition, the domestic capital market has been further opened up, and major international indices have gradually been incorporated into the stock market and bond market, which have shown relevant effects.In the first half of this year, the net cross-border capital inflows of foreign securities investment in China increased by two times over the same period last year. At present, the share of foreign investors in domestic stock market and bond market is less than 3% and 2%. Compared with the major developed countries and some emerging market economies, the proportion is low, and there is still much room for growth in the future. 2018-07-19 10:37:33 Wang Chunying: In addition, over the past few years, we have further accumulated management experience and enriched policy instruments in dealing with external pressures.The SAFE will continue to adhere to the general tone of steadiness with progress. On the one hand, the reform of foreign exchange administration will be deepened to promote the two-way opening up of financial markets and serve the new pattern of comprehensive opening up in China. On the other hand, the stability of the foreign exchange market will be maintained to guard against the risk of cross-border capital flows, safeguard the security, liquidity, value preservation and appreciation of foreign exchange reserves, and safeguard the national economic and financial security. Generally speaking, the economic and policy fundamentals closely related to the operation of China's foreign exchange market remain stable, and cross-border capital flows and the operation of China's foreign exchange market have conditions to maintain overall stability. 2018-07-19 10:43:52 Nikkei reporter: Deficit occurred in China's current account in the first quarter. What impact do you think it will have on China's cross-border capital flows? 2018-07-19 10:45:43 Wang Chunying: Thank you for your questions. In the first quarter of this year, China's current account witnessed slight deficit, but it has tended to be balanced.This change has drawn much concern so I would like to take this opportunity to share some views with you on this issue. First, in recent years, China's current account continued to reach basic equilibrium of receipts and payments, which it is still in.In 2016 and 2017, the ratio of surplus under the current account to GDP was 1.8% and 1.3% respectively. The ratio of surplus to GDP in some quarters was as low as 0.5%.This shows that in recent years, China's current account has reached a very stable range of receipts and payments, and a small surplus can easily turn into a small deficit in a certain period, both of which fall into the range of basic equilibrium. In practice, international studies have shown that whether the deficit under the current account continues to exceed about 5% of GDP is a very critical early warning indicator.Therefore, in the first quarter of this year, China's current account is still within a stable and healthy reasonable range. 2018-07-19 10:48:08 Wang Chunying: Secondly, the basic equilibrium of receipts and payments under the current account in China reflects the effect of domestic economy transforming to high-quality development, and it is also an important contribution to global economic rebalancing. Balance of payments is an external manifestation of the operation of the domestic economy. The current account status of the balance of payments mainly reflects the characteristics of two aspects of China's domestic economic development in recent years. On the one hand, it shows that substantial progress has been made in China's economic restructuring, and the role of domestic demand in economic growth has been significantly enhanced.According to the estimates of the National Bureau of Statistics, from 2008 to 2017, the annual contribution rate of domestic demand to China's economic growth reached 105.7%. Among them, final consumption expenditure has been the first engine of China's economic growth for five consecutive years, and the contribution rate of final consumption expenditure to economic growth reached 78.5% in the first half of this year. This shows that substantial progress has been made in China's economic restructuring; that is, the role of domestic demand in economic growth has been significantly enhanced.On the other hand, it reflects the continuous growth of residents' income and the upgrading of consumption. With the continuous improvement of people's living standards and the rapid rise of consumption, it is normal for people to increase their demand for imported goods, outbound tourism and studying abroad. In addition, China's balance of payments approaching basic equilibrium is also very important for global economic rebalancing. 2018-07-19 10:55:11 Wang Chunying: Thirdly, China's economic development model determines that it is impossible for China's current account to sustain a large deficit in the future.Looking from the history of economic development worldwide, most of the economies with developed manufacturing, such as Germany, Japan, Korea and Taiwan China, have maintained surplus under the current account for a long time, and the occurrence of deficit was rare or the duration of deficit was very short. If the surplus fell, it usually occurred in the stage of transformation and upgrading. China's manufacturing industry will be in a very important position in the national economy for a long time. It has a very mature manufacturing infrastructure. What cannot be ignored is that we have a large number of skilled workers, our industrial chain is relatively complete and our competitiveness in the world is still relatively strong. At present, we are in the process of transformation and upgrading from middle and low-end industries to middle and high-end industries. This upgrading will still help to maintain a reasonable surplus under trade in goods in the medium and long term. At the same time, China's consumption upgrading will gradually move from a fast rising period to a stable period. For example, the growth rate of rapidly increasing overseas tourism and studying abroad in recent years has stabilized, and this trend is also in line with international experience. 2018-07-19 10:58:53 Wang Chunying: Therefore, from the above aspects, China's current account balance will remain within a reasonable range in the future. 2018-07-19 11:05:06 Reporter of South China Morning Post: It is estimated that the Sino-US trade war will lead to capital outflow from China. If there is capital outflow, what measures will the SAFE take to cope with it? 2018-07-19 11:07:52 Wang Chunying: Preventing the risk of cross-border capital flows is an important task of foreign exchange authorities. We are highly concerned about the situation of cross-border capital flows.What you asked was a hypothetical question, but the current operation of our foreign exchange market is relatively stable.We have calculated the recent data performance; since June 25 this year, market fluctuations have increased, but from daily data of individual foreign exchange settlement and sales and cross-border capital flows of non-banking sector, it was far from reaching the period with higher pressure of capital outflow in 2015 and 2016, and the average deficit of individual foreign exchange settlement and sales was only 28% of the daily average on the month with highest pressure at that time. And the daily net outflow of cross-border capital was only 12% of the daily average on the month with highest pressure at that time.So your hypothesis didn't come up. 2018-07-19 11:08:56 Wang Chunying: To guard against the risk of cross-border capital flows, we continue to enrich our response plans and policy reserves, and always adhere to two basic considerations.The first is to deepen the reform of foreign exchange administration, promote the two-way opening up of financial markets and serve the new pattern of comprehensive opening up in China.The second is to maintain the stability of the foreign exchange market, guard against the risk of cross-border capital flows, safeguard the security, liquidity, value preservation and appreciation of foreign exchange reserves, and safeguard the national economic and financial security. In the long run, while accelerating the reform of key areas and links of foreign exchange administration, we will continuously improve and optimize macro-prudential management and micro-market supervision of cross-border capital flows.First, establishing a macro-prudential management system for cross-border capital flows, counter-cyclically adjusting short-term fluctuations in the foreign exchange market, and safeguarding the security of the financial system and the equilibrium of balance of payments.Second, improving the micro-regulatory framework of the foreign exchange market, cracking down on foreign exchange irregularities to maintain the order of the foreign exchange market. 2018-07-19 11:22:54 Wang Chunying: As for macro-prudential policy, first, the monitoring, early warning and response mechanism of macro-prudential management of cross-border capital flows should be established and improved.Secondly, the toolbox of macro-prudential management of cross-border capital flows should be enriched, which will be adjusted continuously according to the changing situation and open policies, including the risk reserve used in the past, and macro-prudential management policies focusing on banks and short-term capital flows. As for the supervision of micro-market, the first is to adhere to the verification of authenticity, compliance and legality, fulfill the obligations of anti-money laundering, anti-terrorist financing and anti-tax avoidance, and protect the legitimate rights and interests of market players. The second is to maintain the stability and consistency of policies across cycles. The third is to adhere to the principle of "leaving traces" in cross-border transactions and strengthen penetrating supervision. 2018-07-19 11:29:11 China Daily reporter: Since this year, the spreads between China and the United States have narrowed as a whole, and the Federal Reserve will continue to raise interest rates in the future. Will this put some pressure on China's capital outflow? 2018-07-19 11:34:25 Wang Chunying: Thank you for your question. The impact of interest rate spreads on cross-border capital flows needs to be analyzed and judged more comprehensively. Spreads do affect cross-border capital flows, but they are not the only or fundamental factor.We can cite several examples: First, in recent years, the interest rate of the US dollar has been significantly higher than that of the Euro zone and Japan, but international capital has not flowed from Europe and Japan to the United States continually, and the exchange rate of the US dollar has not continued to appreciate in the past few years.It shows that international capital needs to consider the comparison of economic growth expectations, monetary policy adjustment, and the resultant exchange rate changes, and also the decentralization of different assets.Secondly, historically, in order to curb capital outflow, many emerging economies raised interest rates by a large margin, even to tens of percentage points, but they failed to attract more capital inflows or retain domestic capital outflow. The related risks brought by economic vulnerability is a very important consideration for all kinds of investment capital.Thirdly, for most of the time period from 2006 to 2007, the interest rate of RMB in China was lower than that of US dollar. At that time, we were faced with continuous net cross-border capital inflows, which showed that factors such as domestic economic conditions, long-term investment prospects and RMB exchange rate expectations had significantly greater impact than that of spreads.So we say that spreads will affect cross-border capital flows, but they are not the only nor the most fundamental factor. 2018-07-19 11:35:38 Wang Chunying: Therefore, factors such as relatively stable economic fundamentals, still high comprehensive investment returns, and increasingly improving demand for RMB asset allocation will have a more important impact on China's cross-border capital flows. First, the uncertainties in the current international financial market have increased and investment risks have increased. However, China's economic fundamentals are generally stable with progress, and the overall social and political situation is stable. At present, China is in the deepening period of reform and opening up. A stable investment environment and huge market development space are still conducive to attracting investment. Secondly, the comprehensive return of overseas investment in China is still very high.According to the data of balance of payments, we estimate that the average return on investment of all kinds of capital coming to China in 2017 was 5.9%. Among them, the return on direct investment in China was higher, which was obviously higher than that of foreign direct investment in developed countries like Europe and America. Thirdly, China's securities market has been continuously opened up to the outside world. At present, RMB assets are still in the stage of low allocation in international capital investment. Just now, I mentioned that the market value of foreign investors in stock market and bond market is less than 3% and 2%, respectively, so there is great room for improvement in the future. Fourthly, the two-way fluctuation of the RMB exchange rate against the US dollar has increased, and it is a relatively stable and powerful currency in the global currency.According to the daily data released by the Bank for International Settlements, it is estimated that CFETS of RMB appreciated by 2.8% in the first half of this year, ranking 10th out of 61 currencies monitored by the Bank for International Settlements. 2018-07-19 11:38:36 Wang Chunying: In addition, the impact of the Federal Reserve raising interest rate on the long-term interest rate of the US dollar needs to be observed.Looking back on 2017, the Federal Reserve raised interest rates three times, but the yield of 10-year Treasury bonds remained basically unchanged. Market expectations of the U.S. economic outlook and other factors will affect its long-term interest rate movements. These are my views on your questions. Thank you. 2018-07-19 11:41:44 Economic Daily reporter: How has China's external debt changed since the beginning of this year, and would you please analyze the causes and risks of this change? 2018-07-19 11:44:47 Wang Chunying: According to the latest published data, at the end of March this year, China's total external debt balance reached USD 1,843.5 billion, an increase of USD132.9 billion over the end of last year. From the perspective of term structure, China's external debt structure has been further optimized, and the proportion of short-term external debt has declined significantly.At the end of March this year, the medium- and long-term external debt balance accounted for 36% of the total external debt, which was basically the same as that at the end of 2017, up by 9 percentage points from that at the end of 2014 when the full-scale external debt statistics were first published.We have observed that 80% of the newly growing external debt is debt securities. Foreign investors have increased their investment in China's medium- and long-term bonds, reflecting their confidence in China's long-term economic growth. At the end of March, the ratio of outstanding short-term external debt was 64%, which was the same as that at the end of 2017, down by 9 percentage points from that at the end of 2014. 2018-07-19 11:45:19 Wang Chunying: According to the classification of debt instruments, the growth of money and deposits, and debt securities is obvious. The increase of both accounts for about 70% of the total increase of external debt, which is mainly because of the increased deposits in domestic banks by overseas non-resident institutions and individuals. Meanwhile, the willingness of overseas non-resident institutions to invest in domestic bond market is strong. Overall, China's external debt risk is controllable.Several external debt risk indicators, such as liability ratio, debt ratio, debt servicing ratio, are within the safety line of international standards. Preliminary judgment shows that China's outstanding external debt will grow steadily in the second quarter, which is conducive to promoting domestic market players to make better use both the domestic and international resources and markets under controllable risks. Thank you. 2018-07-19 11:46:25 Moderator Hu Kaihong: This is the end of today's conference. Thank you, Director Wang! Thank you all! (The original text is available at www.china.com.cn) 2018-07-19/en/2018/0719/1475.html