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Q: Recently there have been comments by scholars that since 2003 China has suffered a huge loss of USD271.1 billion in its foreign exchange reserves, due to the appreciation of the RMB against the US dollar. What is your comment on this? A: First, the appreciation of the RMB will not bring about losses in Chinas foreign exchange reserves. Foreign exchange reserves essentially are assets in foreign exchange, which use the USD as the recording currency. Variations in the RMB/USD exchange rate will result in changes in the book value of RMB converted from the foreign exchange reserves, which are not the actually realized gains or losses. The variation only means some differences in the book value of the reporting currency, be it RMB or USD, and does not have a direct impact on the effective purchasing power of the foreign exchange reserves. The changes in the exchange of currency will only occur when foreign exchange reserves are repatriated from overseas countries (regions) and converted into RMB. Presently, China has no need to repatriate and settle its foreign exchange reserves on a large scale. In addition, equivalent incomes in RMB were attained by banks, enterprises, and individuals when foreign currencies were sold; the appreciated RMB generated considerable benefits in lowering the costs of imports, increasing incomes from investment, and so forth. That is to say, the benefits have been retained within the country. Second, the book loss of foreign exchange reserves caused by the RMB appreciation is far less than the book surplus of Chinas financial assets. The book loss and surplus generated from the reporting currency are like two sides of a coin (in economics called duality). In contrast to book losses of RMB converted from foreign exchange reserves which are denominated in USD, if converted to USD China enjoys a book surplus of RMB financial assets held by citizens. As of the end of March 2011, Chinas balance of foreign exchange reserves reached USD3.04 trillion. Converted at the end-March 2011 exchange rate, the total scale of RMB financial assets, such as RMB deposits of enterprises and individuals, stocks, treasury bonds, and insurance assets during the corresponding period was more than five times that of Chinas foreign exchange reserve assets. This means that when the RMB appreciates, the book gains of RMB assets is over 5 times the book losses of the foreign exchange reserve assets. Furthermore, the book gains of RMB assets will become more substantial when property assets and other kinds of financial assets held by residents in forms of stocks, bonds, and so on are taken into account. Likewise, in essence the above losses or gains are variations in book values. That means the variations will not be realized as gains or losses if the currency is not exchanges. Third, the effective purchasing power of foreign exchange reserves depends on the yield of foreign exchange reserves and the inflation rate of the countries where the investments are made. China has maintained stable gains from its foreign exchange reserves operations over the years; the yields of operations far exceed the inflation rate of the countries (regions) where investments have been made, such as the U.S., Europe, or Japan, thereby ensuring the effective purchasing power of the foreign exchange reserves. During the 2000-2010 period, the consumer price index (CPI) in the U.S., Europe, and Japan increased at an annual rate of 2.4 percent, 2.1 percent, and -0.2 percent respectively. In the meantime, China has seen a far higher average annual operating yield from its foreign exchange reserves. 2011-05-06/en/2011/0506/995.html
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The SAFE recently released the revised data on China's Balance of Payments Statement for the year 2010, as well as the revised data for each quarter of 2010 according to the latest situation, and the annual data from 2005 to 2009. The current account and the capital and financial account continued to post a "twin surplus" in 2010, and international reserves maintained a growing momentum. The surplus under the current account totaled USD305.4 billion, a rise of 17 percent compared with that in the previous year. Specifically, according to the statistical coverage of the balance of payments, the surpluses in goods, income, and current transfers reached USD254.2 billion, USD30.4 billion, and USD42.9 billion, respectively, whereas the deficit in trade in services amounted to USD22.1 billion. Meanwhile, China's surplus under the capital and financial account totaled USD226 billion, an increase of 25 percent. In particular, net inflows of direct investments, portfolio investments, and other investments amounted to USD124.9 billion, USD24 billion, and USD72.4 billion respectively. International reserves assets posted an increase of USD471.7 billion, a rise of 18 percent. Specifically, transactions in foreign exchange reserves assets registered an increase of USD469.6 billion (exclusive of the influence of changes in value due to non-transaction factors such as exchange rates and prices) and the reserve position in the IMF and special drawing rights registered a total increase of USD2.2 billion. In Q4 of 2010, the surplus under the current account was USD102.1 billion, a rise of 7 percent year on year; the surplus under the capital and financial account totaled USD118.9 billion, an increase of 88 percent; and international reserves assets posted an increase of USD185.7 billion, an increase of 49 percent. In addition, the BOP Analysis Team of the SAFE released the China's Balance of Payments Report for 2010 in order to facilitate understanding among all groups sin society about the data and analysis of China's balance of payments. 2011-04-01/en/2011/0401/989.html
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Initial estimates reveal that in Q1 of 2011 the current account and the capital and financial account (including net errors and omissions) continued to post a surplus and international reserves maintained a growing momentum. In Q1, the surplus under the current account totaled USD29.8 billion, a year-on-year decrease of 18 percent as calculated on a comparable basis (the same below). Specifically, the surpluses in goods, income, and current transfers reached USD20.8 billion, USD7.6 billion, and USD11.6 billion, respectively, whereas the deficit in trade in services amounted to USD10.2 billion. Meanwhile, China's surplus under the capital and financial account (including net errors and omissions) totaled USD111.4 billion. In particular, net inflows of direct investments amounted to USD42.6 billion. International reserve assets posted an increase of USD141.2 billion, a rise of 47 percent. Specifically, transactions in foreign exchange reserve assets registered an increase of USD138 billion (exclusive of the influence of non-transaction changes in value such as exchange rates and prices), the reserve position in the IMF registered an increase of USD3.2 million, and special drawing rights registered a decrease of USD100 million. 2011-05-24/en/2011/0524/996.html
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The SAFE recently released China's International Investment Position for year-end 2010. The statistics reveal that at the end of 2011 China's external financial assets reached USD4126 billion, up 19 percent over that at the end of 2009; external financial liabilities reached USD2335.4 billion, up 20 percent over that at the end of 2009; and external financial net assets reached USD1790.7 billion, up 19 percent over that at the end of 2009. Among the external financial assets, direct investments abroad totaled USD310.8 billion, portfolio investments totaled USD257.1 billion, other investments totaled USD643.9 billion, and reserves assets totaled USD2914.2 billion, accounting for 7 percent, 6 percent, 16 percent, and 71 percent respectively of the external financial assets. In terms of external financial liabilities, foreign direct investments totaled USD1476.4 billion, portfolio investments totaled USD221.6 billion, and other investments totaled USD637.3 billion, accounting for 63 percent, 10 percent, and 27 percent respectively of external financial liabilities. The International Investment Position (hereinafter referred to as the IIP) is a statistical statement reflecting the stocks of financial assets and liabilities of one country or region to other countries or regions in the world at one specific point; together with the Balance of Payments Statement (BOP Statement) it constitutes the complete international accounts system, indicating the trade flows of the country or region. The SAFE revised its IIP for year-end 2009 according to the latest data. FILE: China's International Investment Position 2011-05-30/en/2011/0530/999.html
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According to statistical data released by the State Administration of Foreign Exchange (SAFE), in May 2011 the amount of foreign exchange settlement and sales on behalf of clients by banks amounted to USD139 billion and USD87.1 billion respectively. The surplus of foreign exchange settlement and sales on behalf of clients by banks amounted to USD51.9 billion. During the first five months of 2011, the accumulated amount of foreign exchange settlement and sales on behalf of clients by banks amounted to USD644.6 billion and USD413.9 billion, respectively. The surplus of foreign exchange settlement and sales was USD230.7 billion. In May 2011, foreign-related receipts and payments by domestic banks on behalf of clients amounted to USD193.2 billion and USD160.3 billion, respectively, and the surplus of foreign-related receipts and payments reached USD32.8 billion. During the first five months of 2011, the accumulated foreign-related receipts and payments by banks on behalf of clients amounted to USD875.9 billion and USD742.7 billion, respectively; and the surplus of the accumulated foreign-related receipts and payments reached USD133.2 billion. 2011-06-30/en/2011/0630/1001.html
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According to statistical data released by the State Administration of Foreign Exchange (SAFE), in March 2011 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD135.4 billion and USD94.5 billion respectively. The surplus of foreign exchange settlement and sales by banks on behalf of clients amounted to USD40.9 billion. For the first three months of 2011, the cumulative amount of foreign exchange settlement and foreign exchange sales by banks on behalf of clients amounted to USD375.7 billion and USD241.5 billion respectively. The surplus of foreign exchange settlement and sales was USD134.2 billion. During March 2011 foreign-related receipts and payments by domestic banks on behalf of clients amounted to USD188.4 billion and USD157.7 billion respectively, and the surplus of foreign-related receipts and payments reached USD30.7 billion. For the first three months of 2011, the cumulative foreign-related receipts and payments by banks on behalf of clients amounted to USD505 billion and USD429 billion respectively; and the surplus of the cumulative foreign-related receipts and payments reached USD76 billion. 2011-05-03/en/2011/0503/994.html
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According to the statistical data released by the State Administration of Foreign Exchange (SAFE), in February 2011 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD90 billion and USD65.1 billion respectively. The surplus of foreign exchange settlement and sales by banks on behalf of clients amounted to USD24.9 billion. For the first two months of 2011, the cumulative amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD240.3 billion and USD147 billion respectively. The surplus of foreign exchange settlement and sales was USD93.3 billion. In February 2011, foreign-related receipts and payments of domestic banks on behalf of clients amounted to USD129.9 billion and USD120.6 billion respectively; and the surplus of foreign-related receipts and payments reached USD9.3 billion. For the first two months of 2011, the cumulative foreign-related receipts and payments of banks on behalf of clients amounted to USD316.6 billion and USD271.3 billion respectively; and the surplus of the cumulative foreign-related receipts and payments reached USD45.3 billion. 2011-04-13/en/2011/0413/991.html
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According to the statistical data released by the State Administration of Foreign Exchange (SAFE), in April 2011 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD129.8 billion and USD85.2 billion respectively. The surplus of foreign exchange settlement and sales by banks on behalf of clients amounted to USD44.7 billion. In the first four months of 2011, the cumulative amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD505.6 billion and USD326.8 billion respectively. The surplus of foreign exchange settlement and sales was USD178.8 billion. In April 2011 foreign-related receipts and payments by domestic banks on behalf of clients amounted to USD177.8 billion and USD153.3 billion respectively, and the surplus of foreign-related receipts and payments reached USD24.5 billion. In the first four months of 2011, the cumulative foreign-related receipts and payments of banks on behalf of clients amounted to USD682.8 billion and USD582.3 billion respectively; and the cumulative surplus of foreign-related receipts and payments reached USD100.5 billion. 2011-05-25/en/2011/0525/997.html
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In Q3 of 2010 the current account and the capital and financial account continued to post a "twin surplus" and international reserves maintained a growing momentum. The surplus under the current account totaled USD102.3 billion, a year-on-year increase of 103 percent as calculated on a comparable basis (the same below). Specifically, according to the statistical coverage of the balance of payments, the surpluses in goods, income, and current transfers reached USD81.4 billion, USD14 billion, and USD10.8 billion, respectively, whereas the deficit in trade in services amounted to USD3.9 billion. Meanwhile, China's surplus under the capital and financial account totaled USD15.2 billion, a decrease of 65 percent year on year. In particular, the net inflows of direct investments and portfolio investments amounted to USD24.6 billion and USD14.1 billion respectively, whereas the net outflows of other investments reached USD24.5 billion. International reserves assets posted an increase of USD108 billion, a rise of 31 percent. Specifically, transactions in foreign exchange reserves assets registered an increase of USD107.3 billion (exclusive of the influence of changes in the value of non-transaction factors, such as exchange rates and prices) and the reserve position in the IMF registered an increase of USD700 million. In the first three quarters of 2010, China's surplus under the current account totaled USD203.9 billion, an increase of 30 percent year on year; China's surplus under the capital and financial account totaled USD130.1 billion, an increase of 2 percent; and international reserves assets posted an increase of USD286 billion, an increase of 7 percent. Chinas Balance of Payments Statement Q3 of 2010 Unit: USD100 million Items # Balance Credit Debit I. Current Account 1 1,023 5,315 4,292 A. Goods and Services 2 776 4,759 3,983 a. Goods 3 814 4,307 3,493 b. Services 4 -39 452 491 1.Transportation 5 -73 96 169 2.Travel 6 -16 118 134 3.Communication Services 7 0 3 3 4.Construction Services 8 24 38 14 5.Insurance Services 9 -36 6 42 6.Financial Services 10 -2 4 5 7.Computer and Information Services 11 18 25 7 8.Royalties and Licensing Fees 12 -29 2 30 9.Consulting Services 13 20 57 38 10.Advertising and Public Opinion Polling 14 2 7 5 11.Audio-visual and Related Services 15 0 0 1 12. Other Business Services 16 54 95 41 13. Government Services, n.i.e. 17 0 2 2 B. Income 18 140 433 293 1.Compensation of Employees 19 33 37 4 2.Investment Income 20 107 396 289 C. Current Transfers 21 108 123 15 1.General Government 22 -1 0 1 2.Other Sectors 23 108 123 14 II. Capital and Financial Account 24 152 2,717 2,565 A. Capital Account 25 9 9 0 B. Financial Account 26 143 2,708 2,565 1. Direct Investment 27 246 501 254 1.1 Abroad 28 -181 22 203 1.2 In China 29 427 478 51 2. Portfolio Investment 30 141 201 59 2.1 Assets 31 -6 36 41 2.1.1 Equity Securities 32 -3 25 28 2.1.2 Debt Securities 33 -3 10 13 2.1.2.1 Bonds and Notes 34 -3 10 13 2.1.2.2 Money Market Instruments 35 0 0 0 2.2 Liabilities 36 147 165 18 2.2.1 Equity Securities 37 154 158 3 2.2.2 Debt Securities 38 -7 7 15 2.2.2.1 Bonds and Notes 39 -7 7 15 2.2.2.2 Money Market Instruments 40 0 0 0 3. Other Investment 41 -245 2,006 2,251 3.1 Assets 42 -694 64 758 3.1.1 Trade Credits 43 -182 0 182 Long-term 44 -13 0 13 Short-term 45 -169 0 169 3.1.2 Loans 46 -259 1 260 Long-term 47 -138 0 138 Short-term 48 -122 1 122 3.1.3 Currency and Deposits 49 -270 46 316 3.1.4 Other Assets 50 17 17 0 Long-term 51 0 0 0 Short-term 52 17 17 0 3.2 Liabilities 53 449 1,942 1,493 3.2.1 Trade Credits 54 133 133 0 Long-term 55 9 9 0 Short-term 56 124 124 0 3.2.2 Loans 57 140 1,500 1,360 Long-term 58 20 50 31 Short-term 59 121 1,450 1,329 3.2.3 Currency and Deposits 60 177 303 127 3.2.4 Other Liabilities 61 -1 6 7 Long-term 62 -1 0 1 Short-term 63 0 6 6 III. Reserves Assets 64 -1,080 0 1,080 3.1 Monetary Gold 65 0 0 0 3.2 Special Drawing Rights 66 0 0 0 3.3 Reserves Position in the Fund 67 -7 0 7 3.4 Foreign Exchange 68 -1,073 0 1,073 3.5 Other Claims 69 0 0 0 c. Net Errors and Omissions 70 -94 0 94 Note: 1. This statement employs rounded-off numbers. 2. As of the third quarter of 2010, in accordance with international standards, the undistributed profits and the profits that have been distributed but not remitted shall be recorded in the Balance of Payments statement. Chinas Balance of Payments Statement For the First three Quarters of 2010 Unit: USD100 million Items # Balance Credit Debit I. Current Account 1 2,039 13,983 11,944 A. Goods and Services 2 1,555 12,597 11,042 a. Goods 3 1,711 11,370 9,659 b. Services 4 -156 1,227 1,383 1.Transportation 5 -214 247 461 2.Travel 6 -42 337 379 3.Communication Services 7 0 8 8 4.Construction Services 8 61 100 38 5.Insurance Services 9 -101 13 114 6.Financial Services 10 1 8 7 7.Computer and Information Services 11 45 66 21 8.Royalties and Licensing Fees 12 -90 6 96 9.Consulting Services 13 53 159 106 10.Advertising and Public Opinion Polling 14 6 20 15 11.Audio-visual and Related Services 15 -2 1 3 12. Other Business Services 16 129 255 127 13. Government Services, n.i.e. 17 -1 7 8 B. Income 18 182 1,035 853 1.Compensation of Employees 19 84 95 11 2.Investment Income 20 98 940 842 C. Current Transfers 21 302 351 49 1.General Government 22 -2 0 2 2.Other Sectors 23 304 351 47 II. Capital and Financial Account 24 1,301 7,751 6,450 A. Capital Account 25 34 36 2 B. Financial Account 26 1,266 7,715 6,449 1. Direct Investment 27 865 1,449 584 1.1 Abroad 28 -375 52 427 1.2 In China 29 1,240 1,396 157 2. Portfolio Investment 30 68 394 325 2.1 Assets 31 -78 201 279 2.1.1 Equity Securities 32 -77 78 155 2.1.2 Debt Securities 33 -1 123 124 2.1.2.1 Bonds and Notes 34 10 98 88 2.1.2.2 Money Market Instruments 35 -11 25 36 2.2 Liabilities 36 146 193 46 2.2.1 Equity Securities 37 158 186 27 2.2.2 Debt Securities 38 -12 7 19 2.2.2.1 Bonds and Notes 39 -12 7 19 2.2.2.2 Money Market Instruments 40 0 0 0 3. Other Investment 41 333 5,873 5,540 3.1 Assets 42 -1,075 445 1,520 3.1.1 Trade Credits 43 -616 5 621 Long-term 44 -43 0 43 Short-term 45 -573 4 578 3.1.2 Loans 46 -199 126 326 Long-term 47 -198 0 198 Short-term 48 -2 126 128 3.1.3 Currency and Deposits 49 -360 213 573 3.1.4 Other Assets 50 100 101 0 Long-term 51 0 0 0 Short-term 52 100 101 0 3.2 Liabilities 53 1,409 5,428 4,020 3.2.1 Trade Credits 54 583 583 0 Long-term 55 41 41 0 Short-term 56 542 542 0 3.2.2 Loans 57 441 4,183 3,742 Long-term 58 74 178 104 Short-term 59 367 4,005 3,638 3.2.3 Currency and Deposits 60 389 649 260 3.2.4 Other Liabilities 61 -4 13 17 Long-term 62 -4 0 5 Short-term 63 1 13 13 III. Reserves Assets 64 -2,860 0 2,860 3.1 Monetary Gold 65 0 0 0 3.2 Special Drawing Rights 66 -1 0 1 3.3 Reserves Position in the Fund 67 -17 0 17 3.4 Foreign Exchange 68 -2,843 0 2,843 3.5 Other Claims 69 0 0 0 c. Net Errors and Omissions 70 -480 0 480 Note: 1. This statement employs rounded-off numbers. 2. The data for the first three quarters of 2010 are the sum total of the data for Q3 and for H1 of 2010. 3. As of the third quarter of 2010, in accordance with international standards, the undistributed profits and profits that have been distributed but not remitted shall be recorded in the Balance of Payments statement; the data for the previous two quarters have been adjusted accordingly. 2010-12-28/en/2010/1228/972.html
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At the end of September 2010, China's outstanding external debt (excluding that of Hong Kong SAR, Macao SAR, and Taiwan Province) reached USD546.449 billion. Specifically, the outstanding registered external debt reached USD326.549 billion and the balance of trade credit totaled USD219.9 billion. With respect to terms, outstanding long- and medium-term external debt (with the remaining term) was USD177.008 billion, accounting for 32.39 percent of the outstanding external debt. Outstanding short-term external debt (with the remaining term) was USD369.441 billion, accounting for 67.61 percent of the outstanding external debt. Specifically, the outstanding registered short-term external debt (with the remaining term) was USD149.541 billion and the balance of trade credit was USD219.9 billion. In terms of the composition of the debt, trade credit and trade financing (e.g., credit support to foreign trade provided by banks) accounted for 59.52 percent and 18.65 percent of the outstanding short-term external debt 2010 (the remaining term) respectively at the end of September. The trade credit and trade financing accounted for 78.17 percent of the outstanding short-term external debt (the remaining term). The data are closely associated with the dramatic growth of Chinas foreign trade during recent years. Because trade credit and trade financing are conducted against a real foreign trade background, they generally will not result in extra external debt risks. In terms of the types of debtors, the outstanding debt of Chinese-funded financial institutions was USD133.679 billion, accounting for 40.94 percent of the total outstanding registered external debt; the outstanding debt of foreign-funded enterprises was USD101.038 billion, accounting for 30.94 percent; the outstanding debt of foreign-funded financial institutions was USD46.971 billion, accounting for 14.38 percent; the outstanding sovereign debt borrowed by ministries under the State Council was USD38.571 billion, accounting for 11.81 percent; the outstanding debt of Chinese-funded enterprises was USD5.901 billion, accounting for 1.81 percent; and the outstanding debt of other institutions was USD389 million, accounting for 0.12 percent. In terms of the types of debt, the balance of international commercial loans amounted to USD254.591 billion, accounting for 77.96 percent of the outstanding registered external debt, with the proportion rising by 3.54 percentage points compared with that at the end of 2009. The balance of foreign government loans and loans granted by international financial organizations amounted to USD71.958 billion, accounting for 22.04 percent. In terms of the currency structure, debt in US dollars accounted for 71.91 percent of the outstanding registered external debt, representing an increase of 4.15 percentage points compared with that at the end of 2009. Debt in Japanese yen accounted for 10.29 percent, representing a decline of 1.6 percentage points compared with that at the end of 2009. Debt in euro accounted for 4.32 percent, a decline of 2.06 percentage points compared with that at the end of 2009; other kinds of debt, including SDRs and HKD, accounted for 13.48 percent, a decline of 0.49 percentage point compared with that at the end of 2009. In terms of the sectors in which the debts are invested, with reference to the Industrial Classification of the National Economy, USD43.821 billion was invested in the manufacturing sector, accounting for 21.45 percent of the medium- and long-term outstanding registered external debt (based on contract terms); USD25.778 billion was invested in the transportation, warehousing, and postal service sectors, accounting for 12.91 percent; USD17.907 billion was invested in the production and supply of electricity, coal gas, and water, accounting for 8.97 percent; USD12.05 billion was invested in the information technology service sector, accounting for 6.04 percent; USD10.687 billion was invested in the real estate sector, accounting for 5.35 percent. From January to September 2010, medium- and long-term external borrowing totaled USD27.847 billion, an increase of USD14.002 billion or 101.13 percent over that during the same period of 2009; repayment of the principal was USD17.904 billion, a decrease of USD8.055 billion, or 31.03 percent, over that during the same period of 2009. Interest payments totaled USD2.031 billion, a decrease of USD532 million, or 20.76 percent. Addendum: Definition of terms and interpretations Trade credit refers to external liability arising from directly extending credit between the seller and buyer of goods transactions, specifically transactions between residents in Mainland China and foreign non-residents (including non-residents in Hong Kong SAR, Macao SAR, and Taiwan Province), i.e., debt incurred due to the difference between the time of payment and the time of the transfer of ownership of the goods. Trade credit includes credit directly provided by the supplier (e.g., the overseas exporter) for commodity transactions and services, and advance payments by buyers (e.g., overseas importers) for goods, services, and on-going business (or business to be undertaken). Trade financing refers to a loan related to trade extended by a third party (e.g., banks) to an exporter or importer--for instance, a loan extended by a foreign financial institution or an export credit agency to a buyer. Trade-related credit is a broad concept. In addition to trade credit, it also involves other kinds of credit provided for trade activities. As it is defined, trade-related credit includes trade credit, trade financing, short-term notes related to trade, and so forth. 2011-01-19/en/2011/0119/978.html