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The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on banks' foreign exchange sales and settlements and banks' foreign-related payments and receipts for customers for July 2017, and its press spokesperson answered media questions on recent cross-border capital flows. Q: China's cross-border capital flows remained steady in the first half, with a good momentum for growth. Could you brief us on China's cross-border capital flows for July? A: China's cross-border capital flows maintained a basic equilibrium in July. First, the supply and demand of foreign exchange remained balanced in China. In July, banks registered a deficit of USD 15.5 billion in foreign exchange settlements and sales, down by 26% month on month. In particular, a deficit of USD 6.3 billion was recorded in banks' foreign exchange settlements and sales for customers, down by 53%. In the same month, the value of foreign exchange contracted for forward settlements and sales recorded a surplus for fourth consecutive month, which was USD 2.6 billion. Under the combined impact of banks' spot and forward foreign exchange settlements and sales, and foreign exchange supply and demand factors such as options, a better equilibrium between the supply and demand of foreign exchange was maintained in China in the month than in the prior two months. Second, the deficit in foreign-related payments and receipts of non-banking sectors remained steady. In the month, the deficit was USD 22 billion, consistent with that of May and June. To be specific, the deficit of foreign-related receipts and payments in RMB and foreign currencies registered USD 13.8 billion and USD 8.2 billion respectively. Moreover, China's foreign exchange reserves as at the end of July, which were unveiled on August 7, had climbed for 6 consecutive months and amounted to USD 3.0807 trillion, representing a month-on-month increase of USD 23.9 billion. Domestic participants witnessed more stable and orderly foreign-related receipts and payments. First, market participants' desire to settle foreign exchange stayed stable while their desire to purchase foreign exchange was weakened. In July, the ratio of banks' foreign exchange settlements for customers to foreign-related foreign exchange receipts was 62%, down by 1 percentage point; the ratio of banks' foreign exchange purchases for customers to foreign-related foreign exchange payments was 63%, down by four percentage points month on month. Second, enterprises' enthusiasm for funding in foreign currencies was strengthened stably. In July, China continued to see stable growth in the outstanding external debt registered; and the foreign exchange purchased by enterprises to repay domestic foreign exchange loans hit a new low in recent years, down by 46% month on month. Third, foreign exchange purchased by individuals dropped. Since the beginning of this year, as market expectations are further stabilized, individuals' use of foreign exchange has become more reasonable and orderly. In July, foreign exchange purchased by individuals went down by 35% month on month and 27% year on year. Since the beginning of this year, China's economy has been more stabilized with a good momentum for stronger growth, and market expectations have become further stabilized, boosting remarkable improvement in China's foreign exchange situations. Going forward, China's cross-border capital flows will remain stable, economic fundamentals will be more supportive, expansion and further opening of domestic markets is expected to deliver stronger outcomes, and domestic market participants' adjustment of external assets and liabilities will be more stable. 2017-08-16/en/2017/0816/1294.html
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Q: The latest data on foreign exchange reserves disseminated by the People's Bank of China show China's foreign exchange reserves as at the end of September 2017 went up by USD 17 billion month on month. Could you brief us on the causes behind such a change? A: As at the end of September, China posted USD 3.1085 trillion in foreign exchange reserves, up by USD 17 billion or 0.5% month on month, marking the eighth consecutive month of increases. In September, China's cross-border capital flows and trading behaviors of domestic and foreign market participants were further stabilized and balanced. In global financial markets, major exchange rates and asset prices went through ups and downs, and the overall foreign exchange reserve investments rose, boosting foreign exchange reserves to pick up. In the first three quarters, China's foreign exchange reserves bottomed out in January 2017 and recorded increases for the eighth-straight month in September, representing the longest period for continuous increases since June 2014. The foreign exchange reserves as at the end of September rose by USD 98 billion or 3.3% from the beginning of 2017, while those for the same period of the previous year fell by USD 164 billion. Overall, the supply and demand in the domestic foreign exchange market have found an equilibrium, non-USD currencies appreciate against US dollars in the global financial markets, and asset prices rise. All of these have contributed to the recovery of foreign exchange reserves. Q: What would you say about the recovery of China's foreign exchange reserves for the eighth-straight month? What will be the future trends of foreign exchange reserves? A: Since the very beginning of this year, China's economic and financial performance have stayed stable with a good momentum for growth, providing a fundamental guarantee for the continued and stable recovery of China's foreign exchange reserves. In the first three quarters, China's economy grew within a reasonable range, its structural adjustment was deepened, and quality and benefit kept rising, indicating its economy is stable with a good momentum for growth. The RMB exchange rate recorded two-way fluctuations and grew while maintaining stability, the cross-border capital flows were stable and orderly, and the balance of payments was basically balanced. All of these have facilitated the stable recovery of foreign exchange reserves. Going forward, as the domestic economy remains stable with a good momentum for growth, the reform and opening up goes deeper, and market expectations become further stabilized, China will see a more solid foundation for stable cross-border capital flows. As the three tasks, namely, finance serving the real economy, guarding against financial risks and deepening the financial reform, are pressed ahead with in an orderly manner, China's economy and finance will achieve benign circulation and healthy development, which will continue to promote the equilibrium and stability in the balance of payments and foreign exchange reserves. 2017-10-09/en/2017/1009/1376.html
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The State Administration of Foreign Exchange (SAFE) has recently disseminated the initial data on the balance of payments for the second quarter and the first half of 2017, and its press spokesperson answered media questions on relevant issues. Q: Could you brief us on the latest changes in China's balance of payments for the first half of 2017? A: In the first half, the initial data in China's Balance of Payments show that twin surplus was registered under the current account and the financial account excluding reserve assets (including net errors and omissions for the second quarter, the same below), suggesting an increase in reserve assets. First, a reasonable surplus was sustained under the current account, and foreign trade recorded growth on a year-on-year basis. In the first half, China posted USD 71.2 billion in the surplus under the current account, accounting for 1.3% of its GDP for the period. To be specific, trade in goods in the balance of payments registered a surplus of USD 215.4 billion, down by 7% year on year, but import and export of goods were up by 12% and 18% year on year respectively, indicating foreign trade remained steady with a good momentum for growth thanks to the continuous improvements in domestic and foreign demand. In comparison, trade in services recorded a deficit of USD 135.1 billion, up by 24% year on year, chiefly because of an increase of 26% under transport driven by import growth, and travel registered an increase of 19% in deficit. Second, the financial account excluding reserve assets registered a surplus. In the first half, China witnessed a surplus of USD 15.6 billion under the financial account excluding reserve assets, versus a deficit of USD 225.9 billion for the same period last year on a comparable basis. In particular, direct investment recorded a net inflow of USD 14.2 billion, compared with a net outflow of USD 49.4 billion for the same period last year. Specifically, ODI registered a net outflow of USD 40.4 billion, and FDI, a net inflow of USD 54.6 billion, indicating investment has sustained a certain scale in both directions. Third, reserve assets increased. In the first half, China's reserve assets rose by USD 29 billion due to the balance of payments transactions (excluding non-trading factors such as exchange rate and price), versus a decline of USD 157.8 billion for the same period last year. To be specific, foreign exchange reserves rose by USD 29.4 billion, and reserves position in the IMF dropped by USD 400 million. Overall, China witnessed robust balance of payments in the first half, with cross-border capital flows getting stabilized with a good momentum for growth. In the future, the overall equilibrium of the balance of payments will have a stronger foundation. 2017-08-07/en/2017/0807/1292.html
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The State Administration of Foreign Exchange (SAFE) has recently disseminated China's external debt data as at the end of June 2017, and an official from the SAFE answered media questions on relevant issues regarding external debt. Q: Could you brief us on China's external debt data for the second quarter of 2017? A: China's external debt continued its stable growth in the second quarter of 2017. As at the end of June 2017, China's full-scale outstanding external debt registered USD 1.5628 trillion (in both domestic and foreign currencies), up by USD 125 billion or 8.7% quarter on quarter. The growth in external debt for the second quarter was attributed to the growth in banks' external debt. The rise in banks' outstanding external debt contributed nearly 70% of the growth in total outstanding external debt incurred by China, in that banks made full use of overseas low-cost funds to serve the development of foreign trade and the real economy, under the framework of macro-prudential policy management for cross-border financing. Q: What would you say about China's external debt? A: China has witnessed stable growth in external debt since the beginning of this year. Economically, China's overall economic performance is good, with its GDP for the first half rising by 6.9% year on year, and foreign trade growing by 19.6% year on year. There are also many other highlights in China's economic growth, which serve the bases for the continuous increase in external debt. Politically, the People's Bank of China, together with the SAFE, has further refined the macro-prudential management policy for full-scale cross-border financing, expanding the room for banks and enterprises to borrow external debt on their own, and reducing the financing costs for the real economy. Overall, China's external debt boasts a solid economic foundation and is expected to continue growing steadily in the future. The SAFE will continue to watch out for the changes in China's external debt. While further boosting cross-border investment and financing facilitation, the SAFE will effectively guard against external debt risk and safeguard China's economic and financial stability. 2017-09-29/en/2017/0929/1325.html
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Q: The latest foreign exchange reserves data released by the People's Bank of China (PBC) show that China's foreign exchange reserves as at the end of August 2017 went up by USD 10.8 billion month on month. Could you brief us on the causes behind such changes in foreign exchange reserves? A: As at the end of August 2017, China's foreign exchange reserves amounted to USD 3.0915 trillion, up by USD 10.8 billion or 0.4% month on month, recovering 7th-straight month. In August, China's cross-border capital flows and the supply and demand of its foreign exchange continued to remain balanced. In global financial markets, asset prices rose, driving foreign exchange reserves to grow. Since the beginning of this year, China's economy has been stable and improved, with deeper structural adjustments and better-than-expected indicators, suggesting the macro-economy has become more stable. The global financial markets have been relatively stable. Cross-border capital flows have been stabilized with a good momentum for growth, the demand and supply of foreign exchange have found an equilibrium, and the RMB exchange rate has remained stable. Looking ahead, as the supply-side structural reform is advanced, and transformation, upgrades and growth engine shift are further accelerated, positive factors that support the middle and high-speed economic growth and boost the economy to strive toward a medium and high-end level will be strengthened, indicating China's momentum for stable and stronger economic growth will gain ground. Alongside the deeper reform of the financial system, and deepened financial liberalization, the foundation for the stabilization of China's cross-border capital flows will be solidified, which will provide a further boost to maintain a moderate and reasonable size of foreign exchange reserves. 2017-09-07/en/2017/0907/1322.html
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Q: The latest foreign exchange reserves data released by the People's Bank of China (PBC) show that China's foreign exchange reserves as at the end of July 2017 went up by USD 23.9 billion month on month. Could you brief us on the causes behind such changes in foreign exchange reserves? A: As at the end of July 2017, China's foreign exchange reserves amounted to USD 3.0807 trillion, up by USD 23.9 billion or 0.8% month on month, recovering 6th-straight month. In July, China's cross-border capital flows remained stable, indicating a basic equilibrium between the supply and demand of foreign exchange; in global financial markets, non-USD currencies appreciated against the USD, boosting increases in foreign exchange reserves in USD terms. Since the beginning of this year, China's economy has been stable and improved, thanks to the more favorable factors that support the economy to achieve mid and high-speed growth and step onto the mid and high level. Global financial markets have stayed stable. Cross-border capital flows and the demand and supply of foreign exchange markets have found an equilibrium, and the RMB exchange rate has remained stable. Residents and enterprises have thus become more rational in buying foreign exchange. Going forward, as the supply-side structural reform goes deeper, and the innovation-driven development strategy is implemented at a faster pace, the positive changes in China's economic performance will continue to increase. Alongside the expansion and opening up of financial markets, foreign exchange markets will sustain healthy development, market expectations will stay stable, and the foundation for stable cross-border capital flows will be solidified, which will provide a further boost to the stability of foreign exchange reserves. 2017-08-07/en/2017/0807/1293.html
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Q: The latest foreign exchange reserves data released by the People's Bank of China show that China's foreign exchange reserves for June 2017 went up by USD 3.2 billion month on month. Could you explain why such a change occurs? A: As at the end of June, China's foreign exchange reserves amounted to USD 3.0568 trillion, up by USD 3.2 billion or 0.11% month on month, representing an increase for the fifth consecutive month. China's cross-border capital flows sustained stable growth in June, indicating a relative equilibrium between supply and demand of foreign exchange. In the global markets, non-USD currencies appreciated against the US dollar, asset prices fluctuated slightly, the currencies and assets invested with foreign exchange reserves diverged, and foreign exchange reserves rose by a small margin. In the first half of this year, China's cross-border capital flows and the supply-demand of the foreign exchange market remained balanced, the RMB exchange rate rose steadily and foreign exchange reserves rose by USD 46.3 billion or 1.5% from USD 3.0105 trillion of the beginning of this year. Looking ahead, China's economic stabilities and certainties will be strengthened. In terms of industry support, development motives, confidence and environment, China's economic performance will remain stable with the good momentum for growth. Alongside further liberalization of the financial market, healthy development of the foreign exchange market, stable market expectations, and the basic equilibrium of cross-border capital flows and the supply-demand of the foreign exchange market, foreign exchange reserves will sustain stability. 2017-07-07/en/2017/0707/1271.html
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The State Administration of Foreign Exchange (SAFE) held a press conference on the foreign exchange receipts and payments for the first quarter of 2017 in the State Council Information Office on Thursday, April 20, 2017 at 10 am and answered press questions. Moderator Xi Yanchun: Good morning, ladies and gentlemen. Welcome to the press conference of the State Council Information Office. Today we are here to unveil the latest data on China's economic development in the first quarter of this year. We are very glad to have with us Ms. Wang Chunying, press spokesperson for the SAFE and director of the Balance of Payments Department, to brief us on the foreign exchange receipts and payments for the first quarter and answer your questions. Now let me turn to Ms. Wang Chunying for opening remarks. 2017-04-20 10:00:03 Wang Chunying: Good morning, everyone! Welcome to today's press conference. First, I would like to disseminate China's foreign exchange receipts and payments data for the first quarter and then I will be taking your questions. Over the first quarter of 2017, the global economy has continued sluggish recovery and the global financial markets have operated relatively stable. China's economy has sustained a good momentum for growth, with economic growth recovering slightly and the RMB exchange rate staying stable. While adhering to reform and opening up, the SAFE has further enhanced cross-border trade and investment facilitation; on the other hand, the SAFE has guarded against risks arising from cross-border capital flows and sustained a healthy, stable and benign order in the foreign exchange market. Overall, the pressure from cross-border capital outflows on China has been significantly relieved in the first quarter, with the supply and demand finding a basic equilibrium. 2017-04-20 10:00:58 Wang Chunying: In the first quarter, banks settled foreign exchange of RMB 2.59 trillion (USD 375.5 billion) and sold foreign exchange of RMB 2.87 trillion (USD 416.3 billion) on a cumulative basis, with a deficit of RMB 281.5 billion (USD 40.9 billion). Meanwhile, according to the data on foreign-related receipts and payments via banks, in the first quarter, banks registered cumulative foreign-related receipts of RMB 4.67 trillion (USD 677.5 billion) and made external payments of RMB 4.84 trillion (USD 702.7 billion) on behalf of clients, with a deficit of RMB 173.6 billion (USD 25.2 billion). 2017-04-20 10:02:27 Wang Chunying: China’s foreign exchange receipts and payments for the first quarter present the following characteristics: First, the banks' foreign exchange sales and settlements as well as foreign-related receipts and payments registered drastic falls in deficits. In the first quarter, in dollar terms, foreign exchange settlements by banks were up by 7% year on year, and foreign exchange sales by banks, down by 12% year on year, resulting in a deficit of USD 40.9 billion, down by 67% year on year; the foreign-related receipts by banks for customers were up by 2% year on year, while the payments were down by 9%, leading to a deficit of USD 25.2 billion, a decrease of 78% year on year; in particular, the foreign-related foreign exchange receipts and payments recorded a surplus of USD 3 billion, compared with a deficit of USD 36.6 billion in the same period last year. 2017-04-20 10:03:33 Wang Chunying: Second, the supply and demand of foreign exchange have been moving towards an equilibrium. Turning to the banks' foreign exchange sales and settlements, a deficit of USD 19.2 billion was registered in January 2017, much lower than the deficit of USD 46.3 billion for December 2016, and the deficits of USD 10.1 billion and USD 11.6 billion were recorded in February and March respectively. The foreign exchange sales and settlements by banks for customers contracted month by month, reaching USD 15.6 billion, USD 10.1 billion and USD 7 billion for January-March respectively. Considering the spot and forward foreign exchange sales and settlements as well as options, China's foreign exchange supply and demand has found an equilibrium since February. In addition, according to the foreign-related receipts and payments by the non-banking sector, banks' receipts and payments for customers recorded a deficit of USD 9.7 billion in January, a surplus of USD 1.9 billion in February and a deficit of USD 17.4 billion in March, versus a monthly average deficit of USD 25.4 billion in 2016. 2017-04-20 10:05:13 Wang Chunying: Third, the foreign exchange sales rate dropped dramatically on a year-on-year basis, indicating enterprises' foreign exchange financing has recovered. In the first quarter of 2017, the foreign exchange sales rate that measures the motives of enterprises for buying foreign exchange, or the ratio of the foreign exchange bought by customers from banks to customers' foreign-related foreign exchange payments was 68%, down by 12 percentage points year on year, which suggests that enterprises are more reasonable in buying foreign exchange, and more rarely buy foreign exchange to repay foreign exchange financing. Since the beginning of 2017, the outstanding domestic foreign exchange loans have recovered month by month, and increased by USD 11.3 billion in the first quarter on an accumulative basis, while the figure kept declining in most of the past two years; The balance of cross-border financing for imports such as refinancing and forward L/C rose by USD 17 billion, and the balance of financing in foreign currencies went up by USD 22.2 billion. 2017-04-20 10:06:45 Wang Chunying: Fourth, the foreign exchange settlement rate climbed on a year-on-year basis, suggesting individuals' domestic foreign exchange deposits have turned from rises into falls. In the first quarter, the foreign exchange settlement rate that measures the willingness to settle foreign exchange, or the ratio of foreign exchange sold by customers to banks to the foreign-related foreign exchange receipts of customers, was 62%, up by 3 percentage points year on year, indicating market participants' stronger willingness to settle foreign exchange. According to individuals' domestic foreign exchange deposits, the balance increased by USD 300 million in the first quarter, which was down by USD 11.2 billion year on year. Specifically, the balance of individuals' domestic foreign exchange deposits jumped by USD 1.9 billion in January, and went down by ~USD 800 million in February and March respectively. 2017-04-20 10:07:48 Wang Chunying: Fifth, banks' forward foreign exchange sales and settlements registered a lower deficit. In the first quarter, the number of customers contracting for forward foreign exchange settlements with banks was up by 153% year on year, and the number of customers contracting for forward foreign exchange sales with banks dropped by 25%, leading to a deficit of USD 3.4 billion, which was down by 91%. Specifically, the forward foreign exchange sales and settlements registered a deficit of USD 8 billion in January, a surplus of USD 4.7 billion in February, and a basic equilibrium in March, indicating the expectations of RMB depreciation have been dramatically weakened since the beginning of this year. These are the major statistics I want to disclose regarding the foreign exchange receipts and payments for the first quarter of 2017. Now I will answer your questions. 2017-04-20 10:10:16 Moderator Xi Yanchun: Thank you very much, Ms. Wang. Now let us move on to the Q&A session. As usual, please tell us what news agency you are from before raising your questions. 2017-04-20 10:11:45 Economic Daily: According to the data for the first quarter you just disseminated, the pressure from cross-border capital outflows on China has been relieved since the beginning of this year. Could you tell us why? What would you say about the future trends? 2017-04-20 10:12:10 Wang Chunying: As shown by the data I just unveiled, the cross-border capital outflows have slowed down remarkably since the beginning of this year, and the supply and demand of foreign exchange have found an equilibrium, which shows that China's cross-border capital flows are moving towards an equilibrium. A review of the performance over the past few years shows that China's cross-border capital flows have registered net outflows since the second half of 2014, while foreign exchange reserves have also turned from large-scale rises into falls, and even fluctuated violently at the end of 2015 and the beginning of 2016. But since 2016, the pressure from cross-border capital outflows on China has been relieved, with the balance of foreign exchange reserves for the whole year dropping by USD 319.8 billion, which was 38% lower than that of 2015. The outflow pressure has been further relieved since the beginning of this year. In particular, the supply and demand of foreign exchange found a basic equilibrium in February and March, and the balance of foreign exchange reserves have recovered for two straight months. 2017-04-20 10:13:08 Wang Chunying: The enhancement in cross-border capital flows in the first quarter is closely related to the changes in market environment. On the one hand, the stable domestic economic performance has strengthened the market confidence, showing the fundamental roles of the economic fundamentals. In the first quarter, China registered 6.9% in economic growth, up by 0.1 percentage point quarter on quarter, and many economic indicators turned for the better. For example, PMI has been in the expansion range for 8 consecutive months, hitting 51.8 in March, a new record high since May 2012. The data for the first quarter from the National Bureau of Statistics show that the added value of industries above designated size was up by 6.8% year on year, 0.8 percentage point higher than the growth of last year as a whole. The fixed asset investment across China for the first quarter was up by 9.2% year on year, 1.1 percentage points higher than that of last year. Specifically, the private sector's investments grew by 7.7%, 4.5 percentage points higher year on year. On the other hand, the externalities for the first quarter, especially the USD exchange rate, remained stable. Despite the second interest rate hike by the Fed in March, the US dollar index fluctuated by a small margin, going down 1.8% in the first quarter. The global financial markets performed stably as well. Under the combined impacts of domestic and foreign factors, the RMB exchange rate has stayed stable since the beginning of this year, fluctuating in two ways against the US dollar, and expected to remain robust. 2017-04-20 10:18:01 Wang Chunying: Going forward, China's cross-border capital flows will move towards an equilibrium, with its cross-border receipts and payments continuing to stay robust. First, China's economy will continue to grow at a mid and high rate. As the supply-side structural reform is deepened, industrial structure will be further upgraded, delivering higher quality and efficiency of economic growth. A couple of days ago, the IMF released the latest version of World Economic Outlook, upping the expectation of China's economic growth for 2017 from 0.1 percentage point to 6.6%. 2017-04-20 10:25:02 Wang Chunying: Second, China will remain one of the most competitive and attractive destinations for long-term foreign capital. According to the analysis report of the United Nations Conference on Trade and Development (UNCTAD), China was ranked No. 3 among the top 10 economies with capital inflows for 2016, only after the US and the UK, and continued to take the top spot among emerging economies. At the beginning of this year, the State Council introduced a wealth of measures to utilize foreign capital, in a bid to further open up, deepen the administration streamlining and power delegation, optimize services, and create a more open, convenient and transparent business environment to enhance the level and quality of foreign capital utilization. 2017-04-20 10:32:00 Wang Chunying: Third, the financial market will be further liberalized. Last year China boosted the further liberalization of the inter-bank bond market, implemented macro-prudential management of full-scale cross-border financing, and deepened the foreign exchange administration reform for QFIIs and RQFlls, and in October, the RMB joined the IMF's SDR basket of currencies, indicating the policies have begun to deliver results in the markets. We will continue to optimize relevant policies at present and in future. For example, we issued a circular in February to allow foreign investors investing in China's inter-bank bond market to participate in the domestic and overseas foreign exchange derivatives markets based on real demand, which means that efforts will be made to preserve the value of foreign exchange risk exposure. This is typical of our efforts to improve and introduce policies in support of opening up of China's financial market. This is also why China will further liberalize its financial market. 2017-04-20 10:37:01 Wang Chunying: Fourth, as the market-oriented RMB exchange rate formation mechanism is steadily advanced, the RMB exchange rate elasticity will be strengthened further, which will be favorable for promoting the inflows and outflows, and two-way fluctuations of China's cross-border capital. Fifth, China's current account remains in surplus and foreign exchange reserves are adequate, suggesting China is capable of ensuring stable receipts and payments of foreign exchange. Therefore, China's cross-border capital flows will continue to move towards an equilibrium in the future. Thank you. 2017-04-20 10:46:12 CRI: Ms. Wang, according to the data you just released, the Fed's interest rate hike in March had a moderate impact on China's cross-border capital flows. What would you say about this? The Fed will continue to raise interest rates this year, and may consider contracting the balance sheet. What impact will this have on China's cross-border capital flows? 2017-04-20 10:50:52 Wang Chunying: We talk about the Fed's interest rate hikes at every press conference we have held. This issue also attracts our attention and concern in our daily work. The contraction of balance sheet is a new issue that emerges this year, and we are monitoring and assessing it in real time. I would here like to share some of my ideas with you: First, a comprehensive look and analysis is needed as to the Fed's policy adjustment such as interest rate hikes. For the moment, the US meets the conditions for stable hikes based on its economic performance, but there are also uncertainties. For example, in the US, there are uncertainties in the course of policy implementation by the new administration and in the implementation outcomes. It is difficult to reduce taxes and add infrastructure investment, which will impact the fiscal revenues and expenditures of the country, while loosening financial regulation may heighten the risks facing the financial market. The overly strengthening of the USD exchange rate will also be unfavorable for addressing trade imbalances in the country while the USD appreciation will impact its import prices and may slow down the recovery of inflation. Externally, there are still many uncertainties facing the global financial markets. The volatilities in the global markets will also impact the adjustment of the US' domestic policies. For example, the 2016 referendum on Britain's exit from the EU had postponed the Fed's interest rate hikes. Moreover, although the Fed's interest rate hikes are the important factors that boost the strengthening of the US dollars, there are more complicated factors that impact the USD exchange rate. For example, the US government's attention to the appreciation of the US dollars may hamper the strengthening of the US dollars. The recent stabilization of Europe's economy compared with previous years is also an important variable that impacts the USD exchange rate. The Fed's contraction of balance sheet and interest rate hikes are the policy adjustments in the same direction, and will also be subject to the uncertainties discussed above. 2017-04-20 10:52:10 Wang Chunying: Second, a look at China's cross-border capital flows shows that the impact of the Fed's three interest rate hikes is declining. Since its exit from the QE policy, the Fed has raised interest rates three times. In December 2015, the interest rates were raised for the first time. Before the hike the US dollar index had grown by 7% at most. Due to the combined impact of this and other factors, China's balance of foreign exchange reserves for the fourth quarter of that year fell by USD 183.8 billion. In the run-up to the second interest rate hike in December 2016, driven by the interest rate hike expectations and the presidential election, the US dollar index surged by up to 9%. China's balance of foreign exchange reserves for the fourth quarter of that year fell by USD 155.9 billion. Before the Fed's third interest rate hike in March, the US dollar index rose by 2.7% at most. In the first quarter, China's balance of foreign exchange reserves fell by a slight USD 1.4 billion. To be specific, the reserves for January dropped by USD 12.3 billion and grew by USD 6.9 billion and USD 4 billion in February and March respectively. 2017-04-20 11:00:04 Wang Chunying: Third, the different impacts from the Fed's three interest rate hikes on China indicate that China's responsive and adaptive capabilities have been strengthened significantly. First, China's economic performance has been more stable than it was during the Fed's first interest rate hike at the end of 2015. At the end of 2015, China's economy was on a downward trend, with PMI dropping below the boom and bust line for 7 months in a row; by comparison, China's economy remains stable with good momentum for growth at the moment. As I said earlier, PMI has been expanding for 8 consecutive months, and China's GDP for the fourth quarter of last year and the first quarter of this year grew by 6.8% and 6.9% respectively. Second, the supply and demand on the foreign exchange market have remarkably improved. As the adjustments of the structure of assets and liabilities in domestic and foreign currencies by domestic participants are gradually completed, the recent changes are being stabilized. For instance, China's outstanding external debt in domestic and foreign currencies for the fourth quarter of 2015 fell by USD 172.4 billion, but has recovered quarter by quarter since the second quarter of 2016. Third, the financial market has been further liberalized. Particularly, the channels for foreign capital inflows have been extended and the level of facilitation has been gradually enhanced. Since the beginning of 2016, the reform measures such as liberalization of the domestic bond market and macro-prudential management of full-scale cross-border financing have begun to deliver results. Last but not least, the expectations of the depreciation of RMB exchange rate against the USD have been weakened remarkably. We usually look at the expectations of the RMB exchange rate based on the risk reversal indicators for the options market. Risk reversal indicators refer to the volatility gap between call options of the USD/put options of the RMB and put options of the USD/call options of the RMB. A positive gap shows short selling of the RMB and long selling of the USD, and the higher the positive gap, the stronger such expectations. This indicator at home and abroad has dropped substantially from the end of 2015 and 2016, indicating the RMB exchange rate expectations are being stabilized. Overall, China will continue real-time monitoring and assessment of the Fed's interest rate hikes and contraction of the balance sheet. China's responsive and adaptive capabilities show that we are still confident. Thank you. 2017-04-20 11:04:46 Nihon Keizai Shimbun: Some experts say that the Chinese government's control of capital outflows have caused hikes in real estate prices. What would you say about this? Thank you. 2017-04-20 11:23:41 Wang Chunying: In recent years, China has witnessed many normal outbound investments, and China's capital outflows are mainly the external investments by the private sector. Since the second half of 2014, China's cross-border capital outflows have been mainly comprised of outbound investments and repayments of external debt. But since the second quarter of 2016, repayment of external debt has come to an end. External debt has begun to rise in size and the private sector's outbound investments have become the major form of capital outflows. The BOP data shows that between the second half of 2014 and 2016, China's non-reserve financial account registered a deficit of USD 950.1 billion. To be specific, net inflows were still recorded in FDI and portfolio investment and totaled more than USD 670 billion. Items with net outflows include: first, outbound investments by market participants, or the private sector, such as direct investment, portfolio investment and loan, which totaled USD 1.24 trillion. Second, outflows of liabilities under other investments, which totaled more than USD 380 billion net between the second half of 2014 and 2016, and were mainly comprised of repayments of overseas loans and trade credit by market participants. Such outflows were high in 2015, but have been replaced by net inflows since the second quarter of 2016. Overall, of the capital outflows since the second half of 2014, the private sector's outbound investments constituted the majority, with the ratio of outbound investments to repayments of liabilities being 3.2:1. The external assets held by China's private sector constitute more than half of China's total for the first time at the moment, which is testimony to domestic market participants' capabilities of engaging in normal outbound investments and foreign-related economic activities. Certainly, Chinese enterprises also should make outbound investments in a healthy and orderly manner. On November 28 and December 6 last year, the heads of the NDRC, MOC, PBC and SAFE pointed out in the two Q&A sessions that regulators have paid close attention to the unreasonable outbound investments in the real estate, hospitality, cinemas, and entertainment industries and sports clubs, and risks and dangers arising from large-sum investments that do not belong to the principal businesses, outbound investments by limited partnerships, "small parent company and large subsidiaries", and "quick investment and quick exit", and suggested relevant enterprises to make decisions prudentially. They also pointed out that China follows the fundamental principles in outbound investments that under the guidance of the government, enterprises will play a dominant part based on market orientation and international practices, to press ahead with outbound investment management by "streamlining administration, delegating more powers, improving regulation and providing better services", to support domestic enterprises with required capacities and conditions to carry out true outbound investment activities in compliance with regulations, and participate in the Belt and Road Initiative and international production capacity cooperation, so as to promote the transformation and upgrading of China's economy and deepen the mutual benefits and cooperation between China and the rest of the world. 2017-04-20 12:08:23 China News Service: The Currency Composition of Official Foreign Exchange Reserves (COFER) released in April by the IMF lists the RMB assets in the official foreign exchange reserves of other economies for the first time. My question is what the specifics on the RMB assets held by foreign central banks are? What's your view about this? Thank you. 2017-04-20 12:12:46 Wang Chunying: We also have taken notice of the information released by the IMF. The statistical data of the SAFE shows that as at the end of last year, the RMB assets directly held by foreign central banks for the Chinese residents were equivalent to USD 81.1 billion, up by 13% from the end of last year, or by 563.5 billion in RMB terms. In particular, debt securities accounted for 92.5%, and equity and investment funds, 7.4%. We also have noted that the data released by the IMF is USD 84.5 billion, a little different from the figure we have observed on the RMB assets directly held by foreign central banks for the Chinese residents. Our analysis shows that besides the conversion factor, the difference is a result of other contributing factors. For instance, it might be that foreign central banks held the RMB securities issued by non-residents, and non-residential issuers invested in domestic RMB assets after fundraising; it might also be that foreign central banks held RMB assets through agencies, who will be recognized as non-residential issuer or agency in our statistics. 2017-04-20 12:14:13 Wang Chunying: We are pleased to find that the RMB assets held by foreign central banks rise. This shows that a growing number of foreign institutions accept the products denominated in RMB and are willing to hold RMB assets alongside the liberalization of China's financial market and the RMB's official inclusion in the SDR basket of currencies. In the past, foreign central banks usually held a limited portion of products denominated in RMB, but at present they hold the products denominated in the RMB on a large scale, which is favorable for stabilizing China's foreign exchange supplies. That foreign central banks hold more RMB bonds, especially treasury bonds, is in line with the requirements for high liquidity and low risk of allocation of reserve assets, and also shows that foreign investors are optimistic about the long-term performance of the RMB assets and have confidence in China's economic and financial system. In fact, the RMB has been playing a more important role in cross-border capital flows in recent years. Statistics from the Bank for International Settlements (BIS) show that the RMB accounted for 4% of global foreign exchange transactions in 2016. SWIFT statistics show that the RMB made up 1.84% of global payments in February 2017. Therefore, foreign participants' holding of the RMB assets and the emergence of the RMB denominated products are the embodiments of the confidence in China's economy, finance, foreign exchange rate and cross-border capital flows that. 2017-04-20 12:15:43 Phoenix Satellite TV: My first question is about China's foreign exchange reserves. We have learned from a lot of analysis that China's foreign exchange reserves returning to the stable range is a result of the country's control over foreign exchange outflows, including control over external payments such as for real estate and insurance. What would you respond to such views? My second question is about RMB exchange rate. US President Trump's recent policy did not include China in the list of currency manipulators. What would you say about this? The market has responded positively to this on the expectations of stable RMB exchange rate for this year. 2017-04-20 12:19:39 Wang Chunying: Let me first answer your question about the US Department of the Treasury choosing not to label China a currency manipulator. China is not a currency manipulator by objective standards. It is not necessary for China to stimulate exports by depreciating the RMB. A look at several aspects shows that China has sustained mid and high economic growth, its productivity has been higher than other major economies, and its exports are globally competitive and account for a high proportion in the global markets. In 2007, China's exports accounted for 8.8% of the global markets, and over 13% in 2015 and 2016 respectively. Moreover, China does not meet the criteria for a currency manipulator set by the US Department of the Treasury. 2017-04-20 12:24:14 Wang Chunying: For foreign exchange administration, the foreign exchange authorities have not adopted any new measures on exchange and cross-border receipts and payments since China's cross-border capital outflows were registered, but require that banks observe the existing foreign exchange administration regulations, and perform the operation principles to intensify authentication and compliance reviews. The foreign exchange policies remain consistent with the previously published ones, without any change. When formulating and implementing foreign exchange administration policies, we will follow two basic principles: first, we will persevere in reform and opening up to support and boost two-way liberalization of the financial market, further enhance trade and investment facilitation and serve the real economy. Second, we will be on guard against risks arising from cross-border capital flows and the impact from the disorderly flows of cross-border capital on the macro economic and financial stability, so as to maintain the stability of the foreign exchange market and create a sound market environment for reform and opening up. Based on the above two principles, foreign exchange administration policies have several connotations: firstly, an open window will not be closed. China's foreign exchange administration will not step back onto the path of capital control. In 1996, China achieved the full convertibility of the current account. Since the advent of this century, the capital account's convertibility has been gradually enhanced. Secondly, we will boost the capital account liberalization in a prudential and orderly way. In 2016, there were many highlights in the liberalization of China's capital account, including macro prudential management of full-scale cross-border financing, further opening up the capital account and facilitating foreign institutions' investments in inter-bank bond markets. The liberalization of the capital account shall be aligned with the stage of economic development, the situations of financial markets and financial stability. At different time, internal and external factors should be taken into full consideration, to identify the priorities, cadence and steps in the course of liberalizing the capital account. Thirdly, the macro-prudential management and micro regulatory system should be established for cross-border capital flows to safeguard a healthy, stable and sound order in the foreign exchange market. Fourthly, efforts will be made to improve the exchange rate formation mechanism, and increase exchange rate elasticity. I hope that my answer could be of some help to you in understanding foreign exchange administration policies. Thank you. 2017-04-20 12:31:15 Bloomberg: How would you judge the late movement of the RMB exchange rate against the USD? Which will be more stable, the bilateral exchange rate of the RMB against the USD or against a basket of currencies? 2017-04-20 12:37:19 Wang Chunying: In the long term, exchange rate is decided by the economic fundamentals by nature. China's economic fundamentals will continue to support the RMB exchange rate to stay stable at the reasonable and balanced level. But in the short run, the RMB exchange rate may appreciate or depreciate due to expectations and financial market contingencies, which is normal. 2017-04-20 12:46:05 China Global Television Network: Since the beginning of this year, China's foreign trade surplus has been declining, which means that the surplus under the current account may fall too. Would this become true? What would you say about the receipts and payments under China's current account? Thank you. 2017-04-20 12:53:53 Wang Chunying: In recent years, China's current account surplus as a percentage of GDP has stayed stable, making it possible to effectively guard against risks associated with the balance of payments. The historical experiences of other countries in the BOP crisis show that it is a critical early warning indicator that the deficit under the current account exceeds 4-5% of GDP; According to the six pack introduced by the EU in 2011 on enhancing the economic and fiscal integration, one early warning indicator is that the ratio of deficit under the current account to GDP should not exceed 4% and the ratio of surplus under the current account, not surpass 6%. China's current account surplus as a percentage of GDP peaked at 9.9% in 2007 and then has gradually fallen. In recent years, quarterly data have fluctuated sharply, exceeding 3% in some quarters, hitting the lowest level of 0.2% in the first quarter of 2014, and reaching 1.8% the previous year. Overall, they are all within the reasonable range. The increasing balance between receipts and payments under the current account is testimony to optimizing domestic economic structure and strengthening domestic demand, and does not mean the weakening of export competitiveness. As I answered earlier, China's exports accounted for 8.8% of the global markets in 2007, and over 13% in 2015 and 2016 respectively. As a result, the share of China's current account surplus has remained reasonable, making it possible for China to effectively guard against the BOP risks. 2017-04-20 12:55:09 Wang Chunying: Looking ahead, China's current account surplus will continue to stay stable and keep aligned with the development stage of China's foreign-related economy and economic structure. The surplus under the current account covers trade in goods, trade in services and return on investment, which will all be more stable in the future. First, trade in goods will remain in surplus and be more stable. On the one hand, exports will continue to stay stable. Despite the likelihood that trade frictions may rise, there will be factors that are favorable for China's exports to be stabilized. For example, many institutions predict that the global economic growth for 2017 will be higher than that of 2016, and the IMF's latest expectations show that the global economic growth will be 3.5% in 2017, 0.4 percentage point higher than that of 2016. All of this indicates that external demand is recovering slowly. The Baltic Dry Index that measures the global trading trends has been on an upward trend recently, recovering from the all time low of 290 points in the beginning of February 2016 and exceeding 1200 points since late March, which suggests that global trade is recovering too. Along with the stable advancement of the Belt and Road Initiative, the countries within the region will benefit in their exports. Although the land and labor costs have risen, the industry chain of China's manufacturing industry is sound, putting it at an advantage in the international division of labor. This is why China's exports will remain stable. On the other hand, China's economy has sustained mid and high growth, the domestic demand has rebounded somewhat, and international commodity prices stay stale, which will push higher China's export volume. Therefore, China's trade in goods will remain in surplus and be more balanced. 2017-04-20 13:00:14 Wang Chunying: Second, deficit in trade in services will continue to grow at a stable rate. In recent years, the deficit in China's trade in services has grown rapidly, mainly driven by travel and study abroad of domestic residents, which shows the higher incomes of residents and the further facilitation of relevant policies. From 2011 to 2014, the travel deficit grew at an average rate of 112%. But as relevant demand is rapidly unleashed, the travel deficit has reached a relatively stable size. In 2015, the growth plummeted to 12% and further to 6% in 2016. Third, the deficit in return on investment may be contracted stably. China has witnessed rising ODI recently, and may see the increases in returns on outbound investment, which will be favorable for stably reducing the deficit in China's returns on investment. 2017-04-20 13:05:43 Wang Chunying: In addition, in terms of the domestic economic structure, the surplus under the current account as a percentage of GDP shows that the savings rate is higher than investment rate. In the future, the gap between the two rates will remain at a stable and reasonable level. On the one hand, as China's economic structure is stably adjusted, the domestic demand will play a greater role in boosting economic growth, and consumption will make greater contribution, and accordingly, the savings rate will be on a stable downward trend. On the other hand, however, the investment rate will slow down stably. As the supply-side structural reform is deepened and the decapacity policies are effectively implemented, the rapid increase in extensive investments will be inhibited. Therefore, China may see the downturns of the savings rate and the investment rate, but the gap between them will stay stable, and the surplus under the current account will remain at a reasonable level. 2017-04-20 13:07:23 Moderator Xi Yanchun: I would like to extend thanks again to Ms. Wang Chunying for her professional and elaborate explanations as well as every one of you for coming. Now I would like to wrap up today's press conference. 2017-04-20 13:09:34 (The original text is available at china.com.cn) 2017-04-20/en/2017/0420/1256.html
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The State Administration of Foreign Exchange (SAFE) held a press conference on the foreign exchange receipts and payments for 2016 at the State Council Information Office on Thursday, January 19, 2017 at 10 am, and answered press questions. · Xi Yanchun, the moderator: Good morning, ladies and gentlemen. Welcome to the press conference of the State Council Information Office. Today, we are very glad to have with us Ms. Wang Chunying, the press spokesperson of the SAFE, and she will unveil the data on foreign exchange receipts and payments for 2016 and take your questions. Now let's invite Ms. Wang Chunying for some opening remarks. 2017-01-19 10:00:55 · Wang Chunying: Good morning, ladies and gentlemen. Welcome to today's press conference. I would first like to release China's foreign exchange receipts and payments for 2016 and then I will be taking your questions. In 2016, the global economic recovery was slow still, and the global financial markets fluctuated more violently. China's economy grew slowly but steadily and showed promising prospects, and was operating within a reasonable range. The SAFE coordinated the relationship between promoting trade and investment facilitation and guarding against cross-border capital flow risks, in a bid to safeguard the balance of payments and the national economic and financial security. Overall, the pressure from cross-border capital outflows facing China was relieved to some extent in 2016. 2017-01-19 10:01:22 · Wang Chunying: According to banks' foreign exchange settlements and sales, banks settled foreign exchange of RMB 9.55 trillion (USD 1.44 trillion) and sold RMB 11.80 trillion (USD 1.78 trillion) in 2016, representing a deficit of RMB 2.25 trillion (USD 337.7 billion). The data on banks' foreign-related receipts and payments for customers show that banks' cumulative foreign-related receipts amounted to RMB 18.55 trillion (USD 2.79 trillion), and their external payments hit RMB 20.57 trillion (USD 3.10 trillion), representing a deficit of RMB 2.02 trillion (USD 305.3 billion). 2017-01-19 10:03:18 · Wang Chunying: In 2016, China's foreign exchange receipts and payments presented the following features: First, there were deficits in banks' settlements and sales of foreign exchange, and in foreign-related receipts and payments. In 2016, banks' settlements of foreign exchange in dollar terms dropped by 17% year-on-year, and their sales of foreign exchange, 19% year-on-year, leading to a deficit of USD 337.7 billion; and banks' foreign-related receipts fell by 15%, and their foreign-related payments, 11%, resulting in a deficit of USD 305.3 billion. Second, the pressure from cross-border capital outflows for the four quarters was lower than that of the beginning of 2016. According to the data on banks' foreign exchange settlements and sales, the deficit peaked in the first quarter at USD 124.8 billion, then fell to USD 49 billion and USD 69.6 billion in the second and third quarters respectively, and hit USD 94.3 billion in the fourth quarter, 24% lower than the first quarter and down by 43% year-on-year. Banks registered deficits of USD 112.3 billion, USD 56.5 billion and USD 85.5 billion respectively in their foreign-related receipts and payments for customers in the first three quarters, and the deficit dropped to USD 51 billion in the fourth quarter, the lowest record of the year. 2017-01-19 10:04:28 · Wang Chunying: Third, the foreign exchange sales rate dropped and enterprises' solvency process slowed down, while their demand for financing picked up. In 2016, the sales rate that measures the willingness to buy foreign exchange, or the ratio of foreign exchange purchased by customer from banks to the customer's foreign-related foreign exchange payments was 74%, down by 8 percentage points year-on-year. The ratio was 80%, 74%, 70% and 72% respectively in the four quarters, primarily because fewer enterprises bought foreign exchange to repay foreign exchange financing. Accordingly, banks' outstanding domestic loans in foreign exchange fell by USD 35 billion, USD 23.4 billion, USD 12 billion and USD 15.1 billion in the first through fourth quarter of 2016. Since March 2016, importers' balance of cross-border financing denominated in foreign currencies such as refinancing and forward L/C had gone up on a monthly basis and risen by a cumulative USD 42.5 billion as at the yearend. Fourth, the foreign exchange settlement rate fluctuated and the foreign exchange deposits held by Chinese enterprises and individuals in China were on the rise. In 2016, 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 59%, down by 9 percentage points from 2015, indicating that enterprises and individuals preferred to retain foreign exchange receipts. From the first to the fourth quarter of the year, the foreign exchange settlement rate was 59%, 63%, 59% and 57% respectively. In 2016, the balance of the domestic foreign exchange deposits of Chinese banks rose by USD 60.4 billion, up by USD 48.8 billion year-on-year. 2017-01-19 10:06:11 · Wang Chunying: Fifth, banks' deficit in forward settlements and sales of foreign exchange contracted from the level of 2015. In 2016, the number of clients contracting for forward foreign exchange settlement with banks was down by 47% year-on-year, while that of clients contracting for forward foreign exchange sales with banks was down by 52%, representing a deficit of USD 84.9 billion, down by 56%. In particular, a deficit of USD 36.3 billion was registered in the first quarter, and narrowed to USD 800 million in the second quarter, but rose to USD 21.1 billion in the third quarter, which, however, contracted by 79% year-on-year. In the fourth quarter, a deficit of USD 26.7 billion was posted, consistent with the same period of 2015. These are the major data on the foreign exchange receipts and payments for 2016 I would like to unveil. Next, I will be taking your questions. 2017-01-19 10:09:37 · Xi Yanchun, the moderator: Many thanks to Ms. Wang Chunying. Next we will move into the Q&A session. As usual, please tell us what news agency you are from before raising your questions. 2017-01-19 10:12:27 · CCTV: Mr. Donald Trump will take office tomorrow. I am wondering what the new trends are in recent cross-border capital flows. You said just now that the pressure from cross-border capital flows were relieved throughout 2016, but could you brief us on the latest trends? What changes will take place in 2017? Thank you. 2017-01-19 10:13:09 · Wang Chunying: Thank you for your questions, which have drawn wide concern among people. At this juncture, it is likely that everyone is anticipating what the future holds, such as what new changes will take place to the US policies and what impact the execution will have on the future. First of all, China's cross-border capital flows improved over the past year, as shown in the statistical data on foreign exchange receipts and payments released just now, especially in the major indicators of foreign exchange situations such as foreign exchange reserves, banks' foreign exchange settlements and sales, and their foreign-related receipts and payments for customers. 2017-01-19 10:14:30 · Wang Chunying: First, the balance of foreign exchange reserves was stabilized. In 2016, the balance of foreign exchange reserves dropped by USD 319.8 billion, much lower than that of 2015. The balance of foreign exchange reserves fell by USD 107.9 billion in December 2015, and went down further by USD 99.5 billion in January 2016, but contracted significantly afterwards, and even picked up in some months. As the USD exchange rate has appreciated rapidly since October 2016, the US Dollar Index rose by 7.1% in the fourth quarter, leading to tremendous changes to the book value of foreign exchange reserves arising from the foreign exchange conversion factors. Nevertheless, foreign exchange reserves fell more slowly than they did at the beginning of the year. Second, the deficits of banks' foreign exchange settlements and sales, and their cross-border foreign-related receipts and payments for customers contracted. In December 2015 and January 2016, a deficit of USD 89.4 billion and USD 54.4 billion respectively was registered under banks' foreign exchange settlements and sales, and a deficit of USD 72.5 billion and USD 55.8 billion respectively was recorded under foreign-related receipts and payments. The deficits had shrunk since February 2016. Alongside the strengthening of the US exchange rate, the deficit in foreign exchange settlements and sales went up to USD 46.3 billion in December, which was much lower than the level at the end of 2015 and the beginning of 2016; and a deficit of USD 12.3 billion was registered under foreign-related receipts and payments in December, which was low compared with other months in the year. 2017-01-19 10:23:20 · Wang Chunying: China's cross-border capital flows have recently undergone some positive changes in structure, with domestic players adding outbound investments while foreign players' investments in China have converted from net outflows into net inflows, which was evident in the Balance of Payments. A key indicator of a country's cross-border capital flows usually is the financial account in the Balance of Payments that excludes reserve assets, which is indicated as the non-reserve financial account in China's Balance of Payments. From the second half of 2015 to the first quarter of 2016, net outflows were recorded under the credit account and debit account of the non-reserve financial account. The net outflows under the debit account mean outbound investments by domestic players, while the net outflows under the credit account mean domestic players are servicing external debt, and under this circumstance, the capital outflow pressure was heavy. Since the second quarter of 2016, net outflows still have been registered under the debit account of the non-reserve financial account, while net inflows have been recorded under the credit account, representing a positive change that shows the capital outflows from China are the external investments made by domestic players, including ODI, securities investments and external loans. On the other hand, this shows that after a period of external debt servicing, net inflows have begun to be registered under foreign capital. In particular, net inflows have been recorded under FDI all along; the net inflows of foreign securities investment exceeded USD 20 billion in the second and third quarters respectively in 2016, which was high in history; the outstanding external debt has turned around since the second quarter. From these changes, we could infer that, first, China's economy and its markets remain widely attractive across the world; second, driven by actual demands, Chinese debtors are confident in adjusting external debt after relevant risks are released; third, relevant reforms provide a strong boost, such as the further liberalization of interbank bonds markets, macro-prudential management of full-scale cross-border financing, and the inclusion of the RMB in the SDR basket. 2017-01-19 10:35:19 · Wang Chunying: Going forward, China's cross-border capital flows will contract towards an equilibrium. Undoubtedly, in a period to come, the global economy will remain subdued, featuring slowdowns in trading and investment, limited room for financial policy and weak economic recovery. Externally, the Fed's interest rate hikes and various uncertainties may interrupt the global financial markets now and then, which is the environment the countries including China will have to face all the time. This includes the impact of the policies of the new US administration. Overall, however, a country's economic condition is the ultimate determinant of its cross-border capital flows. China stands out in this regard. Its economic growth is at a high level across the world, its financial position is sound, its financial system is robust, the current account remains in surplus, and it takes the top spot worldwide by the size of foreign exchange reserves. Moreover, as I just mentioned, some positive factors that are conducive to the equilibrium between China's foreign exchange receipts and payments are emerging. Thank you. 2017-01-19 10:53:15 · Economic Daily: The Fed hiked the US interest rate last December, and is expected to do it several times in 2017. What's your view on the impact of the interest rate hikes on China's cross-border capital flows? How would you respond? Thank you. 2017-01-19 11:06:54 · Wang Chunying: Thank you for your questions. I would here like to share with you my observations and judgments with regard to the impact. First, the impact from the two interest rate hikes respectively at the end of 2015 and 2016 on China's cross-border capital flows was on the decline. Alongside the two Fed interest rate hikes and the changes in the expectations before the hikes, the USD exchange rate was strengthened. The US Dollar Index climbed by 2.4% in the fourth quarter of 2015, and by 7.1% in the fourth quarter of 2016, which both increased the short-term pressure from cross-border capital outflows, but to a different extent. China's balance of foreign exchange reserves fell by USD 155.9 billion in the fourth quarter of 2016, which was 15% less year-on-year. In December in particular, the margin was 62% less year-on-year. In the fourth quarter, banks posted a deficit of USD 94.3 billion in foreign exchange settlements and sales, down by 43% year-on-year, and in December in particular, the margin was 48% less year-on-year. Banks registered a deficit of USD 51 billion in foreign-related receipts and payments for customers in the fourth quarter, contracting by 59% year-on-year, of which, the margin was 83% lower year-on-year in December. The reason for these is that many domestic players increased the foreign assets they held and serviced debt when the Fed raised the interest rate for the first time, but after the pressure was released, domestic players' adjustment of assets and debt had become more stable, and they continued to make outbound investments, but slowed its pace to service debt and strengthened demand for borrowing, thereby strengthening China's capability to dampen external impact on its cross-border capital flows. 2017-01-19 11:08:03 · Wang Chunying: Second, the Fed interest rate hikes will have a spillover effect worldwide. When most relevant economies are under impact, the extent of impact on a country will be dependent on its economic fundamentals, complemented by the degree of liberalization, economic size, etc. Currently, China stands out worldwide for its economic conditions, robust financial markets and social stability, which will put China at an advantage in coping with the impact from the Fed interest rate hikes. We also have recently noticed that the major economic indicators of China have been improved to various degrees, indicating China's economic growth has become more stable. For example, as at last December, China's official manufacturing purchasing manager's index (PMI) had remained above the 50 boom and bust line for 5 years in a row, and the PPI had sustained positive growth for 4 consecutive years. The International Monetary Fund (IMF) has recently upped its projection of China's economic growth for 2017 to 6.5% by 0.3 percentage point from the level of the early projection. 2017-01-19 11:14:23 · Wang Chunying: Third, further observations are required with regard to the Fed interest rate hike cycle and the strengthening of the US dollars. Based on the current market changes, the USD exchange rate will fluctuate somewhat, as shown by the recent fall of the US Dollar Index against the beginning of the year. There are doubts and disputes about the longer-term movement of US dollars in the market, considering the execution and effects of the policies of the new US administration as well as the impact of the uncertainties in the global financial markets. You may remember that after the hike by the Fed at the end of 2015, it was widely expected in the market that there would be 3-4 times of hikes in 2016, but the interest rate was hiked only once due to the many uncertain and unforeseeable factors. No matter how the external environment changes, the most effective measure would be to do our own business well. In 2017, China's economy will continue to be operating within a reasonable range, and the deepened supply-side structural reform will guide the economy to become better in quality, more efficient, more equitable and more sustainable, which will help China's balance of payments find a basic equilibrium. Adhering to the general work guideline of making progress while maintaining stability, foreign exchange authorities will effectively enhance the level of trade and investment facilitation to serve the real economy. Meanwhile, the authenticity and compliance reviews will be strengthened to sustain a tough stance on foreign exchange irregularities and guard against risks associated with cross-border capital flows. 2017-01-19 11:19:26 · ITAR-TASS: What would you say about the China-Russia cooperation in foreign exchange last year? What is expected from China-Russia cooperation in foreign exchange this year? Thank you. 2017-01-19 11:23:32 · Wang Chunying: Thank you for your questions. With regard to China-Russia cooperation in finance, the SAFE is committed to cooperating with the initiator to boost closer cooperation between the two countries' commercial banks, and provide better services for bilateral trade and economic transactions, which have gone smoothly. We will continue to promote these efforts in 2017. 2017-01-19 11:24:41 · China News Service: At the beginning of this year, the SAFE imposed more stringent declaration requirements for individual purchases of foreign exchange. How will this impact individual purchases of foreign exchange, given the current situation? Thank you. 2017-01-19 11:35:38 · Wang Chunying: Thank you for your question. The data we have monitored show that individual purchases of foreign exchange has stayed stable across the country since the policy is implemented. Since January, the average individual purchases of foreign exchange have declined on a year-on-year and month-on-month basis. This indicates that people have developed an accurate understanding of the policy, with their sentiment staying stable. This is, I believe, attributable to the fact that two aspects of the policy for individual purchases of foreign exchange have remained unchanged. First, the quota for individuals' annual purchases of foreign exchange remains unchanged. After declaring the demand for authentic purchases of foreign exchange by presenting their valid ID cards, domestic residents can purchase foreign exchange within the annual quota from the bank counters and through electronic channels. The annual quota is still USD 50,000, which can satisfy the demands of most people for foreign exchange under the current account. To purchase foreign exchange under the current account beyond the quota, the authentic evidencing materials with the amount of transaction indicated should be presented to the bank, with no barriers in the process. 2017-01-19 11:36:09 · Wang Chunying: Second, the policies for the use of foreign exchange for study and travel abroad that are closely related to people's daily life remain unchanged. To purchase foreign exchange within the quota for study aboard, complete and authentic information should be declared as required. Where the purchases are beyond the quota, private passport, valid visa, and letter of admission from an overseas school, certificate of tuition or cost of living certificate should be presented to buy foreign exchange from banks. Foreign exchange for travel abroad could be bought within the quota based on the traveler's demand or bank card could be used aboard to use the foreign exchange as normal. Moreover, the foreign exchange purchasing policies remain unchanged for residents' other demands for foreign exchange under the current account, such as visiting relatives, seeking medical help abroad, trade in goods, purchases of non-investment insurances and various consulting services. 2017-01-19 11:41:37 · Wang Chunying: The purposes for improving the declaration management of personal foreign exchange information are to enhance ex-post verification, strengthen management and disposal of irregularities and better ensure authentic requirements for foreign exchange. In the past, due to shortfalls in the management of individual purchases of foreign exchange, there were irregularities, frauds and money laundering, which had disturbed normal transaction order, and eroded the interests of residents who followed the provisions on individual purchases of foreign exchange. As a result, it is imperative to improve the management of the declaration of personal foreign exchange information, especially break down what to be declared, make known the rules individuals should observe to buy and make payment in foreign exchange and relevant legal responsibilities they should take on, and intensify banks' responsibilities for authenticity and compliance reviews. It is now easy for individuals to buy and make payment in foreign exchange under the current account, and the SAFE will continue to optimize relevant policies, and urge banks to improve the level of services while intensifying authenticity and compliance inspection of banks that handle individual purchases of and payments in foreign exchange. Meanwhile, further efforts will be made in the ex-post sample surveys and inspections of individual purchases of and payments in foreign exchange, and in the monitoring, analysis, selection and inspection frequencies of individuals' information declaration and transaction data. Heavier penalties will be imposed on individuals and banks involved in false declaration, obtaining foreign exchange under false pretenses, frauds, money laundering, illegal use and transfer of foreign exchange to enhance the costs for violating regulations and laws. Relevant measures are as follows: including individuals violating regulations in the watchlist, restricting them from purchasing foreign exchange within the quota or prohibiting them from buying foreign exchange, and incorporating their behaviors into their personal credit records; the anti-money laundering authority will conduct anti-money laundering investigations into anyone suspected of money laundering; anyone suspected of committing a crime will be transferred to the judicial department for the department to take legal actions against them. 2017-01-19 11:59:33 · Union Morning Paper: Experts have recently said that USD 2 trillion in foreign exchange reserves would be sufficient. What would you say about the size of foreign exchange reserves and its changes? Thank you. 2017-01-19 12:09:14 · Wang Chunying: Thank you for your question. The size of foreign exchange reserves has drawn wide concerns. I would here like to share with you some of my ideas. First, it is not necessary to hype a certain figure since it is normal for financial indicators to go through ups and downs. Second, China's foreign exchange reserves are still sufficient in terms of its capabilities to make external payments and service external debt. There is no common measurement for the size of a country's foreign exchange reserves. By traditional standards, foreign exchange reserves must be sufficient to make payments for at least 3 months of imports. Assuming no RMB is used for making external payment, the current demand for foreign exchange is about USD 400 billion. But as a matter of fact, RMB can be used for making cross-border payments now. Turning to servicing of external debt, foreign exchange reserves should be sufficient to pay off short-term external debt. Currently, the short-term debt denominated in RMB and foreign currencies amounts to USD 800-900 billion, much less than USD 1.3 trillion as at the 2014 yearend, which indicates that most external debt servicing pressure has recently been released. To sum up, China's capabilities to make external payments and service external debt remain strong as shown in the size of China's foreign exchange reserves and are in a good position to safeguard China's economic and financial security. 2017-01-19 12:15:31 · Wang Chunying: Third, from the perspective of foreign exchange reserves' sufficiency for domestic players to hold more external assets, the changes in China's foreign exchange are in nature the changes in the structure of external asset holders, which is a matter of process with some positive implications. As Chinese enterprises' and individuals' economic strengths have been enhanced in recent years, the demands for diversifying asset allocation in the private sector are set to rise, which is a process of encouraging companies and individuals to hold more foreign exchange. According to the International Investment Position, as at September 2016, the external assets held by China's private sector accounted for 49.7% of its total external assets, up by 4.5 percentage points from the end of 2015. In the past, the share of reserves in external assets was large, but now the share of private sector rises, making external assets and external debt of the private sector more balanced and matched with each other. As at the end of September, the private sector's net external debt was USD 1.5 trillion, much lower than the peak of USD 2.3 trillion at the end of 2014. Moreover, the increase in the external assets held by the private sector is not necessarily from foreign exchange reserves. The continued surplus under the current account, and the policies on cross-border financing and market liberalization also facilitate the cross-border capital inflows, which could also be the sources of capital for domestic players to hold more external assets. It is certain that external assets should be adjusted properly and moderately between the government and the private sector, which should be aligned with the levels of economic development and opening up in China. In the future, China will enhance the elasticity of the RMB exchange rate while ensuring the rate stays stable at a reasonable and even level, and improve the cross-border capital flow management system under the framework of macro-prudential management, which will be favorable for stable adjustment as mentioned earlier. 2017-01-19 12:33:21 · Wang Chunying: Fourth, China's foreign exchange reserves will continue to fluctuate within a reasonable range. There are four factors that impact the changes in the size of foreign exchange reserves: first, the central bank's operation in the foreign exchange markets; second, the price fluctuations of foreign exchange reserves as investment assets; third, other currencies' exchange rates against the USD may impact the changes in the size of foreign exchange reserves since the USD is the measurement currency of foreign exchange reserves; fourth, as defined by the IMF, foreign exchange reserves used to support going global will be excluded from the entry of foreign exchange reserves in accounting, and vice versa. In the future, China's foreign exchange reserves will be sufficient to meet the conditions for fluctuating within a reasonable range. On the one hand, the recent increase in the foreign assets held by the private sector is correlated with the current market environment, especially the strengthening of the US dollars, but the dollar's movement is uncertain and impossible to rise all along, while the RMB exchange rate will obtain more support from the domestic economic fundamentals, which means that the private sector may adjust the structure of assets and liabilities denominated in domestic and foreign currencies, making foreign exchange receipts transfer towards official reserves again. On the other hand, and the most important, China's economy will continue to grow at a medium-to-high speed, and the balance of payments will stay stable with a surplus under the current account and a deficit under the capital and financial account. Thank you. 2017-01-19 12:40:37 · The Voice of China: Hello, Ms. Spokesperson. As for a key word you mentioned in your previous answer, outstanding external debt, I learned that it has picked up for two quarters. What would you say about this? As far as you know, will this continue in the future? Thank you. 2017-01-19 12:46:37 · Wang Chunying Thank you for your questions. Indeed, China's outstanding external debt has rebounded for two consecutive quarters. As at the end of June 2016, the full-scale outstanding external debt amounted to USD 1.39 trillion, up by 2% quarter-on-quarter; and as at the end of September, the figure was USD 1.43 trillion, up by 3% quarter-on-quarter. The pick-up of the outstanding external debt for two quarters in a row reversed the downward trend since the second quarter of 2015, for two reasons as follows: First, in the face of optimistic conditions for imports and exports, Chinese enterprises had developed a stronger demand for external financing. According to the external debt structure, the share of credit financing related to the real economy especially trade was high, indicating the country was highly susceptible to the fluctuations in imports and exports. Since the second half of 2014, as the imports declined and the US dollars kept strengthening, Chinese enterprises had actively adjusted the level of external debt they incurred and repaid short-term trade finance and trade credit. Since the second quarter of last year, however, Chinese imports had bottomed out, and grown gradually on a quarter-on-quarter basis especially since May. Meanwhile, the US Dollar Index had fallen, and enterprises' demand for trade finance had rebounded. As at the end of September 2016, the outstanding loans and trade credit rose by USD 35.3 billion quarter-on-quarter and by USD 42.5 billion against the end of March. On the one hand, the growth of enterprises' external debt in two consecutive quarters was for the purpose of the enterprises' business operation and development, and on the other hand, this indicates the sound capability of Chinese enterprises to finance externally and use domestic and foreign funds to serve their production and operations. This also shows that with promising prospects of their operations, Chinese enterprises were optimistic about their outlooks and willing to support their imports and exports through financing. 2017-01-19 12:48:06 · Wang Chunying: Second, foreign investors were optimistic about returns on investing in China and more willing to make investments. In 2016, China's economy maintained stable growth, at a medium-to-high speed, and witnessed a continued surplus under trade in goods, but since April, as the expectations of the Fed interest rate hikes in the global financial markets were weakened, the economy of the euro area and Japan recovered slowly, and the environment in the global financial markets changed, foreign investors were still confident in the returns on investing in China, with a stronger demand for holding more RMB assets. In addition, as China's policy for external financing was further liberalized, China attracted USD 20.8 billion in non-resident deposits and debt securities in the second and third quarters, which was a result of foreign investors' active participation, and reversed the downward trend of the first quarter. It is expected that China's external debt will continue to turn for the better in 2017. Since the beginning of last year, China has introduced a series of reformative measures in favor of domestic players' cross-border financing and foreign players' making investments in China. These measures include steadily pushing forward macro-prudential management of full-scale cross-border financing, facilitating foreign exchange settlement of external debt by Chinese enterprises, vigorously pressing ahead with the liberalization of the interbank bonds markets, and further deepening the external debt management reform to facilitate foreign exchange settlements under the capital account. In 2017, these policies will continue to be deepened, and relevant market infrastructure will be refined, which, coupled with the support from China's real economy and foreign trade development, will be favorable for boosting the steady bounces of China's outstanding external debt. 2017-01-19 12:50:50 · CBN: We have noticed that banks' sales and settlements of foreign exchange remained in deficit, which indicates there are expectations of depreciation of the RMB exchange rate. The US Dollar Index has been weakened and there have been a wave of rebounding of the RMB exchange rate against the USD recently. Are you worried that this will unleash the demand of enterprises and individuals for purchasing foreign exchange to further drive RMB depreciation? What responses does the SAFE have? Word has it that settlement of foreign exchange will be mandated when necessary. Is this true? 2017-01-19 12:57:41 · Wang Chunying: Thank you for your questions. But you'd better judge hypothetical problems prudentially. As far as specific policies are concerned, it is advised that you refer to the official documents released by relevant government departments, rather than give the rumor much credibility. As for the changes in the RMB exchange rate, we believe it should be looked at in the short term and the medium and long term respectively. Over the short run, the supply and demand in foreign exchange markets are impacted by different factors such as balance of payments, market sentiment, cross-border capital flows and speculation and hype, which are reflected in the exchange rate. Sometimes due to expectations and speculation, the supply and demand may deviate from the fundamentals. In the medium and long run, the exchange rate is subject to the impact of the fundamentals. It was much talked and is widely believed that there is no ground for RMB exchange rate depreciation according to China's economic fundamentals. It is sure that this does not exclude short-term fluctuations of the RMB exchange rate, which is normal. Market participants should make analysis by objective standards. As for the rumor you mentioned, I have not heard it yet. In fact, to guard against risks, a response plan should be in place in relation to the pressure from cross-border capital inflows or outflows, and prudential assessment and implementation should be ensured based on domestic and foreign conditions. Our rationale is still that by adhering to the general work guideline of making progress while maintaining stability, trade and investment facilitation should be stuck to serve the real economy, while the authenticity and compliance reviews should be promoted to crack down on foreign exchange irregularities more rigorously. 2017-01-19 13:23:13 · Xi Yanchun, the moderator: Thank you, Ms. Director. This is the end of today's press conference. Thank you all. 2017-01-19 13:27:05 (The original text is available at www.china.com.cn) 2017-01-19/en/2017/0119/1244.html
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The State Administration of Foreign Exchange (SAFE) has recently released the Balance of Payments and the International Investment Position for 2016, and its spokesperson answered media questions on relevant issues. Q: Could you brief us on China's balance of payments for 2016? A: In 2016, China's balance of payments continued to present the pattern of "one surplus and one deficit", namely, surplus under the current account and deficit under the capital and financial account (excluding reserve assets). In 2016, the surplus under the current account remained at a reasonable level in China. The surplus hit USD 196.4 billion in the year, accounting for 1.8% of GDP. In particular, a surplus of USD 494.1 billion was registered under trade in goods, down by 14% from the historical high of last year, but remaining much higher than the levels of 2014 and the years before, showing China was still competitive in foreign trade. A deficit of USD 244.2 billion was recorded under trade in services, up by 12%, chiefly due to a growing deficit under tourism, suggesting that the Chinese residents' spending on travel and study abroad is rising alongside the increase in people's income and the opening up of relevant policies, but the deficit under tourism grew at a slower pace of 6% only in 2016, which was down by 6 percentage points year on year. The pressure from cross-border capital outflows was relieved to some extent, but went through ups and downs in the four quarters. In 2016, a deficit of USD 417 billion was registered under the non-reserve financial account, down by 4% year on year. To be specific, a deficit of USD 126.3 billion was recorded under this item for the first quarter, down by 16% from USD 150.4 billion for the fourth quarter of 2015; the deficit contracted significantly to USD 52.4 billion in the second quarter but rebounded remarkably to USD 135.1 billion in the third quarter, the highest quarterly deficit in 2016, but remaining much lower than the deficits for the third and fourth quarters of 2015; and then the deficit shrank to USD 103.1 billion in the fourth quarter, down by 31% year-on-year. Q: Could you tell us why the surplus under the current account for the fourth quarter of 2016 dropped by more than USD 20 billion from the preliminary statistics? A: In the fourth quarter of 2016, China posted USD 11.8 billion in the surplus under the current account, about USD 26 billion less than the preliminary statistics of USD 37.6 billion. This is chiefly because: First, the profit of foreign-funded enterprises estimated based on the latest data rose, leading to increases in the expenses under ROI and in the deficit under primary income. In China's Balance of Payments, the profits generated by FDI that belong to foreign parties are the profits of foreign-funded enterprises above designated size and the investment enterprises from Hong Kong, Macao and Taiwan calculated by the National Bureau of Statistics. The statistics show that enterprises' operations picked up as China's economic performance was being stabilized. In 2016, the total profits from industrial enterprises above designated size grew by 8.5% from that of the previous year. In particular, the total profits of foreign-funded enterprises and investment companies from Hong Kong, Macao, and Taiwan went up by 12.1%. But as the Balance of Payments was prepared, no data for the whole year were disseminated, and as a result, the preliminary estimates were USD 20 billion lower than the official data. But considering the preliminary data covered all the profits remitted outward, the undervalued RMB 20 billion in the expense under ROI was still recorded under the inflows of FDI under the financial account in recording the expense on ROI under the current account in the Balance of Payments, based on accrual accounting since the expense was not remitted outward. Such recording will affect the structure — but not the overall situation—of the Balance of Payments. Second, as the way the statistics on travel income and expense was adjusted, with payment channel data used, the deficit under tourism rose. In the new method, the revenue and expense under tourism were compiled based on the payment channel data such as credit card, debit card, remittance and banknotes. The deficit under tourism for the four quarters estimated using the new method was USD 6 billion higher than the preliminary statistics. At the same time, retrospective adjustment was made to all of the revenues and expenses under tourism for the quarters since 2014, which were recorded under relevant entries under the financial account, instead of the current account. Q: Could you brief us on the features of cross-border capital flows for 2016? A: In 2016, Chinese market players continued to increase their holding of external assets, and saw the conversion of net outflows of external debts in the last year into net inflows. On the one hand, the domestic market players have diversified the ways of using external funds, with ODI, portfolio investments and other investments on an upward trend. In 2016, the external assets held by domestic market players in various forms grew by USD 661.1 billion, up by 98% year on year. To be specific, a net increase of USD 217.2 billion was registered under ODI, up by 25%; a net growth of USD 103.4 billion was recorded under external portfolio investment, up by 41%; and a net increase of USD 333.6 billion in other investments such as overseas deposits and external loans, climbing by 305%. On the other hand, as the domestic securities market is liberalized and the demand for financing rebounds among enterprises, net inflows of external debt have replaced net outflows of the previous year. In 2016, a net inflow of USD 244.1 billion was registered under foreign investments such as FDI, portfolio investments and other investments, compared with USD 101.0 billion in net outflows for 2015. In particular, a net outflow of USD 13.5 billion was registered in the first quarter, but a net inflow had been recorded and risen quarter after quarter since the second quarter, hitting USD 77.1 billion, USD 84.2 billion and USD 96.3 billion respectively. First, foreign capital under direct investment sustained net inflows, which amounted to USD 170.6 billion throughout the year, including USD 95.8 billion for the second half, up by 28% from the first half. Second, foreign portfolio investment maintained a net inflow of USD 41.2 billion, 512% higher than that of the previous year, which indicated China's increasing attractiveness to foreign capital and deepened liberalization. Third, a net inflow of USD 30.1 billion in other foreign investments was recorded, compared with the net outflow of the previous year, suggesting domestic market players' servicing of foreign debt has come to a halt, and the demand for cross-border financing is rising. Q: Could you tell us about the changes in international investment position at the end of 2016? A: In 2016, China's external financial assets, liabilities and net assets all registered growth. As at the end of 2016, China posted external financial assets of USD 6.4666 trillion, external debt of USD 4.666 trillion, up by 5% and 4% year on year respectively, and net external assets of USD 1.8005 trillion, a year-on-year increase of USD 127.7 billion, or 8%. The external assets held by the private sector have for the first time accounted for more than half of the total. As at the end of 2016, the balance of international reserve assets reached USD 3.0978 trillion, including USD 3.0105 in the balance of foreign exchange reserves. The reserve assets took up 48% of China's external financial assets, still topping China's reserve assets, but the ratio dropped by 7 percentage points year on year, the lowest level since China began to disseminate the international investment position data in 2004. That the proportion of the external assets held by the private sector exceeded half of the total shows that China's external economic and financial communication are shifting from the focus on commodity exports to equal importance of commodity exports and capital exports, and from the focus on external investing by official authorities to the equal importance of outbound investments by official authorities and the private sector. The rises in external debt were primarily contributed by the sustained growth in FDI and the increases in other foreign investments. By the end of 2016, of China's external debt, FDI hit USD 2.8659 trillion, up by 6% year on year, and continued to take the first place among external debt, accounting for 61%, indicating foreign investors are still optimistic about making long-term equity investments in China. Moreover, external debt from investments such as non-resident deposits and external loans reached USD 984.9 billion, down by 2% year on year and accounting for 21% of total debt. Q: What are your expectations of China's balance of payments for 2017? A: Overall, China's balance of payments for 2017 will continue to present the landscape of "surplus under the current account and deficit under the capital and financial account (excluding reserve assets, the same below)", and cross-border capital flows will continue to develop towards an equilibrium. The surplus under the current account will continue to remain within the reasonable range. First, a surplus will continue to be registered under trade in goods. With regard to exports, though trade frictions will potentially threaten China's exports, yet the stable global economic growth in 2017 will continue to provide a basic guarantee for stable external demand in China. Moreover, as relevant cooperation projects such as the Belt and Road Initiative are stably advanced, the countries within the region will benefit in exports. As for imports, China's economic fundamentals will remain sound, and the global prices of commodities will pick up, and therefore, the imports are expected to stay stable. Second, the growth of deficits under trade in services will be stabilized. Tourism has constituted the majority of the deficits under trade in services. As the consumption demands for travel and study abroad are unleashed quickly, the deficit under tourism has begun to be stabilized over the past two years; and as Chinese enterprises are adjusting the revenues from trade in services and their spending structure, the deficits in trade in services other than tourism have contracted substantially. Third, as investments such as ODI by the private sector are on the rise, China is expected to see growing returns from outbound investments. It is expected that the surplus under the current account as a percentage of GDP will hit a balanced and reasonable level in 2017. The deficit under the capital and financial account is expected to contract. On the one hand, due to unstable and uncertain international environment, the market sentiment may often change, thus leading to the interim volatilities in China's cross-border capital flows. On the other hand, the factors that are favorable for the equilibrium between inflows and outflows of cross-border capital will continue to play positive roles. First, China's economy has remained stable recently, with relevant risks being controllable, and the government has introduced policy measures to expand opening up and actively leverage foreign capital, and the foreign investment environment has been optimized further, which will be conducive to boosting the inflows of long-term capital. Second, as Chinese enterprises' comprehensive strength is strengthened and the global demand for resource allocation is enhanced, China has embraced high-speed growth in ODI in recent years. After achieving fast growth in the short term, enterprises' awareness of investment risks will be raised, and their outbound investment will be more reasonable and stable. Third, turning to the policy of expanding the opening up of the financial market, China has implemented the policies such as macro-prudential management of full-coverage cross-border financing, boosting the further opening up of the interbank bond market, and deepening foreign exchange administration for QFII and RQFII, which have produced positive outcomes, and will continue to attract the sustained inflows of cross-border capital. As the market-oriented RMB exchange rate formation mechanism reform is being stably pressed ahead with, the elasticity of the RMB exchange rate will be enhanced, which will be favorable for the inflows and outflows and two-way fluctuations of cross-border capital in China. 2017-04-24/en/2017/0424/1259.html