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· Hu Kaihong: Good morning, ladies and gentlemen. Welcome to the press conference of the Information Office of the State Council. Mr. Guan Tao, director of the Balance of Payments Department in the State Administration of Foreign Exchange (SAFE), has been invited to unveil data on foreign exchange receipts and payments during the first half of 2014 and to answer your questions. Now, let us welcome Director Guan. July 23, 2014, 09:37:09 ·Guan Tao: Good morning, ladies and gentlemen. Welcome to today's press conference. I am delighted to meet you again. Today I am going to release the data on the foreign exchange receipts and payments during the first half of 2014 and to answer your questions on behalf of the SAFE. July 23, 2014, 09:52:17 ·Guan Tao: In the first half of 2014, the global economy grew slowly, the economic recovery in the developed and emerging economies remained obviously imbalanced, and the monetary policies of the major economies were polarized. In the meantime, growth of the Chinese economy was stable. The economic restructuring progressed but maintained stability and enhancement of the economic transformation and upgrading was stable. Based on the philosophy of seeking progress while maintaining stability and instituting reforms and innovations, the SAFE has persistently improved the capability of foreign exchange administration to serve the real economy. Overall, during this period China's cross-border capital flows were basically balanced amid oscillations. Banks settled foreign exchange in the amount of RMB 5.92 trillion (USD 964.5 billion) and sold foreign exchange in the amount of RMB 4.77 trillion (USD 776.3 billion) during the first half of the year, with a surplus of RMB 1.15 trillion (USD 188.3 billion). Meanwhile, according to the data on foreign-related receipts and payments through banks, banks registered cumulative foreign-related income in the amount of RMB 10.03 trillion (USD 1.63 trillion) and made external payments in the amount of RMB 9.50 trillion (USD 1.55 trillion) on behalf of clients, with a surplus of RMB 528.9 billion (USD 86.2 billion), July 23, 2014, 09:52:51 ·Guan Tao: Currently China's foreign exchange receipts and payments are characterized by the following: First, China has witnessed net inflows of cross-border capital. In the first half of the year, after adjustments for foreign exchange rate factors (the same below), the foreign exchange settled by banks was up 6 percent year on year and the foreign exchange sold by banks was up 0.4 percent year on year, representing an increase in the surplus of 36 percent; the foreign-related income received via the banks was up 15 percent year on year, and external payments made through the banks were up 20 percent year on year, representing a decrease in the surplus of 31 percent.. Second, the imbalance between supply and demand of foreign exchange has been significantly eased. According to the data on foreign-related receipts and payments through the banks, the surplus in foreign exchange settled and sold by banks stood at USD 159.2 billion in the first quarter, up 57 percent year on year, and stood at USD 29 billion in the second quarter, down 21 percent year on year or 82 percent quarter on quarter. The surplus in foreign-related receipts and payments amounted to USD 45.5 billion in the first quarter, down 57 percent year on year, and amounted to USD 40.7 billion in the second quarter, up 122 percent year on year or down 10 percent quarter on quarter. July 23, 2014, 09:53:48 ·Guan Tao: Third, the motivation among market players to settle foreign exchange has been weakened while their willingness to buy foreign exchange has been strengthened. Foreign exchange settled via banks, which measures the willingness of enterprises and individuals to settle foreign exchange as a percentage of the foreign-related foreign exchange income (or the foreign exchange settlement rate), was on the decline, down from 77 percent in the first quarter to 68 percent in the second quarter; foreign exchange sold via banks, which measures the motivation to buy foreign exchange as a percentage of the foreign-related foreign exchange payments (or the foreign exchange sales rate), was on the rise, up from 61 percent in the first quarter to 69 percent in the second quarter. Fourth, forward foreign exchange settlements and sales have changed from a surplus to a deficit, while the balance of undue net forward foreign exchange settled changed from an increase to a decrease. Forward contracts for foreign exchange settlements and sales achieved a monthly average surplus of USD 24 billion during the first two months, and dropped to USD 1.7 billion from March to May, experiencing an average monthly deficit of USD 2.7 billion in June. With the adjustment in the performance of forward contracts for foreign exchange settlements and sales, the undue settled net forward foreign exchange increased by a cumulative USD 15.2 billion in January and February, and underwent a correction during the four following months from March to June, dropping USD 36.1 billion on accumulative basis, thus spurring banks to increase their foreign exchange position. At the end of June, the balance of undue settled net forward foreign exchange reached USD 31.8 billion, the lowest since September 2013. In the second quarter, the combined surplus of foreign exchange settled and sold by banks and the balance of undue settled net forward foreign exchange combined to a surplus of USD 2.5 billion, much lower than the surplus of USD 164.9 billion during the previous quarter, indicating that the supply and demand for foreign exchange in the retail banking market for spot and forward foreign exchange were voluntarily tending to be balanced. July 23, 2014, 09:55:06 ·Guan Tao: These are the major statistical data I am going to disclose regarding foreign exchange receipts and payments during the first half of the year. You can find related data on the SAFE's official Website. Next, I would like to answer your questions on these issues. July 23, 2014, 09:57:47 ·Hu Kaihong: Thank you, Director Guan. Now please ask your questions. July 23, 2014, 09:58:09 ·Journalist from CCTV: The Customs data show that the trade surplus during the second quarter increased against the first quarter, while the surplus in foreign exchange settled and sold by banks dropped significantly. Does this mean that with respect to China’s cross-border capital flight is serious? What are your thoughts about cross-border capital flows in the future? Furthermore, China's foreign exchange reserves are nearing USD 4 trillion; I am wondering how these reserves are invested and managed. July 23, 2014, 10:00:20 ·Guan Tao: Thank you for your questions. I'd like to answer them according to the following: First, China's foreign exchange receipts and payments did fluctuate markedly in the first half of the year. Customs statistics show that China witnessed a trade surplus of USD 16.9 billion during the first quarter. The statistics from the Ministry of Commerce reveal that China achieved a net inflow of USD 11.7 billion in cross-border direct investments during the first quarter, excluding net inflows of cross-border direct investments by financial institutions, or the balance between foreign capital actually utilized and outbound direct investments. The combined surpluses of these trading and investment activities associated with the real economy amounted to USD 28.6 billion. In the meantime, banks witnessed a surplus of USD 159.2 billion in the foreign exchange that they settled and sold, which was way in excess of USD 28.6 billion, suggesting that China was under heavy pressure from the net inflows of cross-border capital at the beginning of the year. In the second quarter, China's trade surplus was USD 86 billion and net inflows of direct investments were USD 8.3 billion, which combined came to USD 94.3 billion, up 230 percent from the first quarter, indicating that the trade and investment surpluses associated with real economic activities had rebounded significantly during the period. But at the same time, the surplus in foreign exchange settled and sold by banks reached USD 29 billion, down 8 percent quarter on quarter. Moreover, this surplus was far lower than USD 94.3 billion, revealing that during the period China was under pressure due to the outflow of cross-border capital. July 23, 2014, 10:00:57 ·Guan Tao: Second, such changes are explainable. It indicates that as bidirectional fluctuations in the RMB exchange rate intensify amid many uncertainties and instabilities both at home and abroad, institutions like domestic companies have adjusted some of their behavior in terms of the receipts and payments of foreign exchange. First, their willingness to hold foreign exchange rather than to settle foreign exchange has been strengthened. Domestic foreign exchange deposits in the second quarter increased by USD 86.3 billion, or 104 percent, from the first quarter. Second, the banks’ willingness to buy foreign exchange has been enhanced while their motivation to borrow foreign exchange loans has been weakened. The balance of the domestic banks' foreign exchange loans decreased by USD 2.3 billion in the second quarter, compared with an increase of USD 62.6 billion in the first quarter. This comparison indicates that significant changes have occurred. Third, since the RMB exchange rate began bidirectional fluctuations in mid-February at a remarkably higher rate, the number of domestic enterprises contracting for forward foreign exchange settlements has decreased, while the number of domestic enterprises contracting for forward foreign exchange purchases has risen. The monthly average of forward foreign exchange settled from March to June was down 49 percent from January to February, while that of foreign exchange purchased was up 14 percent, thus leading to a significant decrease in the surplus in forward foreign exchange settled and sold by banks to customers and eventually leading to a deficit in June. As substantial preliminary forward foreign exchange contracts matured and were performed, the balance between the banks' undue forward foreign exchange settled and sold changed, leading to an increase in the banks’ foreign exchange position. As I have just now unveiled, the balance of undue net forward foreign exchange settled fell significantly from March to June, offsetting the increase in the balance of undue net forward foreign exchange settled during the first six months, which was due to the increase in the surplus in forward foreign exchange settled and sold. This also led to a remarkable change in the relationship between supply and demand in the foreign exchange market during the same period. July 23, 2014, 10:03:15 ·Guan Tao: In the second quarter, banks registered a surplus of USD 29 billion in the spot foreign exchange that they settled and sold. Allowing for the impact from the increase in the banks’ foreign exchange position due to the decrease in the balance of net forward foreign exchange settled in the forward market, the monthly supply and demand of foreign exchange were basically balanced during the second quarter. Based on the combined spot and forward foreign exchange, banks reported a surplus of only USD 3.8 billion in April, a deficit of USD 3.5 billion in May, and a surplus of USD 2.2 billion in June, indicating that both the surplus and the deficit were very small. With forward factors taken into consideration, banks recorded a surplus of only USD 2.5 billion in the second quarter. As I have just now disclosed, in the second quarter the supply and demand for foreign exchange were roughly balanced. Third, such a change is positive. Why? First, the RMB exchange rate is now going through bidirectional fluctuations, not trend adjustments. Such fluctuations have not led to consistent and strong expectations of a RMB depreciation. In fact, since China's economic conditions improved in May and June, the RMB exchange rate, trading price, and standard price have rebounded to a certain extent. In particular, we have noted that there are two prices since RMB transactions are carried out both at home and abroad and the difference between these two prices also can reflect the degree of market acceptance of the exchange rate. The daily average difference between the domestic trading price and the overseas trading price of the RMB against the USD was 169 basis points in the first quarter and it was reduced significantly to 37 basis points in the second quarter, which was far lower than the 61 basis points in 2012 when the supply and demand of foreign exchange struck a balance. This indicates that the price was widely recognized and accepted by the market and it also reflects a situation of market clearing. July 23, 2014, 10:14:30 ·Guan Tao: Second, compared with the first quarter, banks registered a low surplus in foreign exchange settled and sold in the second quarter, but the foreign exchange settled and sold on a monthly basis was still in surplus. In the first half of the year, the combined trade surplus and the net inflow of direct investments amounted to USD 122.8 billion, while the surplus in foreign exchange settled and sold by banks reached a cumulative USD 188.3 billion, which was higher than the former, indicating that during the period China was under inflow pressures. This can be described as a pendulum effect. The pendulum swung to the right at the beginning of the year, indicating high inflows. In the second quarter, despite the outflow pressures, the pendulum remained on the right side, suggesting that as a whole outflows remained lower than inflows during the period. Third, the change is an expected normal adjustment. We know that the heavy inflow pressures at the beginning of the year were primarily because the RMB exchange rate was high while the exchange rates of overseas foreign currencies were low, and the RMB exchange rate had been unilaterally appreciating for a long time, with a low fluctuation rate. Under such circumstances, carry trade was quite resilient, leading to substantial capital inflows. According to the BOP data for the first quarter, the current account surplus was only USD 7 billion whereas the capital account surplus was USD 94 billion, indicating that foreign exchange reserves increased by more than USD 100 billion during the period, 90 percent of which was from inflows under the capital account. However, after the RMB began bidirectional fluctuations in the second quarter, institutions such as domestic enterprises have adjusted their behavior in terms of receipts and payments of foreign exchange, decreasing settlements and increasing purchases of foreign exchange, either spot or forward, thus leading to a change in the relationship between the supply and demand of foreign exchange and ultimately balancing supply and demand. This balance means China's overall BOP has improved. As preliminarily projected, the current account surplus may increase further but net inflows under the capital account will decline significantly or may even become a deficit. This will not change the equilibrium in the BOP but it is a change that we expect. It is not an unexpected impact on the market, but an expected control target. July 23, 2014, 10:22:42 ·Guan Tao: Fourth, as for China's cross-border capital flows in the near future, we believe the flows will continue to oscillate during the second half of the year. China's economy has stabilized, which will be favorable for strengthening market confidence. Foreign trade has also begun to rebound. There will continue to be an interest rate spread between China and other countries. All of these factors will lead to capital inflow pressures. However, it should be noted that China faces some uncertainties since at present its economy is going through three phases at the same time, and many instabilities, such as in the monetary policies of the major economies, are being adjusted. Overall, the RMB exchange rate is balanced and rational. Therefore, the bidirectional fluctuations of cross-border capital flows will become a new normal. Domestic market players have been warned that they should adapt to this new normal, adjust their financial management strategies, and change their traditional one-dimensional thinking to bidirectional thinking, to effectively manage the risks associated with the bidirectional fluctuations of capital and the exchange rate. The recent online interview reported that China's foreign exchange reserves are operated and managed based on the principle of ensuring safety, liquidity, and profitability, thus effectively achieving the goal of retaining and increasing the value of the foreign exchange reserve assets. The operating income from the foreign exchange reserves in the areas of investment has exceeded the local inflation levels, ensuring an increase in the value realized of the foreign exchange reserves. July 23, 2014, 10:31:14 ·Journalist from the People's Daily: Premier Li Keqiang said on his recent overseas tour that China's mounting foreign exchange reserves were actually a heavy burden on the country. How do you understand this, and how should this burden be dealt with? Thank you. July 23, 2014, 10:34:17 ·Guan Tao: In my opinion, an accumulation of foreign exchange reserves is beneficial as it enhances China's strength, improves its capability to fend off external impacts, strengthens its international solvency, and increases its international clout. But it also has some adverse effects. As the foreign exchange reserves increase significantly, the central bank has to launch a large amount of base currencies, which may lead to inflationary pressures as well as to upward pressures on asset prices. Massive foreign exchange reserves will also be more difficult to operate and manage. With excessive foreign exchange, China may have to face great challenges in the unstable international financial market and in the operation and management of foreign exchange. Huge foreign exchange reserves also will likely draw much concern from the international community and trigger trade or investment frictions. The increase in foreign exchange reserves has both pros and cons, which should be weighed. At the beginning when foreign exchange is in shortage, an increase in foreign exchange reserves will be beneficial, but as the reserves reach a certain level, an increase in the foreign exchange reserves will have a more negative influence, so we should actively deal with this. As we are doing, we should address these challenges in two respects: first, controlling the flows. We should continue to be committed to promoting an equilibrium in the BOP to strike a more stable trade balance. While encouraging the use of foreign capital, we need to encourage outbound investments. We also should develop the foreign exchange market by improving the RMB exchange rate formation mechanism to further utilize the decisive role of the market in allocating foreign exchange resources. As the BOP reaches an equilibrium, efforts should be made to slow down the increase in foreign exchange reserves, thus effectively controlling the adverse effects. Furthermore, we should activate stock assets by innovating the channels and ways to use the existing foreign exchange reserve assets to improve efficiency in the utilization of the foreign exchange reserve resources. We have actively done this in recent years. July 23, 2014, 10:34:56 ·Journalist from the Economic Daily: The SAFE has recently proposed that foreign exchange options should be developed and exchange risk mitigation tools should be increased to support the growth of foreign trade. But in reality, there could be arbitrage using foreign exchange options. My question is how will regulators guard against speculation by banks and enterprises using foreign exchange derivatives, and what are their suggestions for enterprises to mitigate risks during the marketization of the RMB exchange rate. Thank you. July 23, 2014, 10:40:34 ·Guan Tao: The SAFE's stance on this question is based on two factors. On the one hand, it has been vigorously supporting and encouraging enterprises to engage in rational hedging activities for their real trading and investment activities, while the purpose of developing the foreign exchange market is also to support enterprises to effectively manage exchange risks. On the other hand, the SAFE does not support, and even prohibits, speculation and arbitrage by enterprises, especially through the structuring of trade or the counterfeiting of documents. To guide market players to accurately use exchange risk mitigation tools, the SAFE has been persistently following the following principles: first, developing the foreign exchange market step by step. To serve the real economy, efforts shall be made to gradually develop foreign exchange products that are really needed in the market, such as from simple to complex products and from basic to derivative products, based on the banks' abilities to manage risks and pricing, and the enterprises' capabilities to identify risks and their affordability. Second, guiding banks to carry out careful operations. To serve the real trade, constant efforts shall be made to improve regulation of foreign exchange derivatives and to guide banks to implement regulatory requirements in their internal operations based on the operating principles of "understanding your customers, understanding your business, and carrying out due diligence investigations," turning the "asked to do" attitude to the "I will do" attitude, thus further arousing the banks' enthusiasm and initiatives in verifying the truth of the relevant businesses and their compliance with the law, while the SAFE shall focus on intensifying interim and ex-post regulation on banks. Third, enhancing risk education for enterprises. The SAFE shall constantly educate enterprises and guide them to develop an accurate awareness of the exchange risks and an accurate understanding of the exchange risk mitigation tools, and how to conduct a proper hedging of exchange rate exposures, while making sure enterprises do not deviate from their primary business but carry out their business based on reality. July 23, 2014, 10:41:31 ·Guan Tao: How enterprises prudentially use foreign exchange derivatives to manage exchange risks is an experience-based process that requires learning from doing. There are some tips for enterprises for the use of foreign exchange derivatives based on the lessons from the development of the derivatives markets both at home and abroad: first, enterprises should adapt to the new normal of bidirectional fluctuations of the RMB exchange rate by changing their linear and unilateral thinking, shifting from merely managing risks associated with a unilateral RMB appreciation to comprehensively managing risks from the RMB bidirectional fluctuations, and focus on their main business by changing the uncertainties of bidirectional fluctuations into certainties through hedging activities. Second, enterprises should understand their deals and not make unfamiliar deals. They should assess the value of derivatives and determine the level of risk limitations before conducting deals. Third, the financial departments of enterprises should not function as profit centers but should regard derivative transactions as a tool to lock up risks, not a tool to make profits. Fourth, enterprises should properly conduct hedging activities as excessive hedging is a form of speculation and can be risky. July 23, 2014, 10:55:01 ·Journalist from China News Service: My question is about China's external debt. A recent research report by the Bank for International Settlements (BIS) states that China has recently seen rapid growth in her external debt, of which short-term external debt constitutes a large part. The BIS has indicated concern about the size of China's external debt. What do you think about this? Thank you. July 23, 2014, 11:05:32 ·Guan Tao: We too have noticed this report. This issue is highlighted in the BIS's latest annual report. We should pay attention to this and also analyze it rationally. Our judgment is based on two points: the macro debt is secure while individual debt risks require more attention. First, on the macro level, China's external debt risks are basically within control, suggesting its debt security is guaranteed. Recent statistics show that the balance of China's external debt was USD 883.9 billion at the end of this March, 1.3 times higher than that at the end of 2008. The balance of short-term external debt was USD 690.8 billion, 2.1 times higher than that at the end of 2008. Given this, short-term external debt grew faster than overall external debt, indicating that since the global financial crisis the growth of the short-term external debt was the primary source for the growth of China's overall external debt. As of the end of March, the short-term external debt accounted for 78 percent of overall external debt, which was 20 percentage points higher than that at the end of 2008 and exceeded the 25 percent international warning line. That is why the BIS warned of the risks associated with China's short-term external debt. However, in addition to the short-term external debt there are many other indicators to measure a country's debt security. Other indicators show that China's overall external debt is secure. China is also below the warning line with respect to traditional debt security indicators, such as the foreign debt ratio, liability ratio, and debt servicing ratio. Moreover, the SAFE has paid much attention to the growth of the short-term external debt in recent years, prudentially controlling the allocation of quotas on the short-term external debt, and has made special efforts to administer and clamp down upon fake trade financing without a real trade background. The SAFE will continue to enhance and improve itsmonitoring of external debt statistics and actively build management systems for the external debt and capital flows under a framework of macro-prudential management to guard against the relevant risks. This is our basic judgment regarding China's overall external debt, which on the whole is secure. July 23, 2014, 11:06:26 ·Guan Tao: Macro debt security cannot simply substitute for micro debt security and relevant market players should continue to watch out for individual debt risks. It has been noted in its annual report that the BIS underscores another risk, that is, "excessive risk-taking by financial institutions," amid low interest rates throughout the world and low fluctuation rates in the market, should be guarded against, which can serve as a reference for China. A key reason behind the rapid growth in China's external debt in recent years is the QE monetary policies adopted by the major economies, which led to low interest rates of the major currencies worldwide and relatively high interest rates of the RMB, while the RMB exchange rate has long been appreciating unilaterally, with a low fluctuation rate. Under this circumstance, most domestic enterprises introduced "debt dollarization." They borrowed foreign exchange rather than bought foreign exchange when they had to make outbound payments, thus incurring a huge debt in dollars. Such enterprises must pay close attention to debt risks. They should rationally conduct external debt financing based on their real production and operation situations and guard against bidirectional fluctuation risks associated with cross-border capital and the RMB exchange rate to avoid problems of foreign exchange liquidity or exchange losses in the future. The macro risks of China’s external debt are under control, which means that foreign reserves can be used to guard against systemic debt risks when the government becomes the lender of last resort. However, individuals should deal with the risks associated with debt liquidity and security on their own and not count on implicit guarantees like the rigid honoring of the external debt. To sum up, on the whole China's external debt is secure, while the relevant individuals should continue to pay close attention to debt security. Thank you. July 23, 2014, 11:17:48 ·Journalist from Dragon TV: It was reported recently that the Bank of China in 2011 introduced a project entitled "You Hui Tong" that allows RMB transferred overseas to be converted into foreign currency with no limitation on the amount of the RMB, thus dodging China's foreign exchange regulations. How will the SAFE position such a foreign-related financial project? Is it legitimate or a grey area? Does the SAFE have some new measures to meet current demands as more domestic funds will be provided overseas and more investments will be made overseas? July 23, 2014, 11:30:48 ·Guan Tao: Regarding your second question, I'd like to say that efforts will be made to accelerate the RMB capital account convertibility, gradually expand channels for capital outflows, and encourage people to hold more foreign exchange and individuals to make external investments, which are the pre-set directions of the reform. When and how to implement these measures shall be based on the overall plan and arrangements, which are currently being researched. Since the "You Hui Tong" issue is not the SAFE's responsibility and has nothing to do with today's press conference, I will not make any comment. Thank you. July 23, 2014, 11:32:31 ·Journalist from Xinhua News Agency: I have two questions about the foreign exchange data. First, are the data on the outstanding foreign exchange funds released yesterday in line with the pendulum-like movement of the BOP in the first half of the year, as you have just mentioned? Second, if the deficit of trade in services under the current account that is increasing on a yearly or even a quarterly basis continues, will the current account surplus turn into a deficit in the future? Will China have a current account deficit? Does the SAFE have any measures to sustain a BOP equilibrium in the future? Thank you. July 23, 2014, 11:37:15 ·Guan Tao: The changes in the data on the outstanding foreign exchange funds of financial institutions released by the People's Bank of China (PBC) are consistent with the analysis of the foreign exchange receipts and payments data I have just now released, indicating significant fluctuations. However, as the definition of outstanding foreign exchange funds disclosed by the PBC is different from the definition of foreign exchange settlement and sales, the two data cannot fully match each other, and you need to make inquiries with the department releasing the former data for further details. July 23, 2014, 11:39:15 ·Guan Tao: Regarding your second question, I would say that the deficit in trade in services has widened. In the mid-1990s when China began to conduct trade in services, it saw a deficit, and the deficit reached USD 124.5 billion in 2013, which is rather high. This issue should be viewed in two respects: on the one hand, the deficit in trade in services reflects the objective situation in the current stage of economic development in China. As China's service sector is less competitive in the global market, there is a deficit in trade in services. On the other hand, with the increase in their income in recent years, the consumption power of Chinese residents has strengthened and many residents have begun to travel and study abroad, all of which are calculated under the trade in services. But the deficit in trade in services is favorable for promoting the BOP equilibrium, which means that not every item under the current account, including trade in goods, trade in services, the earnings account, and current transfers, must be in surplus, and there are surely surpluses and deficits. As I have mentioned, China saw a surplus of USD 124.5 billion in trade in services in 2013, which accounted for -1.4 percent of GDP that year, while the surplus in trade in goods, as defined in the BOP, accounted for 3.9 percent of GDP, so taking into consideration both trade in goods and trade in services, the trade surplus accounted for 2.6 percent of GDP, which was very helpful to balance the current account in China. The current account surplus accounted for 2.0 percent of GDP in the year, which was within the rational range as recognized by the international community. To sum up, the deficit in trade in services has played a positive role in promoting the BOP equilibrium. July 23, 2014, 11:42:21 ·Guan Tao: When looking into China's future current account balance, we should not merely focus on trade in services, which is just one item under the current account. Rather, we should focus on the economic fundamentals. First, the situation of economic restructuring. Efforts should be made to look at the level of transformation of the economic development pattern and the degree of the shift from being investment- and export-driven to being consumption-, investment-, and export-driven. Second, changes in the age structure of the population. What is being heatedly discussed now is whether China has reached the Lewis turning point with a decreasing demographic bonus, which may have a negative impact on China's current account. Third, changes in productivity. If productivity increases with an appreciation of the RMB exchange rate, the current account may continue to sustain a surplus. But if productivity does not grow with an appreciation of the RMB exchange rate, the current account may be adversely affected. No matter whether the current account sustains a surplus or a deficit, it will reach a balance so long as the surplus or the deficit is within the rational range. We believe that the current account will be basically balanced in the future. But others have different findings, some arguing for a surplus and some arguing against a surplus, and we are open to suggestions. July 23, 2014, 11:50:10 ·Journalist from the International Business Daily: The data you have released just now show that China's FDI growth has slowed down. What do you think about that for the second half of the year? Are you going to take measures to keep it stable? Thank you. July 23, 2014, 11:58:17 ·Guan Tao: Good question. But I recommend you inquire of the other relevant authorities about how to use foreign capital. They are more authoritative. Thank you. 2014-07-23 11:59:28 July 23, 2014, 11:59:28 ·Hu Kaihong: Thank you for attending today's press conference. July 23, 2014, 12:01:56 (The original text was released at www.china.com.cn ) 2014-08-18/en/2014/0818/1125.html
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· Mr. Hu Kaihong, Press Spokesperson of the State Council Information Office: Good morning, ladies and gentlemen. Welcome to the press conference of the State Council Information Office. The economic and financial environment both at home and abroad was still complex and changing in the first three quarters of this year. Globally, the uneven economic recovery continued, the monetary policy continued to diverge among major economies and the international capital flows became more fluctuating. Domestically, the economy was stable and improved, and the RMB exchange rate formation mechanism became further market-oriented. Due to the combined impacts of the afore-said factors, domestic players adjusted the structures of assets and liabilities in both domestic and foreign currencies, and the volatility of China's cross-border capital flows became heightened, with more outflows recorded by phase. These issues have drawn wide concern from the media and society. To deepen your understanding, we have invited Mr. Wang Xiaoyi, deputy administrator of the State Administration of Foreign Exchange or the SAFE to unveil the data on foreign exchange receipts and payments for the first three quarters and take your questions. We also have here with us Ms. Wang Chunying, press spokesperson of the SAFE. First, let's invite Mr. Wang for some opening remarks. 2015-10-22 09:53:49 · Mr. Wang Xiaoyi, Deputy Administrator of the State Administration of Foreign Exchange: Good morning, ladies and gentlemen. Welcome to today's press conference. First of all, I would like to brief you on the data on foreign exchange receipts and payments for the first three quarters and then I will take the questions of your concern. Banks settled foreign exchange of RMB 8.26 trillion (USD 1.34 trillion) and sold foreign exchange of RMB 10.15 trillion (USD 1.64 trillion) in the first three quarters, with a deficit of RMB 1.88 trillion (USD 301.5 billion). Meanwhile, according to the data on foreign-related receipts and payments through banks, in the first three quarters of 2015, banks registered cumulative foreign-related income of RMB 15.28 trillion (USD 2.48 trillion) and made external payments of RMB 15.70 trillion (USD 2.54 trillion) on behalf of clients, with a deficit of RMB 413.9 billion (USD 63.6 billion). 2015-10-22 10:00:21 · Wang Xiaoyi: China’s foreign exchange receipts and payments for the first three quarters show the following characteristics: First, foreign exchange settlements and sales by banks, and foreign-related receipts and payments through banks were both in deficit.In the first three quarters of 2015, in US dollar terms, the foreign exchange settled by banks was down by 6% year on year, while the foreign exchange sold, up by 31% year on year, leading to a deficit of USD 301.5 billion or USD33.5 billion per month on average. In the first three quarters, foreign-related receipts through banks were up by 1% year on year, and foreign-related payments through banks were up by 6% year on year, resulting in a deficit of USD 63.6 billion, or USD 7.1 billion per month on average. The much lower deficit in foreign-related receipts and payments than the deficit in foreign exchange settlements and sales shows that Chinese market players adjusted the structures of assets and liabilities in both domestic and foreign currencies, including receiving and keeping foreign exchange as deposits rather than settling foreign exchange, and purchasing foreign exchange to increase foreign exchange deposits or repay domestic foreign exchange loans. 2015-10-22 10:03:31 · Wang Xiaoyi: Second, cross-border capital flows became more fluctuating. In the first quarter, foreign exchange settlements and sales posted a deficit of USD 91.4 billion, or USD 30.5 billion per month on average; in the second quarter, the deficit plummeted to USD 13.9 billion, or USD 4.6 billion per month on average. In particular, a small surplus was registered in May and June. But in the third quarter, the deficit surged to USD 196.1 billion, or USD 65.4 billion per month on average. Foreign-related receipts and payments through banks on behalf of clients went through similar ups and downs. Third, market players' willingness to settle foreign exchange was strong at first but weakened afterwards, indicating the reform to encourage people to hold foreign exchange was carried forward stably. Foreign exchange settled by companies and individuals as a percentage of foreign-related foreign exchange income, or the foreign exchange settlement rate, which measures the willingness of companies and individuals to settle foreign exchange, was 69% in the first quarter, climbed to 74% in the second quarter and then dropped to 67% in the third quarter. From 2007 through 2011, when the RMB was appreciated, the foreign exchange settlement rate remained above 70%, suggesting companies' willingness to settle foreign exchange is weak now. In the first three quarters, the balance of foreign exchange deposits held by non-financial companies in China accumulatively increased by USD 46.1 billion and the balance of those held by individuals went up by USD 11.9 billion. Fourth, market players' motive to purchase foreign exchange was weak at first but strengthened afterwards, revealing that the size of borrowings was reduced in a good order. Foreign exchange purchased by companies and individuals as a percentage of foreign-related foreign exchange payments, or the foreign exchange sales rate, which measures the motive to buy foreign exchange, was 79% in the first quarter, dropped to 75% in the second quarter and then climbed to 91% in the third quarter. From 2007 through 2011, when the RMB was appreciated, the foreign exchange sales rate was just between 50% and 60%, indicating companies' and individuals' willingness to buy foreign exchange is strong now. Accordingly, in the first three quarters, the outstanding domestic foreign exchange loans of companies were down by USD 41.8 billion on a cumulated basis, compared with an increase of USD 39.6 billion the same period last year; the balance of import financing such as refinancing and forward L/C dropped by USD 72.8 billion on an accumulative basis, compared with an increase of USD 6.3 billion the same period last year, which suggests that companies have accelerated deleveraging. 2015-10-22 10:06:04 · Wang Xiaoyi: Fifth, forward foreign exchange settlements and sales by banks were in deficit, which had fallen significantly though. In the first three quarters of 2015, the number of contracts signed between banks and clients for forward settlement of foreign exchange was down by 50% year on year, while the number of contracts signed for forward sales of foreign exchange was up by 52%, recording a deficit of USD 167.9 billion, compared with a surplus of USD 50.8 billion for the same period last year. In the first quarter, a deficit of USD 47 billion was registered, which dropped to USD 21.5 billion in the second quarter and then surged to USD 99.3 billion in the third quarter. More recently, the forward contracts for foreign exchange settlements and sales recorded a deficit of USD 15.4 billion in September, down by a staggering 77% month-on-month. These are the major statistics I want to disclose regarding the foreign exchange receipts and payments in the first three quarters of 2015. You can also find the relevant data released on the SAFE's official website. Now we would like to take your questions. 2015-10-22 10:21:46 · Hu Kaihong Now we will take your questions and please remember to tell us where you are from before raising your questions. 2015-10-22 10:22:51 · CCTV: Hello, Mr. Wang. According to the data disseminated just now, both foreign exchange settlements and sales by banks and foreign-related receipts and payments have been in deficit since the beginning of this year. What's your view of the recent capital outflows and the decline in foreign exchange reserves? Is there a risk of capital flight? What will be the future? Thank you. 2015-10-22 10:23:28 · Wang Xiaoyi: I'd like to answer this question from four aspects: Firstly, since the beginning of this year or the second half of last year, China does have witnessed outflows of foreign exchange funds. Secondly, there are reasons behind such capital outflows, which are not capital flight. Thirdly, foreign exchange reserves do have dropped but are within control for the moment. Fourthly, such volatility should be viewed sensibly and we are confident in achieving the equilibrium of balance of payments in the future. To help you better interpret the data of different coverage that are disseminated by the SAFE, I would like to make an explanation on the three sets of data we usually release, which all involve the monitoring of inflows and outflows of cross-border capital. 2015-10-22 10:25:09 · Wang Xiaoyi: The three sets of data include foreign-related receipts and payments through banks and foreign exchange settlements and sales, which were released just now, and balance of payments, where there is a longer timelag before the data are released. First, foreign-related receipts and payments through banks reflect the receipts and payments of funds, RMB or foreign currency funds that are involved in international trade, by banks on behalf of their clients including companies and individuals. Such international trade includes trade and investments, but excludes banks' cross-border transactions. Once occurring, these transactions will be included in the statistics of foreign-related receipts and payments. In the first three quarters, foreign-related receipts and payments recorded a deficit of more than USD 60 billion. Second, foreign exchange settlements and sales by banks involve banks, companies and individuals. When they receive or are required to pay foreign exchange, they will settle or purchase foreign exchange with banks. After the mandatory sales and settlements of foreign exchange were canceled, companies and individuals can choose to settle foreign exchange or keep it as deposits at their discretion after receiving foreign exchange from abroad, which are based on their judgment of the current exchange rate and economic conditions. In the first three quarters, foreign exchange settlements and sales posted a deficit of more than USD 300 billion, indicating net purchases of foreign exchange by companies and individuals. However, this does not mean immediate external payments, but suggests that the purchased foreign exchange is used to pay for imports or outbound investments, or to repay domestic foreign exchange loans, or to be deposited in banks. Therefore, the large gap between the deficit in foreign exchange settlements and sales and the deficit in foreign-related receipts and payments shows companies' and individuals' expectations of exchange rate and judgment of economic conditions. 2015-10-22 10:31:19 · Wang Xiaoyi: Third, the balance of payments (BOP) is released on a quarterly basis, with a timelag of more than one month. BOP data are recorded by resident and non-resident, and some can better measure China's cross-border capital flows. BOP data fall into two categories, namely, current account and capital and financial account. Assuming there is no net error or omission, the sum of current account and capital and financial account is zero. In other words, current account surplus is equal to capital and financial account deficit, with the latter including the changes in reserve assets. According to the official data for the first half, the current account surplus was USD 148.6 billion, or 3.1% of China's GDP, while the deficit in the capital and financial account excluding reserve assets was USD 125.6 billion. If direct investment, including ODI and FDI, was excluded from the deficit, then the non-direct investment deficit was USD 217.2 billion, more accurately reflecting cross-border capital flows under portfolio investment, external debt, trade finance and trade credit. The data for the third quarter are not yet disseminated, and the net outflows under non-direct investment for the first half amounted to USD 200 billion or so. 2015-10-22 10:49:56 · Wang Xiaoyi: This is a normal case when it comes to the balance of payments, and China is no exception. China recently posted a current account surplus and a capital and financial account deficit, compared with twin surpluses often seen in the period when the RMB is appreciated, which results in significant growth in foreign exchange reserves. Foreign exchange reserves are a kind of capital outflows that are in the hands of the central bank. Germany and Japan have seen surpluses in one account and deficits in the other account for years, indicating such adjustment in China's balance of payments is normal. Secondly, the recent capital outflows are essentially different from panic-driven capital flight. First, these outflows indicate the shift of foreign exchange assets from the hands of the central bank to the hands of companies and individuals, or the effect of encouraging companies and individuals to hold more foreign exchange, who are more willing to hold foreign exchange or make outbound investments. Meanwhile, to cope with the deficit in forward settlements and sales of foreign exchange posted since the beginning of this year, banks bought enormous amounts of foreign exchange position. In the first three quarters, banks' foreign exchange position increased by more than USD 100 billion, and foreign exchange deposits held by companies and individuals went up by more than USD 50 billion. Second, driven by the "Belt and Road" initiative, domestic enterprises are becoming much more willing to make outbound investments, quickening their pace to go global. In the first three quarters, non-financial ODI amounted to USD 87.3 billion, up by 16% year on year. Last but not least, some capital outflows were the result of companies cutting their external debt to reduce the high-leverage risk facing them. Overall, the recent changes are normal and not capital flight. 2015-10-22 11:05:02 · Wang Xiaoyi: Thirdly, volatility of the balance of payments should be viewed sensibly. In the case of capital outflows, market players may follow suit and make irrational adjustments, leading to higher expectations of RMB depreciation. But given China's macroeconomic fundamentals, there is no foundation for continued RMB depreciation, so the irrational factors in the market will vanish along with the stabilization of the economy. China's balance of payments is highly pro-cyclical and is therefore vulnerable to the changes in economic fundamentals. The National Bureau of Statistics recently released that GDP growth for the first three quarters was 6.9%, which was high among major economies, and the economic structural optimization is accelerating, suggesting China's development potential remains strong. Meanwhile, the current account remains in surplus, and its ratio to GDP is still within a rational range of around 3%. It is an international standard that it is normal that the ratio of current account to GDP is between plus and minus 4%. Last, foreign capital inflows for long-term investments remain unchanged. In the first three quarters, China used foreign capital of nearly USD 95 billion, up by 9% year on year; compared with the end of March, the outstanding middle and long-term external debt grew by 3% as at the end of June, indicating overseas investors are still optimistic about China's middle and long-term prospects. Therefore, we firmly believe that the short-term volatility in cross-border capital flows is the result of different market expectations, and given China's fundamentals, we are fully confident in the long-term stable operations of China's balance of payments. 2015-10-22 11:20:16 · Japanese TV Asahi: An official US report predicts that China intervened heavily in the foreign exchange market in the third quarter to prevent RMB depreciation. Is this true? Will the Chinese government continue to do so in the future? 2015-10-22 11:33:16 · Wang Xiaoyi: According to the media coverage on the Semi-Annual Report on International Economic and Exchange Rate Policies recently published by the US Department of the Treasury, the US Department of the Treasury no longer believes that the yuan is significantly undervalued, which is an important signal. The previous reports always believed that the RMB exchange rate was undervalued and the RMB should be appreciated. I would like to answer your questions in two aspects. Firstly, any country intervenes in its foreign exchange market, but in different ways. Generally speaking, the exchange rate volatility in the third quarter was the voluntary action of market players. In the first seven to eight months of this year, the RMB was under depreciation pressure. Irrational fluctuations were seen in the market after the improvement of the central parity rate formation mechanism on August 11, but the market has been stabilized after the one-time central parity rate modification was completed. The players that trade foreign exchange in the domestic market are banks and enterprises, and when foreign exchange is in short supply, the central bank needs to intervene to replenish liquidity, which is one of the reasons behind the decline in foreign exchange reserves in August. However, this is not a heavy intervention, but a normal transaction to stabilize market sentiment based on market demand. 2015-10-22 11:34:04 · Wang Xiaoyi: Secondly, the market was stabilized through September and October, which was also a process of self-modification of the market. When the RMB exchange rate expectations were stabilized, people came to agree that there was no foundation for long-term RMB depreciation and as a result, excessive speculative trading would be discouraged, which is normal. There are many factors that will impact foreign exchange reserves, and it is normal to fill in the short-term market gap with foreign exchange reserves, which is also the function a country's monetary authority must perform. But after the market is stabilized, market supply and demand tend to be adjusted automatically. 2015-10-22 11:52:10 · China News Service: The IMF pointed out at its recent annual meeting that the Fed's increase of interest rates may severely impact emerging economies. What's your view of the impact of the interest rate hike on China's cross-border capital flows? 2015-10-22 11:53:25 · Wang Xiaoyi: The impact of the Fed's monetary policy orientation on the global economy and the financial market is not negligible. Given that the US is the world's largest economy and an issuer of the most important international currency, we have been paying attention to the impact of the US' monetary policy orientation on China, especially on the balance of payments. First, the normalization of the Fed's monetary policy, including the QE exit and expectations of interest rate rise, is exerting increasing impact on China's cross-border capital flows. In the first three quarters, the market's expectations of the Fed's increase of interest rates and the trajectory of the US dollar had different impacts on China's cross-border capital flows at different stages. In the first quarter, China was under heavy cross-border capital outflow pressure; in the second quarter, as the US dollar's momentum for appreciation was weakened, China's cross-border receipts and payments were basically balanced; but in the third quarter, the outflow pressure became heavier. 2015-10-22 11:55:03 · Wang Xiaoyi: The Fed's monetary policy, especially before the interest rate hike, has a strong impact on the world economy and emerging markets, which, however, should not be over-interpreted as the interest rate hike does not mean collapse of the world economy or flows of all capital into the US. Historically, the Fed's policy had different impacts on the world. The interest rate hikes in mid and late 1990s respectively did trigger heavy capital outflows from some emerging economies. But between 2004 and 2006, Fed's increase of interest rates did not lead to capital outflows from emerging economies, most of which saw continued capital inflows instead. Therefore, the Fed's increase of interest rates has not direct causal relationship with global capital flows. Historical experience shows that there are three factors that impact a country's cross-border capital flows: first, good macroeconomic fundamentals are the basic guarantee to withstand external impact. Second, the coordination between the flexible exchange rate regime and orderly opening of the capital account is also important. Third, macro-prudential management of cross-border capital flows should be strengthened to prevent excessive inflows and outflows. 2015-10-22 12:05:16 · Wang Xiaoyi: Given China's reality, the normalization of the US' monetary policy will have an impact on China's cross-border capital flows, but we are able to cope with the external impact and are fully confident about that. A stronger dollar will increase the foreign exchange financing cost, thereby putting companies that are beset by heavy external debt, and serious maturity and currency mismatches at heavy operating risks and under heavy adjustment pressure. On the other hand, the US dollar interest rate hike or the normalization of the Fed's monetary policy will have positive impact on China. Firstly, if the Fed decides to raise interest rates, it means that the US economic recovery has been on the right track, while the Fed's recent hesitation indicates that the US economic recovery remains tepid. The sustained US economic recovery will be favorable for China to expand external demand. Secondly, the normalization of the Fed's monetary policy will further diverge the expectations of the international community including investors of the trajectory of the RMB exchange rate, which will be favorable for us to capture opportunities to press ahead with and accelerate relevant reforms. In addition, the Fed's increase of interest rates will be a gradual process, quoting the Fed chairman as saying that raising interest rates cannot be achieved overnight but is a long-term process, with relevant impact digested and absorbed gradually. Last but not least, as I stressed previously, with good economic fundamentals, China is fairly capable of withstanding external impact. 2015-10-22 12:15:18 · Wang Xiaoyi: We surely will pay close attention and actively respond to the spillover effect and impact of the Fed's increase of interest rates. First, we will focus on our own business to make sure the domestic economy is running within a reasonable range. Second, as the foreign exchange authority, we will continue to intensify monitoring and warning of cross-border capital flows, accelerate the promotion of relevant reforms, especially the development of the foreign exchange market, and enhance education and guidance of market players against risks, and further increase data transparency to help market players make rational judgment. 2015-10-22 12:26:23 · Ta Kung Pao: China has recently seen more outflows of cross-border capital and a higher deficit in foreign exchange settlements and sales. Is this related to China's central parity rate reform? What impact does this reform have on China's foreign exchange receipts and payments? 2015-10-22 12:31:18 · Wang Xiaoyi: The increase in cross-border capital outflows is not directly caused by the August 11exchange rate reform. The reform was conducted to improve the central parity rate formation mechanism, effectively helping release the pressure from cross-border capital outflows in the first 7 to 8 months. The cross-border capital did fluctuate sharply a few days after the reform was launched. But this does not mean the massive capital outflows were attributed to the reform. Instead, this shows that the RMB exchange rate was under depreciation pressure before modification. Since the second half of last year, the US dollar index has risen by more than 20%, and the absolute majority of other currencies have depreciated, except that the RMB have appreciated slightly against the US dollar, which suggests that the RMB exchange rate needs adjustment. In a word, the one-time modification of the exchange rate reform just released the pressure of the previous months but did not contribute to the excessive outflows of cross-border capital. 2015-10-22 12:31:53 · Wang Xiaoyi: It currently seems that some irrational factors of the cross-border capital outflows have been eliminated and the outflows are decelerating. In late September and October, corporate behaviors such as holding more foreign exchange, purchasing foreign exchange in advance, repaying debt in advance, and substantially increasing hedging became much less. The RMB exchange rate was being stabilized, with the gap between CNH and CNY shrinking in late September, even closing to zero in some time. All this shows that the central parity rate reform is a key adjustment to boost the RMB exchange rate toward equilibrium, but is not directly related to the short-term volatility in cross-border capital flows. This reform will play a more positive role in stabilizing the future cross-border capital flows. 2015-10-22 12:42:01 · Bloomberg: How far are we from QDII2? Can you brief us on the changes in the capital account convertibility process in China in the 13th Five-Year Plan? 2015-10-22 12:46:24 · Wang Xiaoyi: There is no definite schedule for QDII2 yet. This issue has been questioned many times over the past few years and has drawn wide concern from society. But as a supporting department rather than a dominant department, we have been cooperating with other relevant departments in carrying out related studies. The way forward for the opening of the capital account in China has not been changed in the 13th Five-Year Plan. President Xi Jinping recently told the Wall Street Journal prior to his visit to the United States that China has been striving for capital account convertibility over the past 20 years since the goal was proposed in the early 1990s. According to the 7 categories of 40 criteria set by the IMF, we don't have many items that are not opened, and China is marching confidently toward the convertibility of the RMB capital account. The capital account convertibility has been the item and task we have been promoting. 2015-10-22 12:47:56 · Wang Xiaoyi: Recently, the capital account convertibility tended to accelerate in China. Some media, including the international community, think that China's economy is now in difficulty or faced with volatility, which will impact the process of capital account convertibility. But we believe the way forward for the capital account convertibility in China will not be affected. We have been following the principles of overall planning, controllable risks and step-by-step implementation to boost the capital account convertibility. The SAFE, responsible for formulating convertibility policies, will cooperate closely with other departments to support the two-way opening of the capital market, and facilitate external debt and capital flows management under the macro-prudential framework, to enhance the level of convertibility of cross-border and financial transactions. At the same time, we will effectively manage risks during the opening up. 2015-10-22 12:55:08 · Economic Daily and ce.cn: We have noted that the central bank and the SAFE have recently introduced a series of policies against the volatility in cross-border capital flows. What would you say about the effect of these policies? If the volatility continues to be heightened, will the SAFE adopt capital controls to control such volatility? 2015-10-22 13:03:03 · Wang Xiaoyi: Guarding against the risks associated with the volatility in cross-border capital flows has always been a top priority of the SAFE. Recently the People's Bank of China and the SAFE did have taken some measures against the abnormal volatility in the foreign exchange market. But what is sure is that the policy orientation of foreign exchange administration to support the development of the real economy and promote trade and investment facilitation remains unchanged. Second, the SAFE remains committed to reducing administrative intervention in micro economic trading behaviors despite recent measures for reinforcing ongoing and ex-post regulation. Third, while controlling abnormal capital flows, the SAFE has been dedicated to prudential management by economic and market means, and will continue to do so in the future. Overall, we have been committed to promoting reforms to boost trade and investment facilitation and preventing risks to maintain the equilibrium in the balance of payments. 2015-10-22 13:03:48 · Wang Xiaoyi: The measures taken include: firstly, the frequency of monitoring has been enhanced. We require the SAFE branches to check key enterprises with abnormal spending, but do not intervene in their behaviors except requiring them to clarify the reasons behind. Secondly, in accordance with the existing laws and regulations, we urge banks to follow the three principles of "knowing your customer", "understanding your business" and "due diligence" to intensify verification of the authenticity and compliance of their clients' transactions, without imposing administrative restrictions or regulations on true and legitimate cross-border receipt and payment needs. 2015-10-22 13:14:04 · Wang Xiaoyi: The policies have taken effect, with the deficit in foreign exchange settlements and sales falling and cross-border capital outflows dropping in September. This way of administration will continue for ongoing and ex-post regulation, so as to build a macro-prudential management framework, rather than the traditional capital control model. Unlike capital control that is to impose mandatory restrictions on the financial transactions by residents and non-residents, macro-prudential management is to impact borrowing behaviors of market players by economic means or legal authorization, and increase the cost for speculation by those who make excessive speculation, so as to curb impulse for making excessive loans and crack down on asset price speculation. Along with the capital account liberalization and the RMB internationalization, China will improve management under the macro-prudential framework in the future. 2015-10-22 13:18:17 · Wang Xiaoyi: Administrator Yi Gang stressed recently that market regulation means such as Tobin tax, URR, and foreign exchange transaction fees should be studied to contain abnormal short-term fluctuations of arbitrage funds. 2015-10-22 13:28:00 · Beijing Youth Daily: Why does the SAFE choose to introduce at this moment the policy that a limit of RMB 100,000 per year will be imposed on overseas withdrawal using a bank card? What are your major considerations? 2015-10-22 13:30:36 · Wang Xiaoyi: The introduction of this policy is indeed related to the recent capital outflows. In addition to this short-term factor, the policy is also introduced to improve policy design. During our day-to-day monitoring, we have found from the information from banks and international organizations that some Chinese individuals withdraw large amounts of money overseas that have apparently exceeded the reasonable requirements for tours, shopping or studying abroad and are suspicious of assets transfer, money laundering or speculation. Improving cash management is an international practice. Many countries and regions including Europe and the US provide only a small amount of cash in ATM, also in order to restrict large-sum cash transactions. Overseas withdrawal with a foreign currency bank card issued by a domestic bank is subject to daily, monthly and semi-yearly limit management, while overseas withdrawal with an RMB bank card is only subject to daily limit management for technical reasons. However, as China UnionPay updates its technologies, it now has the above capabilities, and it is time to enhance management of overseas withdrawals with RMB bank cards. The annual limit that is the equivalent of RMB 100,000 is imposed mainly to inhibit overseas withdrawals of large amounts of cash by a small number of Chinese individuals, and more than 90% of cardholders' normal consumption and withdrawal requirements will not be impacted. 2015-10-22 13:34:44 · Hu Kaihong This is the end of today's conference. Thank you, Mr. Wang and Ms. Wang! Thank you, all reporters! 2015-10-22 13:36:13 (The original text is available at china.com.cn) 2015-11-26/en/2015/1126/1176.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 half of 2017 in the State Council Information Office on Thursday, July 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 very glad to have with us Ms. Wang Chunying, press spokesperson and director of the Department of Balance of Payments of the SAFE. She will brief us on the foreign exchange receipts and payments for the first half of 2017 and take your questions. Now let's invite Ms. Wang for some opening remarks. 2017-07-20 10:00:50 Wang Chunying: Good morning, everyone. Welcome to today's press conference. Now I would like to disseminate China's foreign exchange receipts and payments data for the first half of 2017 and then I will be taking your questions. In the first half of this year, the global economy continued to recover and the global financial markets remained stable. China's economy performed stably with stronger momentum for growth. Its economic development becomes more stable, coordinated and sustainable, and the RMB exchange rate stayed stable. The SAFE was committed to enhancing the cross-border trade and investment facilitation and boosting the two-way opening of the financial market in a proper and orderly manner to serve the development of the real economy on the one hand; and on the other hand, it tightened the monitoring of cross-border capital flows, enhanced the building of regulatory capability, and cracked down on foreign exchange irregularities to safeguard the health and stability of the foreign exchange market and China's economic and financial security. Overall, China's cross-border capital flows remained sound with good momentum for growth, and the supply and demand in the foreign exchange market found a basic equilibrium in the first half, which proved to be the best equilibrium over the past three years. 2017-07-20 10:01:52 Wang Chunying: Banks settled foreign exchange of RMB 5.31 trillion (USD 772.7 billion) and sold foreign exchange of RMB 5.95 trillion (USD 866.5 billion) in the first half, with a deficit of RMB 644.3 billion (USD 93.8 billion). Meanwhile, banks registered cumulative foreign-related income of RMB 9.55 trillion (USD 1.39 trillion) and made external payment of RMB 10.12 trillion (USD 1.47 trillion) for their customers, with a deficit of RMB 577.9 billion (USD 84.2 billion), according to the data on banks' foreign-related receipts and payments for customers. 2017-07-20 10:03:59 Wang Chunying: China's foreign exchange receipts and payments for the first half present the following characteristics: First, banks' foreign exchange sales and settlements as well as foreign-related receipts and payments registered drastic falls in deficits. In the first half, in dollar terms, foreign exchange settlements by banks were up by 6% year on year, and foreign exchange sales by banks, down by 4% year on year, resulting in a deficit of USD 93.8 billion, down by 46% year on year; the foreign-related receipts by banks for customers were up by 3% year on year, while the payments were down by 3%, leading to a deficit of USD 84.2 billion, representing a decrease of 50% year on year; in particular, the foreign-related foreign exchange receipts and payments recorded a deficit of USD 14.3 billion, down by 45% year on year. Second, the supply and demand of foreign exchange were moving towards a basic equilibrium. According to the foreign-related foreign exchange receipts and payments for customers, a surplus was registered between January and February, and a monthly average deficit of USD 5.9 billion from March to June. As for the foreign exchange settlement and sales for customers, a deficit of USD 15.6 billion was recorded in January, and the monthly average deficit fell to USD 11.2 billion from February to June, compared with the monthly average deficit of USD 26.6 billion in 2016. Considering the spot and forward foreign exchange sales and settlements as well as options, China's foreign exchange supply and demand has found a basic equilibrium since February. 2017-07-20 10:04:27 Wang Chunying: Third, the foreign exchange sales rate dropped drastically while foreign exchange financing of enterprises grew steadily. In the first half, this rate that measures enterprises' motives to buy foreign exchange, or the ratio of customers' purchases of foreign exchange from banks to customers' foreign-related foreign exchange payments was 68%, down by 9 percentage points year on year. In particular, the ratio was 68% and 67% for the first and second quarters respectively, indicating that enterprises are more reasonable in buying foreign exchange, and their willingness for foreign exchange financing is recovering, while they are less willing to buy foreign exchange to service debt. In the same period, China's outstanding foreign exchange loans rose by USD 7.1 billion, down by USD 58.3 billion year on year. The balance of cross-border financing for imports such as refinancing and forward L/C climbed by USD 13.8 billion, and the balance of financing in foreign currencies went up by USD 26.2 billion. Fourth, the foreign exchange settlement rate climbed, indicating domestic resident individuals were less willing to hold foreign exchange. In the first half, the foreign exchange settlement rate that measures taxpayers' willingness to settle foreign exchange, or the ratio of foreign exchange sold to banks by customers to their foreign-related foreign exchange receipts was 62%, up by 1 percentage point year on year. To be specific, the ratio was 62％ and 63％ respectively for the first and second quarters, indicating market participants are more willing to settle foreign exchange. The domestic foreign exchange deposits of individuals went down by USD 1.7 billion in the first half, up by USD 12.9 billion year on year. 2017-07-20 10:09:01 Wang Chunying: Fifth, the differential of forward foreign exchange settlement and sales turned from a deficit into a surplus. In the first half, the value of foreign exchange contracted for forward settlement by banks for customers was up by 94% year on year, while that of foreign exchange contracted for forward sales was down by 18%, leading to a surplus of USD 9.5 billion in forward foreign exchange settlement and sales contracted with banks, compared with a deficit of USD 37 billion for the same period last year. To be specific, a deficit of USD 3.4 billion was registered for the first quarter, and a surplus of USD 13 billion for the second quarter, indicating the recent expectations of RMB depreciation has declined markedly. Sixth, the supply and demand of the foreign exchange market were being increasingly balanced, boosting the continuous recovery of the balance of foreign exchange reserves. As at the end of June 2017, the balance of China's foreign exchange reserves was USD 3.0568 trillion, up by USD 46.3 billion from the level of the end of 2016. The balance of foreign exchange reserves registered recovery for 5 consecutive months from February to June. These are the major statistical data I want to unveil regarding foreign exchange receipts and payments for the first half. Now I will answer your questions. 2017-07-20 10:11:25 Moderator Xi Yanchun: Thank you, Ms. Director. Now let's move on to the Q&A session. As many foreign journalists are present today, we arrange for simultaneous interpreting service here. As usual, please identify yourself before raising your questions. Now let's begin. 2017-07-20 10:13:31 Market News International (MNI): Ms. Director, China's cross-border capital flows for the past few months have changed for the better. Will this momentum continue in the second half? What possible disturbances will be guarded against by the competent authority in the near future? The recent reports say that the overseas investment projects of some major companies have been suspended as they violated relevant investment regulations. My second question is whether these reports are true. Is China tightening reviews of outbound investments? Will cross-border capital flows that have taken a turn for the better as you said just now enable the regulators to relax their regulation? Thank you. 2017-07-20 10:17:56 Wang Chunying: Let me answer you first question first. Since the beginning of this year, China's cross-border capital flows have changed for the better in all respects, which can be obviously seen in the various data indicators. First, a twin surplus was posted under the current and capital and financial accounts in the balance of payments. In the first quarter, the current account registered a surplus of USD 18.4 billion, and the non-reserve financial account recorded a surplus of USD 36.8 billion, compared with a deficit of USD 103.1 billion for the fourth quarter of last year, thus ending the deficits that have continued for 11 consecutive quarters. Second, the domestic supply and demand of foreign exchange are moving towards an equilibrium. According to the data just unveiled, banks' deficit in foreign exchange settlement and sales for the first half had dropped by an astonishing 46% year on year. If other factors that impact the foreign exchange supply and demand such as the surplus in the foreign exchange contracted for forward settlement and sales are taken into account, the supply and demand of foreign exchange has remained in balance since February. Third, non-banking sectors such as enterprises posted remarkably lower outflows of cross-border capital. The data just released also show that the deficit in foreign-related receipts and payments dropped by 50% year on year in the first half. Fourth, the balance of foreign exchange reserves has risen for five months straight. 2017-07-20 10:18:33 Wang Chunying: There are also diverse factors that boost the turnaround of China's cross-border capital flows. Internally, first, the domestic economic fundamentals become more supportive. Recently, China's momentum for steady economic growth has become more evident, thereby strengthening market confidence. China's economic growth hit 6.8% last quarter, higher than the previous three quarters, and reached a higher level of 6.9% in the first half, with many economic indicators continuing changing for the better. For example, China's official manufacturing purchasing manager's index (PMI) has remained in the expansion cycle for 11 consecutive months; the added value of industries above designated size grew by 6.9% year on year, 0.9 percentage point higher than the same period last year. Second, domestic market participants' expectations of the market are being further stabilized. In the first half, the two-way fluctuations of the RMB exchange rate against the USD became more obvious, growing by 2.4% accumulatively. At the same time, the formation mechanism for the central parity of the RMB against the USD was further refined, and the impact of the counter-cyclical adjustments took shape. Under such circumstances, domestic market participants were increasingly reasonable in making outbound investments and China's external debt continued its stable recovery. 2017-07-20 10:32:26 Wang Chunying: Externally, the global financial markets are relatively stable. Despite the Fed's interest rate hikes in March and June, and the proposal of shortening the balance sheet for the first time, the US Dollar Index dropped from 102 at the beginning of the year to around 96 as at the end of June, and the USD exchange rate depreciated by 6.4% accumulatively in the first half. In Europe, the euro zone posted a more stable momentum for economic recovery, no black swan event was witnessed in French presidential election, and the subsequent progress of Brexit did not make a stir, suggesting lower uncertainties in the market. 2017-07-20 10:39:31 Wang Chunying: Going forward, there will be a more solid foundation for China's cross-border capital flows to stay stable. In particular, recently collected statistics and information have further built our confidence. First, the domestic economy will have a more solid and sustainable momentum for stable growth. The Report on the Work of the Government, published early this year, points out that the target for this year's economic growth is around 6.5%, while the real growth for the first half hit 6.9%, making it certain that the economy will achieve the target and continue to stay within the reasonable range. In June, the IMF upped its projection of China's economic growth for 2017 to 6.7%, which is the second time that the expectations of China's economic growth has been upgraded this year, representing an objective judgment of the international community. Moreover, China's economic structure is being optimized and the quality of its economic growth is stably improved. Second, the domestic market will be further liberalized. The recent National Financial Work Conference and the Conference of the Central Leading Group on Finance and Economic Affairs studied the issues of improving investment and market environments and expanding opening up, and more work or policies will be introduced in the future. For direct investments, China has recently adopted a series of measures favorable for foreign investments, such as the newly revised Catalogue for the Guidance of Industries for Foreign Investment, and the early and pilot implementation policy for deepening foreign investments in free trade zones, so as to provide better services and build a better environment for the entry of foreign investments into China. As relevant measures are implemented one after another, foreign direct investments will continue stable growth. As for portfolio investment, the connectivity of HK and mainland bond markets indicates the Bond Connect has been launched. The inclusion of A shares in the MSCI Emerging Markets Index shows that this will play a positive role in actual capital inflows and market confidence, which will help enhance the attractiveness and international impact of RMB assets. For example, the European Central Bank announced in June to hold more RMB assets that are the equivalent of EUR 500 million as the foreign exchange reserves. 2017-07-20 10:42:49 Wang Chunying: In addition, the impact from external environment will be milder. According to the real economy, the world economy at large will continue to recover. The IMF projection shows that the global economic growth will be 3.5% this year, 0.4 percentage point higher than the previous year. As for the financial markets, the Fed has raised interest rates for four times since the US exited from the QE policy, and its impact on the market, especially on the increase of the USD exchange rate, has been declining. On the one hand, this shows that the market has strengthened its capabilities of understanding, adapting to and digesting policies, and on the other hand, this indicates the hedging effect of other factors, such as the market expectations of the long-term growth of the US economy, the economic performance as well as the orientation of monetary policies in the Euro Zone and Japan. Therefore, China's cross-border capital flows will remain stable in the future, and the risk arising from the significant outflows of capital will become much lower. The SAFE will certainly continue to closely watch the impact of various factors and tighten its monitoring and analysis. 2017-07-20 10:55:25 Wang Chunying: As for your second question, I am sorry I have no such information at hand. As for the ODI policies, we have also noticed that the NDRC and the Ministry of Commerce and other relevant departments have given responses, supporting capable domestic enterprises who meet the conditions to conduct true ODI activities in compliance with regulations, and supporting enterprises to make market-oriented outbound investments in accordance with business principles and international practices, especially to make investments and conduct operating activities under the Belt and Road Initiative and to get involved in international production capacity cooperation. At the same time, departments concerned will continue to watch the tendency of irrational outbound investments in real estate, hotels, cinemas, entertainment, and sports clubs to guard against the risks associated with outbound investments and recommend relevant enterprises to be prudent in making decisions. The SAFE will cooperate closely with departments concerned with regard to ODI, to ensure capable enterprises that meet the conditions to carry out true outbound investing activities in compliance with regulations and encourage domestic enterprises to participate in the construction projects under the Belt and Road Initiative and in international production capacity cooperation. On the other hand, the SAFE will take measures to effectively guard against risks arising from outbound investments and boost the healthy, stable and sustainable development of China's outbound investments. 2017-07-20 11:07:28 Wang Chunying: I would like to stress again that the SAFE's foreign exchange administration policies for outbound investments have been consistent and stable. We will keep to several "unchangeds": the going global strategy, the guideline of utilizing domestic and foreign markets and resources, the direction of supporting ODI that is in compliance with laws and regulations, and the principle of guarding against risks arising from outbound investments in pushing for trade and investment facilitation will remain unchanged. Thank you for your questions. 2017-07-20 11:13:59 Phoenix Satellite Television: We have noticed that the SAFE has introduced relevant documents since the end of last year to raise the requirements on declaration of foreign exchange information, especially on enterprises. Some enterprises say many materials and documents are required to be submitted for cross-border remittances, which leaves them very confused. What would you say about this? How to look at the impact of relevant requirements on the normal operating activities of enterprises? Thank you. 2017-07-20 11:16:44 Wang Chunying: Thank you for your questions. As for the declaration of foreign exchange information, the SAFE released at the end of 2016 the Circular of the State Administration of Foreign Exchange on Optimizing the Information System for Individual Foreign Exchange Business, which came into force on January 1. This Circular imposes the authenticity review requirements on the individual foreign exchange business, improves the declaration form for individuals' buying of foreign exchange from banks, refines what to be declared and emphasizes the quality and authenticity of data. In fact, the policies for individuals' buying of foreign exchange remain unchanged, except for the information declaration newly required to purchase foreign exchange. Since the implementation of the policy, individuals' awareness of using foreign exchange in compliance with regulations has been markedly raised, given the survey results and feedback, while false declaration to purchase a large amount of foreign exchange in violation of regulations, and lending foreign exchange quota for split purchases of foreign exchange have declined drastically. The individual sales and settlements of foreign exchange across the country are normal, suggesting a remarkable outcome of standardizing the order in the individual foreign exchange sales and settlements market. The monitoring data of the SAFE show that in the first half, foreign exchange purchased by individuals went down by 4% year on year from a growth of 14% in the same period last year. Also in the first half, the balance of foreign exchange deposits of residents fell by USD 1.7 billion, versus an increase of USD 12.9 billion in the same period last year, indicating residents' desire to purchase and hold foreign exchange is stable. 2017-07-20 11:18:25 Wang Chunying: For enterprises, we did not impose any requirement on information declaration, and the SAFE's principle of enhancing trade and investment facilitation to better serve the real economy and deepen the opening up remains unchanged. Without making any significant policy adjustment, the SAFE still follows the principle of current account convertibility, duly supports and ensures true payments and transfers under the current account in compliance with regulations, while enhancing trade and investment facilitation. What's more, we will continue to properly and systematically push for the two-way opening of the market, support capable domestic enterprises that meet the conditions to make true outbound investments that conform to the regulations and support them to go global. For the issues you are concerned about, we can keep in contact with each other as the issues are also of help to us. Thank you. 2017-07-20 11:27:12 China National Radio: The Bond Connect has been launched recently. What impact will it have on China's cross-border capital flows? What supportive measures will the SAFE provide for the Connect? 2017-07-20 11:33:37 Wang Chunying: China has been committed to stably pressing ahead with the opening up of the financial market, while the Bond Connect is a key measure to achieve this end. Along with the robust development of China's economy and the development of RMB internationalization, global investors are strengthening their demand for investing in RMB assets. The Bond Connect is the institutional arrangement for the connectivity of infrastructure in the financial markets between mainland and Hong Kong, and Northbound Connect makes it easier for foreign investors to invest in China's bond market. 2017-07-20 11:37:02 Wang Chunying: China's bond market has much room for developments and strong potential for attracting the inflows of foreign capital. First, China's bond market still has great potential for growth. Currently the market ranks No. 3 worldwide, but has plenty of leeway for growth as compared with GDP. The balance of government bonds, for example, is nearly 50% of China's GDP, compared with more than 70% in the US and over 200% in Japan. Second, foreign investors are expected to hold more shares. For the moment, foreign investors take up 1.2% of China's bond market. The share of foreign investors holding government bonds is 4% in China, versus 42% in the US, and 10% in Japan. The share is also lower than those of emerging markets in Asia such as Indonesia, Malaysia and Thailand. Third, the bond yield in China still outperforms other major markets. At the beginning of July, for example, the yield of 10-year treasury bonds was 3.6% in China, compared with 2.3% in the US, 0.5% in Europe and only 0.08% in Japan. 2017-07-20 11:41:30 Wang Chunying: The SAFE has been active in supporting the liberalization measures of the Bond Connect. It works with the People's Bank of China to study relevant capital remittances, inward or outward, exchange and foreign exchange risk management, and adopts facilitation management measures. For example, it imposes no restriction on capital remittances, inward or outward, and exchange; it allows foreign investors to trade foreign exchange derivatives through the clearing house in Hong Kong, who can square off the position in the domestic interbank market based on the true compliance requirements under the Northbound Connect, which is favorable for foreign investors to manage exchange rate risks. Going forward, the SAFE will ensure the combination of investment facilitation and risk control to boost stable cross-border capital flows, based on the progress of the liberalization of China's financial market and the implementation of the Bond Connect. The SAFE will also be dedicated to ensuring foreign currency exchange and foreign exchange risk hedging to deepen and refine the liberalization of China's foreign exchange market and its coordination with the opening up of the domestic financial market. Thank you. 2017-07-20 11:45:24 Bloomberg News: We have noticed that the short-term external debt of Chinese enterprises is rising. Are you concerned about this? What risks will this impose on Chinese enterprises? Will the SAFE take measures to tackle such risks? 2017-07-20 11:49:50 Wang Chunying: China's external debt is growing stably now. As at the end of the first quarter of 2017, China's outstanding full-scale external debt was USD 1.44 trillion, up by USD 17.1 billion or 1.2% against the end of 2016. The total external debt has climbed steadily for four consecutive quarters. 2017-07-20 11:52:07 Wang Chunying: Given the level of external debt and relevant metrics, the risk associated with China's external debt is under control now. First, China's full-scale external debt has continued rebounding recently, but is far lower than the peak in recent years. As at the end of 2014, China's outstanding full-scale external debt amounted to USD 1.78 trillion and has been falling since then. As at the end of the first quarter of 2016, the outstanding full-scale external debt hit USD 1.33 trillion, the lowest level since the statistics on full-scale external debt began to be collected. The current level of USD 1.44 trillion was USD 106.3 billion higher than the historical low, but more than USD 340 billion less than the high level as at the end of 2014. According to the maturity structure of external debt, the medium and long-term external debt has changed stably, with the outstanding medium and long-term external debt as at the end of the first quarter of this year being USD 39.7 billion higher than that of the end of 2014. But short-term external debt is volatile. The outstanding short-term debt as at the end of the first quarter increased by USD 45.5 billion year on year, chiefly due to the increases in currencies and deposits attracted by banks, but was still USD 381.8 billion lower than the outstanding external debt as at the end of 2014. The normal flows of external debt in compliance with regulations will help support the development of the real economy. In our opinion, to observe the changes of an economic datum or financial indicator, one should focus on the long-term performance and assess the level of the datum in terms of absolute value or relative value. China's short-term external debt in terms of absolute value is markedly lower than the historical high. 2017-07-20 11:55:06 Wang Chunying: Second, the major indicators of the risks associated with China's external debt are lower than the internationally accepted alarm levels. As at the end of 2016, China's liability ratio, or outstanding external debt/GDP, was 13%, compared with the internationally accepted safe level of 20%; the debt ratio, or outstanding external debt/income from exports of goods and services, was 65%, versus the internationally accepted safe level of 100%; the solvency ratio, or the payments of principal and interest on external debt/income from exports of goods and services, was 6%, compared with the internationally accepted safe level of 20%; the ratio of short-term external debt to foreign exchange reserves was 29%, much lower than the internationally accepted safe level of 100%. Going forward, the PBC and the SAFE will continue to refine the external debt and capital flows management system under the macro-prudential management framework, and will strengthen ongoing and ex-post monitoring and analysis while further promoting cross-border investment and financing facilitation, so as to guard against external debt risks and safeguard China's economic and financial security. Thank you. 2017-07-20 12:04:00 China News Service: China's foreign exchange reserves have recovered for five months straight. What are the major reasons for this? What would you say about the trend of foreign exchange reserves for the second half? Thank you. 2017-07-20 12:06:03 Wang Chunying: The first half has witnessed the five consecutive months of rebounds in foreign exchange reserves, which has strengthened market confidence. The factors that impact the changes in foreign exchange reserves, as we have communicated with you many times before, include the following: First, the central bank's operation in the foreign exchange markets. Second, price fluctuations of foreign exchange reserve assets for investments. Third, as foreign exchange reserves are denominated in the US dollar, changes in the exchange rates of other currencies against the US dollar will lead to changes in 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. 2017-07-20 12:07:12 Wang Chunying: The consecutive recovery of foreign exchange reserves in the first half should be attributed to the following: first, in the dimension of trading, China's economic growth has gained momentum, the cross-border capital flows have continued to be stabilized, and the RMB exchange rate has grown stably, and therefore, residents and enterprises have become increasingly reasonable in buying foreign exchange and the supply and demand of foreign exchange have found an equilibrium. Second, in non-trading terms, the currencies against the US dollar have appreciated this year, and the prices of foreign exchange reserves assets for investments have risen, boosting foreign exchange reserves to recover stably. 2017-07-20 12:10:40 Wang Chunying: Looking ahead, it is likely that China's foreign exchange reserves will stay stable. On the one hand, as China's economic growth becomes increasingly stable and coordinated, China's economic performance will continue to make progress while maintaining stability, in terms of industry support, development motives, development confidence and development environment. On the other hand, the further opening up of the financial market, the healthy development of the foreign exchange market, the more stable market expectations, and the balance of cross-border capital flows and the supply and demand of the financial market will further boost the stability of foreign exchange reserves. Thank you. 2017-07-20 12:13:17 Moderator Xi Yanchun: This is the end of today's press conference. Let me thank Ms. Director again for her wonderful answers and thank you all for coming. 2017-07-20 12:17:15 (The original text is available at china.com.cn) 2017-07-20/en/2017/0720/1289.html
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· Hu Kaihong: Good morning, ladies and gentlemen. Welcome to the press conference of the State Council Information Office. We are very pleased to have with us today Mr. Guan Tao, director from the Balance of Payments Department of the State Administration of Foreign Exchange(SAFE). He will first unveil the foreign exchange receipts and payments data for the first three quarters of 2014 and then will take your questions. Now let us welcome our old friend Mr. Guan to give the opening remarks. October 23, 2014, 09:43:08am · Guan Tao: Good morning, ladies and gentlemen. Welcome to today's conference. I am delighted to meet you again.This is the fourth time I have seen you this year.Today I am going to unveil the foreign exchange receipts and payments data for the first three quartersof this year and take your questions on behalf of the SAFE. In the first three quarters of this year, the global economy recovered slowly, but was imbalanced among countries, with different monetary policies in the major economies. Meanwhile, the domestic economy remained stable under the new normal, the marketization of the RMBexchange-rateformation achieved new progress and the foreign exchange administration reformsproceeded steadily. Overall, during this period China's cross-border capital flows were basically balanced amid oscillations. Banks settled foreign exchange totaling RMB 8.77 trillion (USD 1.43 trillion) and sold foreignexchange totaling RMB 7.71 trillion (USD 1.25trillion) in the first three quarters, with a surplus of RMB 1.05 trillion (USD 172.3 billion). Meanwhile, banks registered cumulative foreign-related income of RMB 15.10 trillion (USD 2.46 trillion) and made external payments of RMB 14.70 trillion (USD 2.39 trillion) on behalf of theirclients, with a surplus of RMB 405.5 billion (USD 66.2 billion). October 23, 2014, 10:00:15am · Guan Tao: China's foreign exchange receipts and payments are currently characterized by the following: First, China is witnessing net inflows of cross-border capital.Excluding the impact from foreign exchange rates (the same below), in the first three quarters the foreign exchange settled by banks was up 4 percent year on year and that sold by banks was up 4 percent year on year, representing an increase in the surplus of 3 percent. Meanwhile, the foreign-related income received via banks was up 14 percent year on year, and external payments made through banks were up 19 percent year on year, representing a decrease in the surplus of 52 percent. Second, the motivation of market players to settle foreign exchange was weakened while their willingness to buy foreign exchange was strengthened.Foreign exchange settled via banks as a percentage of total foreign-related foreign exchange income (or the foreign exchange settlement rate), which measures the willingness of companies and individuals to settle foreign exchange, was on thedecline, down from 77 percent in the first quarter to 68 percent in thesecond quarter and then 69 percent in the third quarter; foreign exchange sold via banks as a percentage of total foreign-related foreign exchange payments(or the foreign exchange selling rate), which measures the motivation to buy foreign exchange, was on the rise, up from 61 percent in the first quarter to 69 percent in thesecond quarter and 70 percent in the third quarter. Third, the supply and demand of foreign exchange has beenbasically balanced amid oscillations. The surplus in foreign exchange settled and sold by banks stood at USD 159.2 billion in the first quarter, decreasing to USD 29 billion in the second quarter, and becoming a deficit of USD 16 billion in the third quarter. The surplus in foreign-related receipts and payments via banks amounted to USD 45.5 billion in the first quarter, decreasing to USD 40.7 billion in thesecond quarterand becoming a deficit of USD 20 billion in the third quarter. Fourth, forward settlements and sales of foreign exchange by banks have changed from a significantsurplus to being basically balanced.Forward contracts for foreign exchange settlements and sales registered consecutive surpluses during the first five months of the year, but the monthly average surplus dropped from USD 24 billion in the first two months to USD 1.7 billion from March to May. Then, between June and September, the surpluses and deficits in the forward settlements and sales offoreign exchange alternated in a moderate absolute size, with a monthly average deficit of USD 600 million. October 23, 2014,10:00:39am · Guan Tao: Fifth, the foreign exchange market is voluntarily becomingbalanced. Excluding the performance of the forward contracts for foreign exchange settlements and sales, the undue net forwardforeign exchange settled increased by a cumulative USD 15.2 billion in January and February, and then underwent a correction during the seven months from March to September, dropping USD 50.6 billion on an cumulative basis, thus spurring banks to increase their foreign exchange position. The balance of spot and forward foreign exchange settled and sold by banks (or the balance of foreign exchange settled and sold by banks and the balance of the combined undue net forward settled foreign exchange), an indicator of the supply and demand for foreign exchange in the retail market, amounted to a surplus of USD164.9 billion in the first quarter, which dropped to USD 2.5 billion in the second quarter and then became a deficit of USD 30.5 billion in thethird quarter. These are the major statistics I want to disclose regarding the foreign exchange receipts and payments during the first three quarters of this year. You can also find the relevant data released on the SAFE's official Website. Now I would like to take any questions you might have. October 23, 2014, 10:00:52am · Hu Kaihong: Thank you, Mr. Guan. Now please raise your questions and remember to tell us where you are from before asking your questions. October 23, 2014,10:03:05am · Reporter from CCTV: China's foreign exchange reserves stood at USD 3.89 trillion at the end of the third quarter of this year, a decrease of nearly USD 100 billion from the end of the second quarter. Could you tell us the main reasons behind this significantdecrease? How should we regard this decrease? Thank you. October 23, 2014,10:03:33am · Guan Tao: Thank you for your questions. We also have noted thatthebalance of foreign exchange reserves as of the end of September, which was just released by the People's Bank of China, was about USD 100 billion less than that at the end of June. In our opinion, the main reason behind the decline was the change in the exchange-rate conversion due to the rise in the USD exchange rate in the international market. The US dollar index (USDX) picked up 7.7 percent in the third quarter. Of China's foreign exchange reserves, there are the US dollar-denominated assets and assets not denominated in the US dollarsthat have to be converted into US dollars before being announced, and anappreciation of the US dollar would lead to a decrease in the amount of those assets not denominated in US dollars when they are converted into US dollars. However, the change in thebalance due to such conversions is just a change in the valuation of the book value, not the actual loss, and it does not result in actual cross-border capital flows. Therefore, the change in the valuation of the book value is different from actual losses or profits. The fluctuations in the exchange rates of the major currencies in the international market will likely lead to changes in the balance of China's foreign exchange reserves, but the impact will be limited since China's foreign exchange reservesare nearing USD 4 trillion. It is commonplace that the exchange rates of the major currencies have ups and downs, and we do not need to overanalyze that. October 23, 2014,10:20:10am · Guan Tao: Regarding your second question, I'd like to make three points: First, the government has made it clear that it is not that the moreforeign exchange reserves, the better. The slowdown in the foreign exchange reserve growth during the first three quarters due to the fluctuations in the exchange rates in the international market also reflects that China's BOPis basically becomingmore balanced. The report on the work of the government unveiled at the beginning of this year states that one of our major tasks this year is to basically balance the BOP and we are now striving to achieve this goal. Second, new measures have been introduced in the reform of the RMB exchange-rate formation mechanism this year, expanding the bidirectional floating range of the RMB exchange rate, while the People's Bank of China has started to end normal interventions in the foreign exchange market. Under these circumstances, the self-balancing of the market and the slowdownin the growth of foreign exchange reserveswill become a new normal, which is in line with the goals of the reform.Third, China nowhas enormous foreign exchange reserves, which will enable it to experience a correction in its foreign exchange reserves sometime in the future due to the bidirectional fluctuations in cross-border capital flows. China can use this strong base to ward off external shocks. This is what I think about the decrease in foreign exchange reserves, and I want to stress that we need to look at the fluctuations in foreign exchange reservescalmly and rationally. October 23, 2014,10:27:16am · Reporter from the People's Daily: WhileChina's trade surplus has set new records and the RMB exchange rate has increased, the surplus between foreign exchangesettled and sold by banks has remained low since the beginning of the third quarter and even turned into a deficitduring some months. How do you look at this? Does this mean that China is at risk of capital flight? What are your ideasaboutfuture movements of the foreign exchange reserves? Thank you. October 23, 2014,10:43:16am · Guan Tao: Thank you for your questions. We have noted this as well. While the RMB exchange rate increased and the trade surplus was large, the foreign exchange market registered a slight shortfall in thethird quarter. Such a change in the supply and demand of foreign exchange is another result of the reform of the RMB exchange-rate formation mechanism that started in March. Since the bidirectional floating range of the RMB exchange rate against the US dollar was expanded in mid-February, or more accurately, on March 17, the unilateral movements of the RMB exchange rate have ended and there have been bidirectional fluctuations, with both ups and downs, which have somehow guided the market, making market players adjust their foreign exchange transaction strategies. The willingness of market players to buy foreign exchange has been strengthened and their motivation to settle foreign exchange has been weakened. Despite increases in the RMB exchange rate over the past several months, companies have been deeply impressed by the preliminary bidirectional fluctuations of the RMB exchange rate amidthe complex economic and financial environments in China and in the international markets, so they have continued the financial adjustments of increasing foreign exchange deposits and reducing foreign exchange loans and external liabilities. We have some data to explain this. October 23, 2014,10:44:59am · Guan Tao: First, foreign exchange settled by banks in the third quarter was up by 3 percent against the second quarter, while foreign exchange sold by banks was up by 14 percent. According to indicators that measure a company’s motivation to buy foreign exchange, the percentage of foreign exchange bought by companies to make payments reached 70 percent in the third quarter, up by 5 percentage points against the first half of the year, while the percentage of foreign exchange settled by companies as foreign exchange income was 69 percent, down by 3 percentage points from the first halfof the year. Second, companies' foreign exchange deposits rose by USD 3.8 billionin the third quarter, among which the combined increasein July and August amounted to USD 22.9 billion, while the growth was USD 38.7 billion in the first quarter and USD 65.2 billion in thesecondquarter. Foreign exchange loans dropped by USD 21.2 billion in the third quarter, compared with an increase of USD 62.6billion in the first quarter and a decrease of USD 2.3 billion in the second quarter. Thebalance of import trade financing fell by USD 36.5 billion in the third quarter, versus an increase of USD 24.1 billion and USD 18.7 billion respectively in the first and second quarters. These data show that companies were more willing to buy than to settle foreign exchange and in the third quarter they continued financialadjustments of increasing foreign exchange deposits and reducing foreign exchange loans and external liabilities. October 23, 2014, 10:50:40am · Guan Tao: As for how we look at this issue, we believe China is currently experiencing capital flight; however, this does not represent a risk or a problem. Customs statistics show China's trade surplus stood at USD 128.1 billion in the third quarter, up by 48 percent quarter on quarter and up 111 percent year on year. The short supply in the foreign exchange marketindicates net outflows under the capital account. However, this should not be regarded as a risk or a problem but rather it should be considered in the following three ways. First, in terms of the results of the adjustments, such a change is in line with the goal of the macro controls set at the beginning of this year that is, basically balancing the BOP. The current and capital BOP accounts both registered a surplus and foreign exchange reserves jumped by more than USD 100 billionin the first quarter,suggesting that balancing the BOP would be very challenging. But as the RMB exchange rate fluctuated bi-directionally amidincreased economic uncertainties both at home and abroad,companieshave made reverse financial adjustments since April. In thesecond quarter, although the trade surplus and the current account surplus increased, the capital account changed from a net inflow of USD 94 billion in the first quarter to a net outflow of USD 16.2 billion, and thegrowth of foreignexchange reserves in the BOP slowed down, dropping by 82 percent quarter on quarter from more than USD 100 billion in the previous quarter to more than USD 20 billion. Initial estimates indicate that Chinamaintainedan equilibrium in the BOP during the third quarter, that is, the current account was in surplus and the capital account was in deficit. This will be favorable for a voluntary balance in the BOP in China and for the People's Bank of China to improve macro controls and to expand the space for operation of its monetary policies. Second, from the perspective of the approach to the adjustment, the increase in companies’foreign exchange deposits, including their increase in external investments, has helped allocateforeign exchange to the marketinstead of to the government, which is in line with the reform goal of encouraging people to hold more foreignexchange. The reductionsin foreign exchange loans and external liabilities by companies are favorable for reducing the currency mismatch and exposure to external liabilities, thus cutting financial risks. During themarketization reform of the RMB exchange-rate formation mechanism, thecentral bank phased out its intervention in the foreign exchange market, which means that the trade surplus has a positive correlation with capital outflows, namely, the higher the trade surplus, the more capital outflows there are, which is also a goal of the reform. Our reform has delivered fruits and has achieved theexpected goals, which should not be regarded as a problem, but it still requires careful consideration. Third, in terms of the adjustment process, China witnessed a round of massive net capital inflows between the end of 2012 and the beginning of this year, but due to the bidirectional fluctuations of the RMB exchange rate and the complex domestic and international environments, capital inflows have recently been replaced bycapital outflows, suggesting a relativelyobvious pendulum effect, which is considered normal. A shortage ofUSD 20–30 billionin foreign exchange is not very serious and it is something that China can withstand. Moreover, the percentage of foreign exchange settled by companies as foreign exchange income was 69 percent in the third quarter, up by 1 percentage point from the second quarter.In particular, the percentage was 74 percent in September, 6 percentage points higher than that in August. All these indicate that at present the willingness of market playersto hold foreign exchange is stable and there is no reason to panic about speculation in foreign exchange. October 23, 2014, 10:59:23am · Guan Tao: China's cross-border capital flows will be basically balanced amid oscillations in the future. Currently receipts and payments under the current account are basically balanced and the RMB exchange rate is rationally balanced. Butdue to increased uncertainties both at home and abroad, bidirectional fluctuations in cross-border capital flows may become a new normal, which is also the case of the BOP under the economic new normal. There are stillfactors that may lead to inflows or outflows of China's cross-border capital. For example, stable economic growth, will increase demand for the allocation of RMB assets in theinternational market, and thepositive spread both at home and abroad and during thepeak season for consumption at the year-endtraditionalWestern holidayseason are all favorable for cross-border capital inflows. On the other hand, given the complex economic and financialenvironments both at home and abroad, the many uncertainties may increase the volatility of China's cross-border capital flows. But by deepening efforts on all fronts, promoting economic upgrading and transformation, and maintaining stable economic growth based on the plans of the Central Committee and the State Council, coupled with the high trade surplus and enormous foreign exchange reserves, China will be able to withstand such volatilities. October 23, 2014, 11:23:08am · Reporter from the Economic Daily News: Although the RMB exchange rate experienced obvious bidirectional fluctuations and the SAFE introduced relevant policies to develop foreign exchange derivatives since thebeginning of this year, we have learned that some companies have reduced their foreign exchange hedging businesses. What would you say about this? October 23, 2014, 11:37:33am · Guan Tao: The foreign exchange market has responded positively to the bidirectional fluctuations of the RMB exchange rate, but some issues still require our attention. First, significant changes have taken place in foreign exchange derivative transactions. On the one hand, the bidirectional fluctuations of the RMB exchange rate have endedthe single expectations of the RMB, making companies change their unilateral transaction strategies that only focus onforward settlements of foreignexchange and excludeforward purchases of foreign exchange. The monthly average of forward settlements of foreign exchange from March to September dropped by 48 percent from those of January to February, while the monthly average forwardsales of foreign exchange were up by 18 percent. On the other hand, derivative transactions have been more active since the end of June when the SAFE introduced foreign exchange market development measures that focus on foreign exchangeoptions with simplified market access. The number of foreign exchange option transactions set a record in August and was 1.8 times that in the previous month;the percentage of forward transactions during the same periodwas up from 8 percent in July to 21 percent. All these changes reveal the voluntary adjustments of the market and the effects of policy support. Second, providing risk education to companies is still a pressing issue. We have noted that some companies have not yet adapted to the bidirectional fluctuations of the RMB exchange rate. Due to the unilateral appreciation of the RMB, the RMB exchange rate seldom fluctuated sharply in the past, and the forward settlement price of foreign exchange was even higher than thespot settlement price of foreign exchange for a certain period of time. Given this, some companieshave used forward settlements offoreign exchange as a tool to make money, and some even believethat it is not necessary to hedge risks if forward transactions or other derivative transactions prove not to be profitable. On the other hand, some companies have formeda stereotypical routine in derivative transactions, that is, they only settle forward foreign exchange income and they do not hedge risks arising from foreign exchange spending or external liabilities. In other words, despite foreign exchange exposure arising from foreign exchange loans, they do not hedge foreign exchange- rate risks. Next, the SAFE will continue to promote the development of the foreignexchange market and support market players to use derivatives to manage exchange-rate risks so as to better serve the real economy. Banks should provide companies with hedging services in line with the principle of merchantability, improve the provision of risk education, and guide market players to build a proper sense of hedging. Meanwhile, under the new normal of bidirectional fluctuations of the RMB exchange rate, companies should have a correct sense of risks, create strict financial discipline,manage exchange-rate risks properly by using derivatives, and replace subjective judgments with market operations. October 23, 2014, 1:06:32pm · Reporter from NHK, Japan: What do you think of the impacton China's economy of the US withdrawalfrom its third round of quantitative easing?It is said that theprevious “hot money”inflowswere one of the reasons behind the increase in property prices and the year-on-year increase in real estate investments in China. What would you say about this and what areyour ideasabout the recent changes? Since most of China's foreign exchange reserves are used to buy US bonds, will the US withdrawal fromthe QE lead to a reduction in China’s holding of US bonds? October 23, 2014, 1:10:04pm · Guan Tao: We have already conducted interviews on investments in foreign exchange reserves, and you can review the relevant reports if you are interested. By the way, this issue is irrelevantto today's conference. Now I'd like to talk about the impact of the US withdrawal from the QE. The direction of US monetary policy has always been an important factor that has an impact on China's cross-border capital flows, and it is a variant we have closely watched since the beginning of this year. So far, the USwithdrawalfrom the QE, coupled with many other factors in China and the international market, has hada certain impact on China's cross-border capital flows. Companies have adjusted theirfinancialstrategies, not merely due to the US withdrawal from theQE but also due to factors such as the bidirectional fluctuations in the RMB exchange rate, domestic economic conditions, and differentiated exchange-rate expectations. As I have mentioned, the results of such impactsare beneficial and in line with the direction of the reform and the goal of macro control. We will continue to pay attention to the direction of US monetary policy in the future and make plans to respond. The market should watch out for the effects in the domestic and international markets and use proper tools and approaches to manage the cross-border capital flows and the risks arising from bidirectional fluctuations in the RMB exchange rate. Regarding the property market, the indicators we monitor show that there are no strong signs of outflows of foreign capital from China's property market. On the whole, we have witnessed more net inflows of foreign capital into China's property market. The inflows of capital from non-residents to buy housing in China stood at USD 520 million in the first three quarters, which was not huge but several ten times that during the same period from 2009 to 2013. Capital inflows of foreign-funded companies inthe property industry remain high, with the net amount totaling USD 20.1 billion in the first three quarters, the highest for the same period since 2009. October 23, 2014, 1:10:44pm · Reporter from CRI: The exchange rate of the RMB against the US dollar has been on the decline since the beginning of this year. Reportedly, companies such as those in the aviation, iron and steel, and property industries have reported significant exchange losses in the first half of the year. How would you look at this? October 23, 2014, 1:12:33pm · Guan Tao: First, we have noted this as well. It has been recently reported that the exchange losses that listed Chinese companiesdisclosed during the first half of this year amounted to RMB 11.7 billion. That is true. As the RMB exchange rate is on the decline, companies that have foreign-denominatedliabilities will suffer exchange losses. But this is a book loss in an accounting sense, not a real loss, provided that real liabilities arising from purchases of foreign exchange using RMBdo not occur. As the RMB exchange rate fluctuates bi-directionally, losses may be incurred as the RMB depreciates, but they will decrease as the RMB appreciates, just as what has been occurring recently, so such changes are dynamic rather than static. Second, many companies have foreign-denominatedboth liabilities and assets. Exchange-rate fluctuationsare a double-edged sword. When the exchange rate is declining, companies' foreign-denominatedliabilities will rise, but the returns fromtheir foreign-denominated assets will rise.Therefore, losses or gains should be analyzed based on the real situation. Given that the beneficiaries of the exchange-rate fluctuations constitute the silent majority, while the losers will be reported or be hyped by the media, the negative impact of the exchange-rate fluctuations may be exaggerated. Third, companies may have become used to the unilateral rises and low fluctuations of the RMB exchange rate. It is attractive in terms of accounting to have foreign-denominatedliabilities when the RMB interest rate is high. But this will not always be profitable after the RMB exchange rate begins to fluctuate bi-directionally. It is therefore suggested that companies adapt to the bidirectional fluctuations of the RMB exchange rate, reduce currency mismatches, and adopt the strategy of borrowing, collecting, and repaying foreign exchange. Moreover, companies should borrow foreign money based on their real needsand should not artificially magnify the lever and take this as a financing tool to make money. Therecently unveiled financing risks that are associated with commodity trading may entail a high leverage transaction ratio and companies using this financing tool to make moneywill face risks as the RMB exchange rate fluctuates bi-directionally. In addition, companies should properly hedge the risks associated with exposure to foreign-denominated liabilities and actively use tools such as foreign exchange derivatives to manage the exchange-rate risks. October 23, 2014, 1:13:11pm · Reporter from Global Times (English edition): Officials from the People's Bank of Chinasaid in September that the PBC will promote the building of a QualifiedDomestic Institutional Investormechanism, or the new QDII mechanism, to allow individuals to invest in overseas markets. What measures will the SAFE taketo support overseas investments by individuals?Will it further ease the limit of USD 50,000per person per yearfor foreign exchange purchases by individuals? October 23, 2014,1:16:24pm · Guan Tao: The relevant QDII policy has been developed by the People's Bank of China, so I recommend that you make enquiries of the relevant departments. The question regarding the limit of USD 50,000per person per year for individual foreign exchange purchases was raised at the SAFE press conference on September 25. To save your time, I will not repeat the answer. October 23, 2014,1:17:03pm · Hu Kaihong: This is the end of today's conference. Thank you for coming. October 23, 2014, 1:17:57pm The original text is available at www.china.com.cn 2014-11-26/en/2014/1126/1134.html
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2019-07-08http://www.gov.cn/xinwen/2019-07/06/content_5406818.htm
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问：国家外汇管理局公布的最新外汇储备规模数据显示，2019年6月末，我国外汇储备规模较5月末上升182亿美元。请问造成外汇储备规模变动的原因是什么？今后的外汇储备规模趋势是怎样的？ 答：截至2019年6月末，我国外汇储备规模为31192亿美元，较5月末上升182亿美元，升幅为0.6%。 6月，受全球贸易局势、主要国家央行货币政策等因素影响，美元指数下跌，国际金融市场资产价格上涨。汇率折算和资产价格变化等因素共同作用，外汇储备规模有所上升。 今年以来，在外部环境不确定不稳定因素有所增加的情况下，我国经济总体平稳、运行在合理区间，外汇市场供求基本平衡，主要渠道跨境资金流动呈现积极变化，外汇储备规模稳中有升。 往前看，国际经济金融形势仍然错综复杂，但我国将持续推进经济高质量发展，积极落实全方位对外开放举措，经济增长的韧性和可持续性将进一步增强。这些都会为我国外汇市场稳定提供有力支撑，从而为外汇储备规模保持总体稳定提供坚实基础。 2019-07-09/xiamen/2019/0709/1317.html
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附件：7月9日人民币汇率中间价及人民币对美元汇率变动表 2019-07-09/ningbo/2019/0709/1084.html
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湖南省分局业务办理咨询电话及联系方式 2019-06-24/hunan/2018/0528/677.html
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2019-07-08http://www.gov.cn/premier/2019-07/06/content_5406845.htm
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2019-07-08http://www.gov.cn/xinwen/2019-07/05/content_5406606.htm