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The State Administration of Foreign Exchange (SAFE) has recently held the Branch Directors Seminar 2016 in Beijing to implement the plans of the CPC Central Committee and the State Council, and study and analyze domestic and foreign economic and financial conditions as well as China's foreign exchange situation, with focus on training and discussions on the priorities of foreign exchange administration. Pan Gongsheng, administrator and secretary of the Party Leadership Group of the SAFE, delivered a special lecture to an audience of deputy administrators, and heads of SAFE branches (foreign exchange administrative departments) and SAFE organizations. Pan pointed out that in face of the complex economic and financial conditions both at home and abroad since the beginning of 2016, foreign exchange authorities, under the leadership of the CPC Central Committee and the State Council, and the guidance of the CPC Committee of the People's Bank of China (PBC), have been committed to tackling tough problems of reform head on, such as pushing forward administration streamlining and power delegation, reforming foreign exchange administration for QFIIs, refining policies for foreign exchange settlement under the capital account, cooperating with the PBC to roll out nationwide the macro-prudential management policy for full-scale cross-border financing, and boosting the opening up of the inter-bank bonds market. On the other hand, foreign exchange authorities have focused on intensifying risk prevention and control, enhancing authenticity and compliance management, cracking down on foreign exchange irregularities, and maintaining the stability of foreign exchange markets. Further, foreign exchange authorities have strengthened the operation and management of foreign exchange reserves to ensure security, liquidity, value maintenance and growth. Pan stressed that the current foreign exchange situation should be objectively assessed and accurately understood. Since the beginning of this year, China's economy has run stably, featuring a basic equilibrium between supply and demand in foreign exchange markets and much lower pressure from cross-border capital outflows. Despite the complex economic environment and many uncertainties worldwide, China's economy has stayed stable. The transformation of the growth model and structural adjustments have been stably pushed forward, the quality of economic growth has been improved, the surplus in the current account has been sustained, and foreign exchange reserves have been sufficient, indicating that China is highly attractive to long-term capital. In the future, China's cross-border capital flows are expected to remain stable. According to Pan, officials of foreign exchange authorities should follow the gist of President Xi Jinping's speech at the meeting to celebrate the 95 anniversary of CPC, and plans of the CPC Central Committee, the State Council and the PBC to deliver a good performance in the subsequent work of foreign exchange administration, with focus on pushing forward the capital account convertibility, boosting the development of foreign exchange markets and guarding against risks arising from cross-border capital flows, for the purpose of serving the real economy and enhancing the efficiency of foreign exchange resource allocation. First, foreign exchange authorities shall press ahead with foreign exchange administration reform in key areas, accelerate the development of foreign exchange markets, push forward the capital account convertibility, and ensure good communication with markets, so as to further promote trade and investment facilitation. Second, foreign exchange authorities shall intensify cross-border capital monitoring and early warning, support banks to refine the self-discipline mechanism and conduct authenticity and compliance reviews, and continue to maintain a tough stance on foreign exchange irregularities like underground banks to safeguard China's economic and financial security. Third, foreign exchange authorities shall optimize the operation and management of foreign exchange reserves to make use of the role of foreign exchange reserves in safeguarding the balance of payments. Fourth, foreign exchange authorities shall organize training and education programs for officials to learn Party rules and regulations and the gist of President Xi Jinping's speeches as well as growing into a qualified Party member, so as to implement the requirements on comprehensively strengthening Party discipline. In addition, discussions were held on current foreign exchange situation and experts and scholars were invited to give lectures at the Seminar. 2016-11-08/en/2016/1108/1221.html
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The State Administration of Foreign Exchange (SAFE) has recently published the data on banks' foreign exchange sales and settlements as well as the foreign-related receipts and payments via banks for July 2016. The SAFE press spokesperson answered media questions on recent cross-border capital flows. Q: The pressure from cross-border capital outflows has been relieved in the first half of this year. What would you say about July? A: China's cross-border capital flows fluctuated within a normal range in July. First, the deficit in banks' foreign exchange sales and settlements represented a month-on-month increase, but that of non-banking sectors such as enterprises and individuals remained relatively stable. In July, the banking sector recorded a deficit of USD 31.7 billion in foreign exchange sales and settlements, higher than the monthly average of USD 16.3 billion in the second quarter, but lower than the monthly average of USD 41.6 billion in the first quarter. In particular, the non-banking sectors registered a deficit of USD 19.8 billion in foreign exchange sales and settlements, up by 12% month-on-month, but at a low level in the year to date. Second, the non-banking sectors registered a deficit in foreign-related receipts and payments again, but the deficit was low. In July, the deficit was USD 31.9 billion, including a deficit of USD 1.3 billion in foreign exchange receipts and payments. In the first four months, China posted a deficit of USD 20.1 billion, USD 10.5 billion, USD 5.9 billion and USD 2 billion in foreign exchange receipts and payments respectively, but registered surpluses in May and June. The short-term impact from Britain's exit from the EU and seasonal factors contributed to stronger net demand for foreign exchange in July. In July, Britain's exit from the EU led to volatilities in international financial markets and helped strengthen the dollars but dragged down the RMB exchange rate. Under such circumstances, Chinese market players became less willing to settle foreign exchange. In the month, the ratio of foreign exchange sold by bank customers to foreign-related foreign exchange receipts was 58%, down by 3 percentage points from June. As global markets tended to be stabilized, the supply and demand for foreign exchange in China was less impacted and fell within control. On the other hand, as July is traditionally the month when foreign-funded enterprises remit out profits and overseas listed companies distribute dividends and bonuses, the ROI-related demand for foreign exchange rose, which is also a key cause behind the heavy deficit in foreign exchange sales and settlements of banks themselves who hold overseas listed shares; what's more, as individuals' purchases of foreign exchange for overseas travel and study are high during the summer vacation, foreign exchange purchases under travel went up by 12% month-on-month in July. Positive factors in favor of the equilibrium of supply and demand for foreign exchange continued to emerge. First, the foreign exchange sales rate, or the ratio of purchases of foreign exchange from banks to the payments of foreign-related foreign exchange was 69% in July, down by 5 percentage points month-on-month. In particular, although individuals' purchases of foreign exchange presented seasonal rises, yet purchases of foreign exchange under travel dropped by 7% year-on-year in the month, indicating stable market sentiment for the moment. Second, foreign exchange financing through certain channels continued to pick up in the month, and the balance of cross-border foreign exchange financing for imports such as refinancing and forward L/C rose by USD 3.4 billion from the end of June, representing the fifth month of bouncing back, and showing enterprises' deleveraging of external debt continued to slow down. In conclusion, China's cross-border capital flows have fluctuated within a normal range recently, without changing the pattern of mid and long-term stability, and will continue to develop toward a stronger equilibrium between inflows and outflows in the future. 2016-11-08/en/2016/1108/1222.html
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To push forward the rule of law in finance and support the policy measures of stabilizing reform, promoting reform, readjusting structure and improving people's living standards, the State Administration of Foreign Exchange (SAFE) has continued to increase legislations and streamline regulations in key areas since the beginning of 2016. Legislations mainly concern settlement of foreign exchange under the capital account, investment in interbank bonds markets by foreign institutional investors, domestic securities investment by qualified foreign institutional investors (QFIIs), foreign currency exchange agency and self-service currency exchange machines, declaration of the balance of payments statistics and refinement of authenticity review requirements. Regulations streamlining is to abolish or nullify regulations on foreign exchange administration that cannot adapt to the requirements for business development and reform. To facilitate public enquiry and application, the SAFE then upgraded the Catalogue of Major Existing Laws and Regulations in Effect on Foreign Exchange Administration (Catalogue) and released it at its official website. The upgraded Catalogue contains 213 policies, laws and regulations on foreign exchange administration released as of June 30, 2016, which fall into 8 categories including general foreign exchange administration, foreign exchange administration under the current account, foreign exchange administration under the capital account, regulation of the foreign exchange business of financial institutions, the RMB exchange rate and the foreign exchange market, balance-of-payments and foreign exchange statistics, foreign exchange inspections and application of the laws and regulations, and the scientific administration of foreign exchange, and several sub-categories by specific business type. This is the seventh straight year that the SAFE has regularly updated and published the list of currently effective regulations. The SAFE will continue to implement a long-term mechanism for regulations streamlining, step up efforts with regard to power delegation, centralization and services, regularly streamline and update the Catalogue, to help market players understand and use foreign exchange administration laws and regulations, so as to serve the development of the real economy. 2016-11-08/en/2016/1108/1220.html
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To further promote trade and investment facilitation and support the policy measure of "stabilizing growth, promoting reform, adjusting restructure and benefiting people", with a vision to streamline administration, delegate powers, combine decentralization and regulation, and optimize services, the State Administration of Foreign Exchange (SAFE) has been committed to law-based administration and sorting out regulations, to abolish, nullify or modify selected regulations on foreign exchange administration that cannot adapt to the requirements for business development and reform. More than 700 documents on foreign exchange administration have been abolished and nullified since 2009. To further streamline the effective regulatory documents on foreign exchange administration, the SAFE has recently released the Circular of the State Administration of Foreign Exchange on Announcing 14 Regulatory Documents on Foreign Exchange Administration Abolished and Nullified and One Modified (Huifa No. 13 [2016]) Specifically, one was modified, 3 were abolished including one that was announced abolished with the Ministry of Finance through negotiation, and 11 were nullified. The documents mainly concerned management of individual foreign exchange settlement under trade, foreign exchange administration under the capital account, balance of payments and foreign exchange statistics, foreign exchange administration for financing institutions and construction of foreign exchange system. Bearing in mind the whole picture of reform and development, the SAFE will continue to implement the long-term mechanism for regulation streamlining, and attach equal importance to establishment, modification, nullification and interpretation of regulations, so as to enhance policy transparency and serve the real economy. 2016-11-08/en/2016/1108/1217.html
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To deepen the foreign exchange administration system, better serve and facilitate domestic players' demand on operations and capital operation, and boost cross-border investment and financing to serve the development of the real economy, the State Administration of Foreign Exchange (SAFE) recently published the Circular of the SAFE on the Policies for Reforming and Standardizing Management of Foreign Exchange Settlement under the Capital Account (Huifa No. 16 (2016), "Circular"). The highlights of the Circular are as follows: First, managing discretionary settlement of foreign exchange under external debt in an all-round way, allowing companies to choose the time for foreign exchange settlement under external debt at their discretion. Second, unifying the policy for discretionary settlement of foreign exchange receipts under the capital account by domestic institutions. Third, clarifying that domestic institutions' use of foreign exchange receipts and settlements under the capital account should be in conformity with the regulations on foreign exchange administration, a "negative list" approach will be adopted to the use of receipts under the capital account, and relative negative lists will be deeply cut. Fourth, further standardizing the payment management with regard to receipts and settlements under the capital account, and clarifying banks should take responsibility for authenticity review under the three-point business principle. Fifth, the SAFE will strengthen ongoing and ex-post management, with focus on strengthening ex-post regulation and punishments arising from violations. The Circular will come into force as of the date of issuance. (End) 2016-11-08/en/2016/1108/1218.html
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The State Administration of Foreign Exchange (SAFE) has recently published the 2016 list of enterprises surveyed for trade credit. According to the Statistics Law of the People's Republic of China, and the Measures for the Declaration of Balance of Payments Statistics, enterprises are obligated to cooperate with the survey and liable for the accuracy of the data reported. China's trade credit survey system came into force in 2004. In January 2016, the SAFE revised the system and released the Circular on the Issuance of the Trade Credit Survey System (Huifa No.1 [2016]）, effective August 1, 2016. Based on the foreign trade volume and receipts and payments under trade, 16,439 enterprises participated in the survey in the year, consistent with the figures of past years. To be specific, 11,851 enterprises participated in the annual survey, and 4,588, monthly survey. These two types of enterprises were required to report data by the month or per annum, so as to find an equilibrium between the improvement of the quality of statistical data and reduction of reporting burdens. To make it easy to enquire, the list is categorized by the foreign exchange authority located in the registration places of the enterprises surveyed. The list may be subject to minor adjustments as the survey goes on. 2016-11-08/en/2016/1108/1223.html
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The SAFE has recently published the Circular of the State Administration of Foreign Exchange on Foreign Exchange Administration for Overseas Institutional Investors Participating in China's Interbank Bond Market (Huifa No. 12 [2016], "Circular") to facilitate the opening-up of the interbank bond market and standardize foreign exchange administration for overseas institutional investors participating in the interbank bond market. The highlights of the Circular are as follows: (a) overseas institutional investors are subject to registration management, and shall perform foreign exchange registration via a settlement agent; (b) no quota will be set for an individual institution or no total quota will be set. An overseas institutional investor may go through without authorization or approval of the SAFE the procedures for inward and outward remittances, or settlement and purchases of foreign exchange with a bank directly, based on relevant registration information; (c) the currencies in outward and inward remittances shall be the same, i.e., the proportion of domestic and foreign currencies in an outward remittance by an investor shall be consistent with that of an inward remittance, with the difference no higher than 10%. The Circular will come into force on the day of release. (The end) 2016-11-08/en/2016/1108/1219.html
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On September 7, 2016, Pan Gongsheng, Deputy Governor of the People's Bank of China and Administrator of the State Administration of Foreign Exchange (SAFE), met with Stephen A. Schwarzman, Chairman, CEO and Co-Founder of Blackstone in Beijing. The two sides exchanged ideas on topics such as global economic and financial trends, investment opportunities, and business cooperation. 2016-11-08/en/2016/1108/1216.html
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On the morning of August 30, 2016, Pan Gongsheng, Administrator of the State Administration of Foreign Exchange (SAFE), met with a delegation led by Leo Melamed, Chairman Emeritus at the Chicago Mercantile Exchange (CME Group). The two sides exchanged ideas on topics of interest such as enhancing financial infrastructure construction and deepening cooperation. 2016-11-08/en/2016/1108/1215.html
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The State Administration of Foreign Exchange (SAFE) has recently released the Balance of Payments and the International Investment Position for 2016, and its spokesperson answered media questions on relevant issues. Q: Could you brief us on China's balance of payments for 2016? A: In 2016, China's balance of payments continued to present the pattern of "one surplus and one deficit", namely, surplus under the current account and deficit under the capital and financial account (excluding reserve assets). In 2016, the surplus under the current account remained at a reasonable level in China. The surplus hit USD 196.4 billion in the year, accounting for 1.8% of GDP. In particular, a surplus of USD 494.1 billion was registered under trade in goods, down by 14% from the historical high of last year, but remaining much higher than the levels of 2014 and the years before, showing China was still competitive in foreign trade. A deficit of USD 244.2 billion was recorded under trade in services, up by 12%, chiefly due to a growing deficit under tourism, suggesting that the Chinese residents' spending on travel and study abroad is rising alongside the increase in people's income and the opening up of relevant policies, but the deficit under tourism grew at a slower pace of 6% only in 2016, which was down by 6 percentage points year on year. The pressure from cross-border capital outflows was relieved to some extent, but went through ups and downs in the four quarters. In 2016, a deficit of USD 417 billion was registered under the non-reserve financial account, down by 4% year on year. To be specific, a deficit of USD 126.3 billion was recorded under this item for the first quarter, down by 16% from USD 150.4 billion for the fourth quarter of 2015; the deficit contracted significantly to USD 52.4 billion in the second quarter but rebounded remarkably to USD 135.1 billion in the third quarter, the highest quarterly deficit in 2016, but remaining much lower than the deficits for the third and fourth quarters of 2015; and then the deficit shrank to USD 103.1 billion in the fourth quarter, down by 31% year-on-year. Q: Could you tell us why the surplus under the current account for the fourth quarter of 2016 dropped by more than USD 20 billion from the preliminary statistics? A: In the fourth quarter of 2016, China posted USD 11.8 billion in the surplus under the current account, about USD 26 billion less than the preliminary statistics of USD 37.6 billion. This is chiefly because: First, the profit of foreign-funded enterprises estimated based on the latest data rose, leading to increases in the expenses under ROI and in the deficit under primary income. In China's Balance of Payments, the profits generated by FDI that belong to foreign parties are the profits of foreign-funded enterprises above designated size and the investment enterprises from Hong Kong, Macao and Taiwan calculated by the National Bureau of Statistics. The statistics show that enterprises' operations picked up as China's economic performance was being stabilized. In 2016, the total profits from industrial enterprises above designated size grew by 8.5% from that of the previous year. In particular, the total profits of foreign-funded enterprises and investment companies from Hong Kong, Macao, and Taiwan went up by 12.1%. But as the Balance of Payments was prepared, no data for the whole year were disseminated, and as a result, the preliminary estimates were USD 20 billion lower than the official data. But considering the preliminary data covered all the profits remitted outward, the undervalued RMB 20 billion in the expense under ROI was still recorded under the inflows of FDI under the financial account in recording the expense on ROI under the current account in the Balance of Payments, based on accrual accounting since the expense was not remitted outward. Such recording will affect the structure — but not the overall situation—of the Balance of Payments. Second, as the way the statistics on travel income and expense was adjusted, with payment channel data used, the deficit under tourism rose. In the new method, the revenue and expense under tourism were compiled based on the payment channel data such as credit card, debit card, remittance and banknotes. The deficit under tourism for the four quarters estimated using the new method was USD 6 billion higher than the preliminary statistics. At the same time, retrospective adjustment was made to all of the revenues and expenses under tourism for the quarters since 2014, which were recorded under relevant entries under the financial account, instead of the current account. Q: Could you brief us on the features of cross-border capital flows for 2016? A: In 2016, Chinese market players continued to increase their holding of external assets, and saw the conversion of net outflows of external debts in the last year into net inflows. On the one hand, the domestic market players have diversified the ways of using external funds, with ODI, portfolio investments and other investments on an upward trend. In 2016, the external assets held by domestic market players in various forms grew by USD 661.1 billion, up by 98% year on year. To be specific, a net increase of USD 217.2 billion was registered under ODI, up by 25%; a net growth of USD 103.4 billion was recorded under external portfolio investment, up by 41%; and a net increase of USD 333.6 billion in other investments such as overseas deposits and external loans, climbing by 305%. On the other hand, as the domestic securities market is liberalized and the demand for financing rebounds among enterprises, net inflows of external debt have replaced net outflows of the previous year. In 2016, a net inflow of USD 244.1 billion was registered under foreign investments such as FDI, portfolio investments and other investments, compared with USD 101.0 billion in net outflows for 2015. In particular, a net outflow of USD 13.5 billion was registered in the first quarter, but a net inflow had been recorded and risen quarter after quarter since the second quarter, hitting USD 77.1 billion, USD 84.2 billion and USD 96.3 billion respectively. First, foreign capital under direct investment sustained net inflows, which amounted to USD 170.6 billion throughout the year, including USD 95.8 billion for the second half, up by 28% from the first half. Second, foreign portfolio investment maintained a net inflow of USD 41.2 billion, 512% higher than that of the previous year, which indicated China's increasing attractiveness to foreign capital and deepened liberalization. Third, a net inflow of USD 30.1 billion in other foreign investments was recorded, compared with the net outflow of the previous year, suggesting domestic market players' servicing of foreign debt has come to a halt, and the demand for cross-border financing is rising. Q: Could you tell us about the changes in international investment position at the end of 2016? A: In 2016, China's external financial assets, liabilities and net assets all registered growth. As at the end of 2016, China posted external financial assets of USD 6.4666 trillion, external debt of USD 4.666 trillion, up by 5% and 4% year on year respectively, and net external assets of USD 1.8005 trillion, a year-on-year increase of USD 127.7 billion, or 8%. The external assets held by the private sector have for the first time accounted for more than half of the total. As at the end of 2016, the balance of international reserve assets reached USD 3.0978 trillion, including USD 3.0105 in the balance of foreign exchange reserves. The reserve assets took up 48% of China's external financial assets, still topping China's reserve assets, but the ratio dropped by 7 percentage points year on year, the lowest level since China began to disseminate the international investment position data in 2004. That the proportion of the external assets held by the private sector exceeded half of the total shows that China's external economic and financial communication are shifting from the focus on commodity exports to equal importance of commodity exports and capital exports, and from the focus on external investing by official authorities to the equal importance of outbound investments by official authorities and the private sector. The rises in external debt were primarily contributed by the sustained growth in FDI and the increases in other foreign investments. By the end of 2016, of China's external debt, FDI hit USD 2.8659 trillion, up by 6% year on year, and continued to take the first place among external debt, accounting for 61%, indicating foreign investors are still optimistic about making long-term equity investments in China. Moreover, external debt from investments such as non-resident deposits and external loans reached USD 984.9 billion, down by 2% year on year and accounting for 21% of total debt. Q: What are your expectations of China's balance of payments for 2017? A: Overall, China's balance of payments for 2017 will continue to present the landscape of "surplus under the current account and deficit under the capital and financial account (excluding reserve assets, the same below)", and cross-border capital flows will continue to develop towards an equilibrium. The surplus under the current account will continue to remain within the reasonable range. First, a surplus will continue to be registered under trade in goods. With regard to exports, though trade frictions will potentially threaten China's exports, yet the stable global economic growth in 2017 will continue to provide a basic guarantee for stable external demand in China. Moreover, as relevant cooperation projects such as the Belt and Road Initiative are stably advanced, the countries within the region will benefit in exports. As for imports, China's economic fundamentals will remain sound, and the global prices of commodities will pick up, and therefore, the imports are expected to stay stable. Second, the growth of deficits under trade in services will be stabilized. Tourism has constituted the majority of the deficits under trade in services. As the consumption demands for travel and study abroad are unleashed quickly, the deficit under tourism has begun to be stabilized over the past two years; and as Chinese enterprises are adjusting the revenues from trade in services and their spending structure, the deficits in trade in services other than tourism have contracted substantially. Third, as investments such as ODI by the private sector are on the rise, China is expected to see growing returns from outbound investments. It is expected that the surplus under the current account as a percentage of GDP will hit a balanced and reasonable level in 2017. The deficit under the capital and financial account is expected to contract. On the one hand, due to unstable and uncertain international environment, the market sentiment may often change, thus leading to the interim volatilities in China's cross-border capital flows. On the other hand, the factors that are favorable for the equilibrium between inflows and outflows of cross-border capital will continue to play positive roles. First, China's economy has remained stable recently, with relevant risks being controllable, and the government has introduced policy measures to expand opening up and actively leverage foreign capital, and the foreign investment environment has been optimized further, which will be conducive to boosting the inflows of long-term capital. Second, as Chinese enterprises' comprehensive strength is strengthened and the global demand for resource allocation is enhanced, China has embraced high-speed growth in ODI in recent years. After achieving fast growth in the short term, enterprises' awareness of investment risks will be raised, and their outbound investment will be more reasonable and stable. Third, turning to the policy of expanding the opening up of the financial market, China has implemented the policies such as macro-prudential management of full-coverage cross-border financing, boosting the further opening up of the interbank bond market, and deepening foreign exchange administration for QFII and RQFII, which have produced positive outcomes, and will continue to attract the sustained inflows of cross-border capital. As the market-oriented RMB exchange rate formation mechanism reform is being stably pressed ahead with, the elasticity of the RMB exchange rate will be enhanced, which will be favorable for the inflows and outflows and two-way fluctuations of cross-border capital in China. 2017-04-24/en/2017/0424/1259.html