· Xi Yanchun:
Good morning, ladies and gentlemen, welcome to the press conference of the State Council Information Office. April is the month for releasing economic data, and the State Council Information Office will hold conferences on the economic data for the first quarter in the next few days. Today we are pleased to have with us Ms. Wang Chunying, press spokesperson for the State Administration of Foreign Exchange (SAFE). Now let me invite Ms. Wang to brief you on China's foreign exchange receipts and payments for the first quarter of this year and then she will answer your questions.
2016-04-21 09:34:07
· Wang Chunying:
Good morning, friends from the press, welcome to today's press conference. I know you have paid close attention to recent foreign exchange receipts and payments and I wish to take this opportunity for more relevant and effective communication with you. Now I would first like to brief you on China's foreign exchange receipts and payments for the first quarter of this year.
Since the beginning of this year, the world economic growth has remained slow, uncertainties and instabilities have increased, and the global financial markets have been in high volatility. Domestically, the economy has continued to grow stably, some major indicators have undergone positive changes and the RMB exchange rate has been basically stabilized. The SAFE has been committed to pressing ahead with the foreign exchange administration reforms, enhanced monitoring, analysis and assessment of cross-border capital flows, and highlighted the requirements on authenticity and compliance reviews of foreign exchange business. Overall, China posted continued cross-border capital outflows but was under eased outflow pressure in the first quarter.
In the first quarter, banks settled foreign exchange of RMB 2.29 trillion (USD 350.0 billion) and sold foreign exchange of RMB 3.10 trillion (USD 474.7 billion) on a cumulative basis, with a deficit of RMB 815.2 billion (USD 124.8 billion). Meanwhile, according to the data on foreign-related receipts and payments via banks, in the first quarter, banks registered cumulative foreign-related income of RMB 4.33 trillion (USD 663.1 billion) and made external payments of RMB 5.06 trillion (USD 775.4 billion) on behalf of clients, with a deficit of RMB 734.3 billion (USD 112.3 billion).
China’s foreign exchange receipts and payments for the first quarter show the following characteristics:
2016-04-21 09:54:14
· Wang Chunying:
First, the balances of foreign exchange settlements and sales by banks, and foreign-related receipts and payments were both in deficit. In the first quarter, in dollar terms, foreign exchange settlements by banks were down by 9% quarter-on-quarter, and foreign exchange sales by banks, down by 14%, resulting in a deficit of USD 124.8 billion; foreign-related income received via banks was down by 19% quarter on quarter, and external payment made through banks was down by 18%, indicating a deficit of USD 112.3 billion, leading to a deficit of USD 36.6 billion in the balance of foreign-related foreign exchange receipts and payments.
Second, the recent pressure from cross-border capital outflows has been much lower than the beginning of this year. China registered a deficit of USD 69.4 billion in the balance of foreign exchange settlements and sales via banks in January, which narrowed to USD 35 billion in February and further to USD 33.6 billion in March. Given the Chinese New Festival in February, the daily average deficit in the balance of foreign exchange settlements and sales via banks, estimated based on the trading days each month, was USD 3.5 billion, USD 2.2 billion and USD 1.5 billion in January, February and March, indicating a significant decline. China posted a deficit of USD 55.8 billion, USD 30.5 billion and USD 26.1 billion in the balance of foreign-related receipts and payments via banks, or a daily average deficit of USD 2.8 billion, USD 1.7 billion, and USD 1.1 billion in January, February and March respectively. The deficit in the balance of foreign exchange receipts and payments was USD 20.1 billion, USD 10.5 billion and USD 5.9 billion in January to March respectively, or USD 1 billion, USD 600 million and USD 300 million per day on average in each month.
2016-04-21 09:57:04
· Wang Chunying:
Third, companies' desire to buy foreign exchange has been weakened and customers' debt servicing pace has slowed down. The foreign exchange sales rate, or foreign exchange purchased by customers from banks as a percentage of their foreign-related foreign exchange payments, which is the measurement of the motivation to buy foreign exchange, was 80% in the first quarter, or 90% in January, and 74% in February and March, which was down by 16 percentage points from the first month, suggesting customers' desire to buy foreign exchange was weakened. The outstanding domestic foreign exchange loans fell by USD 35 billion in the first quarter, and in January and February in particular, the balance dropped by USD 26.4 billion and USD 8.6 billion, but climbed slightly by USD 30 million in March. The balance of import financing such as refinancing and forward L/C contracted by USD 34.9 billion in the first quarter, and particularly in January and February, the decline was USD 17.7 billion and USD 14.2 billion, but narrowed to USD 3.1 billion in March. The changes in the outstanding domestic foreign exchange loans from declines to increases and the remarkable decreases in the balance of cross-border trade credit indicate that customers' debt servicing speed has significantly slowed down.
Fourth, the reform to encourage companies and individuals to hold more foreign exchange has been carried forward smoothly. Foreign exchange sold by customers to banks as a percentage of their foreign-related foreign exchange income, or the foreign exchange settlement rate that measures the willingness of companies and individuals to settle foreign exchange, was 59% in the first quarter, down by 1 percentage point quarter on quarter. The rate was 59% for March, up by 3 percentage points from February, suggesting companies' and individuals' willingness to hold foreign exchange income has stayed stable since the beginning of the year, with the percentage of foreign exchange income sold to banks for March higher than February. The balance of domestic foreign exchange deposits held by companies and individuals went up by USD 33.9 billion in the first quarter, including an astonishing USD 16.7 billion in January, and USD 8.8 billion and USD 8.4 billion in February and March. The much slower growth in foreign exchange deposits held by companies and individuals suggests that companies ' and individuals' desire to hold foreign exchange has been stabilized.
2016-04-21 09:58:34
· Wang Chunying:
Fifth, the deficit in the balance of forward foreign exchange settlements and sales by banks has shrunk month by month. In the first quarter, the number of customers contracting for forward foreign exchange settlements with banks was up by 16% quarter on quarter, and the number of customers contracting for forward foreign exchange sales with banks wad up by 31%, leading to a deficit of USD 36.3 billion. The monthly deficit was USD 24.7 billion, USD 6.1 billion and USD 5.4 billion respectively in the quarter, denoting the supply and demand of foreign exchange in the forward markets is being balanced.
These are the major statistics I want to disclose regarding the foreign exchange receipts and payments for the first quarter of 2016. Now I will answer your questions.
2016-04-21 09:59:39
· Xi Yanchun:
Thank you, Ms. Director. Please remember to tell us the news agency you are working with before asking your questions.
2016-04-21 10:00:18
· CCTV:
We noticed that China was faced with lighter pressure from cross-border capital outflows in the first quarter. What would you say about recent changes and future trends? How to guard against relevant risks？Should the management approach be adjusted? Thank you!
2016-04-21 10:00:58
· Wang Chunying:
Thank you for your questions. Just as I have just said, there were some volatilities in the first quarter, but overall the pressure from cross-border capital outflows has been much lower than the beginning of the year. As for recent changes and future trends and how to guard against risks and adjust policies, I would like to share my views with you in three aspects as follows:
2016-04-21 10:01:43
· Wang Chunying:
First, recent changes show that China's cross-border capital outflows are returning to the fundamentals after short-term volatilities. At the beginning of the year, both domestic and overseas markets experienced short-term volatilities, resulting in drastic adjustments in global major stock markets, heightened risk aversion and a 1% increase in the US index in January, as well as higher expectations of RMB exchange rate depreciation in the domestic financial markets. But the market environment has been stabilized afterwards. Globally, major stock indexes have rebounded, the VIX index that measures the volatility of risk aversion has dropped from the mid-February high, and the US index went down by 1.4% and 3.7% in February and March respectively. Domestically, some major indicators have undergone positive changes. Industrial added value, fixed asset investment, and total retail sales of consumer goods accelerated in March, PMI was back above the boom and bust line in March, and domestic financial markets have become relatively stable. Under such circumstances, market sentiment is becoming sensible again and China's cross-border capital flows are becoming more stable.
2016-04-21 10:04:07
· Wang Chunying:
Specifically, the balance of foreign exchange reserves declined more slowly and rebounded in March. China's balance of foreign exchange reserves dropped by USD 99.5 billion and USD 28.6 billion in January and February, and went up by USD 10.3 billion in March. Second, the deficit in the balance of foreign exchange settlements and sales has contracted compared with the beginning of the year, and net cross-border outflows of capital held by non-banking sectors such as companies and individuals has declined. Third, the RMB exchange rate stays stable. The RMB exchange rate against the USD fell slightly in January and has become stable since February. The CNH-CNY spread keeps shrinking, which was 419, 111 and 94 basis points in January to March. The RMB exchange rate against a basket of currencies remains stable too.
2016-04-21 10:09:34
· Wang Chunying:
Second, China's cross-border capital flows will remain basically stable in the future. Of the many contributors to cross-border capital flows, mid and long-term contributors are decisive and stable, defining the overall movements of China's cross-border capital flows in a period of time. For example, China's economic prospects are optimistic, and the annual GDP growth of higher than 6.5% set in the 13th Five-Year Plan for the next five years, relatively high among the rest of the world, will be achieved while maintaining large GDP, which will be favorable for attracting persistent inflows of foreign capital, especially long-term capital. China's trade in goods and current account will sustain surpluses, and China is still the world's No. 1 by foreign exchange reserves, which are abundant and much higher than those of other countries. These factors will help stabilize China's cross-border capital flows.
2016-04-21 10:13:38
· Wang Chunying:
Along with China's economic development and restructuring, domestic players will have stronger demand for resource allocation in both domestic and global markets, and two-way cross-border capital flows will become more active but after adaptations and improvements, so relevant capital flows will still be within a predictable and controllable range. But this does not mean short-term contributors will not take effect at a certain time, such as impact from emergencies and contributors that are beyond market expectations, but they will not change the mid and long-term trends.
2016-04-21 10:19:57
· Wang Chunying:
Third, given that the risks associated with China's cross-border capital flows are within control, further efforts will be made to balance facilitation and risk prevention in foreign exchange administration. To prevent risks, risks should be first objectively assessed. China's capability of making international payments is strong now, with no difficulties in the payments of BOP. Efforts are also made to press companies to adjust and service external debt. After a period of debt deleveraging, the risk of future debt servicing facing China has been reduced, with the outstanding external debt in domestic and foreign currencies as at the end of last year dropping by USD 257 billion from that of the end of last March with comparable coverage. Given this, further efforts will be made to defend the bottom line against risks while continuing to implement the reform and opening up policy in foreign exchange administration. While continuing to serve the development of the real economy, foreign exchange administration reforms will be promoted, with external debt and cross-border capital flows management to be improved under the macro-prudential management framework, to further facilitate market players' use of domestic and overseas markets and to satisfy their demand for use of foreign exchange for trading and investments with authentic backgrounds. On the other hand, efforts will be made to actively prevent the risks associated with cross-border capital flows while enhancing monitoring, analysis and early warning of the balance of payments, to effectively communicate with market players, and to guide banks to conduct authenticity and compliance reviews to crack down on foreign exchange irregularities. In all, China's policies are consistent and coherent, and will enable us to effectively respond to the current state of cross-border capital flows.
2016-04-21 10:27:38
· China Daily:
We know that the US Federal Reserve started interest rate hikes last December. Janet Yellen, chair of the Fed, has recently expressed some of her views. Some argue that Yellen is the biggest facilitator behind China's efforts to slow cross-border capital flows. What are your views on the impact of the Fed's interest rate hikes on China's cross-border capital flows? Thank you!
2016-04-21 10:39:56
· Wang Chunying:
Thank you for your question. Over the past two years, from the Fed's QE exit to interest rate hikes, the Fed's monetary policy has attracted wide attention. I would here like to share with you some of the ideas.
First, the Fed's interest rate hikes are important factors that impact international capital flows. But we are always stressing that this should be viewed objectively. The Fed's previous interest rate hikes had different impact on international capital flows, especially the cross-border capital flows in emerging markets. Since the 1990s, the dollar has gone through three rounds of interest rate hikes, usually along with the strengthened USD exchange rate. Although the two rounds of interests rate hikes in the middle of and at the end of the 1990s did trigger problems in some emerging economies, yet some economies like China withstood the impact. The third round of interest rate hikes between 2004 and 2006 did not result in withdrawal of international capital from emerging markets either, and instead, most emerging markets posted cross-border capital inflows benefitting from continued economic growth. Good macro-economic fundamentals are the basis to resist external impact.
Second, the first interest rate hike in this round did have impacted China's cross-border capital flows, but will not change the mid and long-term stability. Soon after the first hike last December, the market began to pay close attention to the frequency and degree of the Fed's interest rate hikes this year. The US index remained strong, risk aversion was heightened, global stock markets and commodity prices were in high volatility, currencies in emerging markets and the RMB exchange rate were under pressure, and China was faced with heavier pressure from cross-border capital outflows. But since March, as insights into the path of the dollar interest rate hikes have become clearer, it is mostly believed that the Fed will raise interest rates gradually while watching out the impact of global financial markets on its economy. Under such circumstances, risk aversion has been weakened, the dollar index has depreciated, especially by more than 5% in February and March combined, currencies have quickly strengthened in emerging markets, with JP Morgan's currency indexes for emerging markets registering a rebound of more than 6%, the RMB exchange rate has been stabilized, China's cross-border capital flows are returning to the economic fundamentals and its receipts and payments of foreign exchange have been more balanced and stable. The good fundamentals can ensure mid and long-term stability of China's cross-border capital flows. Meanwhile, China's recent good economic performance has strengthened its capability to cope with the impact from the Fed's interest rate hikes. For example, China has sustained high-speed economic growth, and is further optimizing its economic structure and committed to deepening reform and economic transformation; it has posted continued surpluses under the current account, maintained high foreign exchange reserves and is faced with the declining external debt serving risk; the economic and financial risks it is faced with are within control, unemployment remains low and social and political situations stay stable.
2016-04-21 10:42:55
· Wang Chunying:
Third, China's existing economic and financial policies can help it adapt to the normalization of the Fed's monetary policy. First, sustaining China's economic and financial stability. China will continue to deepen reforms to yield the dividends of policies, hold market expectations of China's economic prospects, enhance market acceptance and recognition of China's new economic normal and cope with risk events in a timely and effective manner. Second, further coordinating and pressing ahead with reforms. China will push forward with capital account liberalization in a proper and orderly manner and build a macro-prudential policy framework for cross-border financing and capital flows to guard against relevant risks. It will press ahead with the market formation mechanism reform to expand and extend the foreign exchange markets. Third, China will impose higher requirements on authenticity and compliance reviews of foreign exchange business, and crack down on financial irregularities such as foreign exchange frauds and underground banking, to enhance the effectiveness of foreign exchange administration and ensure good market order. Moreover, it will strengthen monitoring, analysis and early warning of cross-border capital flows and improve response plans as precautions.
2016-04-21 10:46:56
· Bloomberg:
Could you explain why the RMB exchange rate appreciated against the USD but depreciated against a basket of currencies recently? Do you still believe that the RMB stays stable despite the 3.5% fall in the RMB exchange rate index? What's your definition of the stable level? Is there a bottom line for RMB depreciation?
2016-04-21 10:53:38
· Wang Chunying:
Thank you for your questions. We are also observing the movements of the RMB exchange rate. We believe that the RMB exchange rate is stable, proper and balanced. As for the movements of the RMB exchange rate against baskets of currencies, the data from China Foreign Exchange Trade System (CFETS) show that the RMB nominal effective exchange rate against the CFETS (13 currencies), BIS (40 currencies) and SDR (4 currencies) baskets of currencies had slightly dropped as at the end of the first quarter, or was down by 2.8%, 2.6% and 1.2% from the end of last year. BIS data show that the RMB real effective exchange rate fell by 1.3% and the RMB nominal effective exchange rate, 2.3%, in the first quarter, which were within the stable range. The CNY-CNH spread also narrowed, being 419, 111 and 94 basis points per day on average in January to March, also indicating the stable RMB exchange rate.
2016-04-21 11:08:16
· Wang Chunying:
Our observations show that some currencies were in high volatility and some depreciated by more than 10% in a certain period of time, which however, was rarely seen in the RMB exchange rate. During the NPC and the CPPCC in March, Mr. Zhou, governor of the People's Bank of China, explained the causes behind the volatilities in the RMB exchange rate and shared his view on the outlooks, saying that the recent high volatilities were caused by the fluctuations in domestic and international economic and financial markets as well as the changes in market sentiment, but the foreign exchange markets have returned to normal, to sensibility and to the fundamentals, which is very likely to continue. Last but not least, I would like to reiterate that the RMB exchange rate system is a managed floating exchange rate system based on market supply and demand and relative to a basket of currencies.
2016-04-21 11:14:27
· Economic Daily:
While China posted a surplus of nearly USD 600 billion in trade in goods, its foreign exchange reserves contracted remarkably and the balance of foreign exchange settlements and sales via banks that is related to trade in goods was in deficit in 2015, which happened again in the first quarter. Why is this?
2016-04-21 11:28:38
· Wang Chunying:
Good question. These data are thought-provoking. Chinese Customs statistics show that China registered a trade surplus of more than USD 590 billion, but a small deficit in the balance of foreign exchange settlements and sales under trade in goods via banks in 2015, resulting in a variance of USD 631.1 billion. There was also a variance of more than USD 100 billion in the first quarter. These were due to different statistical coverage and companies' financial operations.
As for statistical coverage, the Customs imports and exports, which are about goods flow, and foreign exchange settlements and sales under trade in goods, which are about funds flow, are different in the scope of statistics and time of recording, and therefore cannot fully match.
Companies' financial operation involves three aspects: first, the increase in companies' foreign assets. Some companies' extended collection cycle of export payments will cause their trade credit assets to rise. The export revenue a Chinese exporter fails to collect from its importer is the trade credit the Chinese exporter provides to its importer, and also its asset. Chinese companies' trade credit rose by USD 46 billion in 2015. Some Chinese exporters will also deposit not settle their foreign exchange revenue. The balance of Chinese companies' foreign exchange deposits increased by around USD 25 billion in 2015, and further by USD 22.4 billion in the first quarter, which were largely export revenue. The trade credit data for the first quarter are being compiled at a quicker pace so as to present you the recent changes in companies' trade credit assets as soon as possible.
Second, the decrease in companies' external debt. Many of companies' import payments are made to repay previous overseas financing and do not match the imports for the current period. For example, companies' cross-border financing made through refinancing and forward L/C from overseas financial institutions went down by USD 115.1 billion in 2015, and further by USD 34.9 billion in the first quarter. Companies' trade credit debt to overseas counterparts decreased by USD 62.3 billion in 2015. In addition, some of companies' foreign exchange sales under trade in goods are not related to the import payments for the current period but to pay previous foreign exchange loans borrowed from domestic banks. The outstanding domestic foreign exchange loans fell by USD 100.6 billion in 2015 and by USD 35 billion in the first quarter, most of which were trade-related loans.
Third, companies' cross-border RMB settlements. China posted more than USD 170 billion in net cross-border RMB income under trade in goods with comparable coverage with Customs in 2015, and less than USD 10 billion in the first quarter, which did not lead to foreign exchange settlements and sales by banks.
2016-04-21 11:30:14
· Wang Chunying:
In the long term, along with loose external liquidity and large capital inflows, the variance between the two figures will be quite the contrary. The current variance is the result of the recent changes in market environment but will be reversed in the long run. This indicates that Chinese companies are flexible in conducting financial operations, a significant progress in adapting to the changes in the environment. In day-to-day regulation, we will also consider other factors, such as failure to collect payments, collection of excessive or insufficient payments, and conduct management after explaining the data variance.
The changes in foreign exchange reserves are the result of many factors combined, not just trade in goods, but also trade in services, and the capital and financial account. Therefore, the best way to look at the changes in foreign exchange reserves is through the Balance of Payments Statement. In 2015, the balance of foreign exchange reserves fell by USD 512.7 billion, including more than USD 340 billion due to trade, and around USD 170 billion due to asset price changes and exchange rate conversion, as shown by the Balance of Payments Statement. The changes in income from foreign exchange reserves will also impact trade. After the initial data in the Balance of Payments Statement are released, you will see the structural changes in foreign exchange reserves, including the percentages of trade and non-trade factors, and find out more about the supply and demand of foreign exchange. Thank you!
2016-04-21 11:35:44
· TASS:
You have just unveiled the foreign exchange data for the first quarter. Could you tell us about the foreign exchange transactions between China and Russia in the period and release relevant data? What are your predications on this year's market, especially the activities?
2016-04-21 12:00:18
· Wang Chunying:
Thank you for your questions and your attention to the transactions in and development of the foreign exchange markets between China and Russia. We have country-specific data and you can contact us if you want them.
2016-04-21 12:01:39
· Phoenix Satellite TV:
We noted large deficits in the capital and financial account and heavy overseas investments by domestic enterprises since last year. Does this mean less investment opportunities in China? One more question, given that media statistics show that China posted capital outflows of more than USD 100 billion in the first quarter, will the pressure from capital outflows be heightened?
2016-04-21 12:04:52
· Wang Chunying:
This issue has drawn wide concern recently. I would here like to make an analysis based on relevant data.
First, China's cross-border financing and investments continue to lead to inflows and outflows of capital. According to the Balance of Payments Statement, China's ODI increased by USD 187.8 billion in 2015, up by 53% from 2014; overseas securities investment rose by USD 73.2 billion, 5.8 times that of 2014; and other investment assets like overseas loans and deposits grew by USD 127.6 billion, 61% less than that of 2014. On the other hand, FDI in China remained heavy in 2015, with USD 249.9 billion in net overseas capital inflows under direct investment, and USD 6.7 billion in net foreign securities investment inflows, including USD 35.7 billion in stocks and bonds issued overseas by domestic institutions and bought by non-residents. All these show that overseas investors are still optimistic about the companies and investment projects in China. The preliminary statistics from the SAFE for the first quarter show that China's direct investments in the balance of payments rose by more than USD 50 billion but less than USD 100 billion. The direct investments of USD 100 billion, as unveiled by the media, may include those under negotiation and those that China has intent.
2016-04-21 12:07:19
· Wang Chunying:
Second, the increase in China's outbound investments are reasonable and of great significance. The increase in ODI shows China's remarkably strengthened overall strength, a natural byproduct of China's economic development. In some developed countries, companies made heavy investments overseas after a period of rapid economic development. Currently, China is the world's No. 2 by economic aggregate, with per capita GDP nearing 8000 USD, and the world's highest foreign exchange reserves. It has entered into the capital output period from the capital inflow stage. Second, this also shows the demand of optimized global allocation of assets. As economic globalization deepens and competition intensifies, MNCs are expanding and extending their global capital layouts, and Chinese companies are more eager to go global and rebuilding value chains through incorporating overseas organizations and cross-border M&As. The implementation of national strategies such as the Belt and Road Initiative has helped accelerate companies' efforts to go global. The increase in outbound securities investments is an indicator of China's deeper liberalization and further facilitation of purchasing assets such as overseas stocks by domestic residents through channels like QDII and Shanghai-Hong Kong Stock Connect. The increases in other investments like overseas loans also indicate more diversified ways for domestic players to use overseas funds. The capital outflows associated with global capital allocation will support future exports of goods and services and bring capital inflows such as incomes and returns like profits, dividends and interest, marking the beginning of China's deep participation in the global financial markets. Overall, the increase in outbound investments has positive implications, except that some companies or individuals are over-optimistic about overseas markets or blindly follow suit in making outbound investments.
2016-04-21 12:17:06
· Wang Chunying:
Third, two-way cross-border financing and investments will be a normal at present and in the foreseeable future. Firstly, the government will encourage and support two-way cross-border financing and investments in policy. The 13th Five-Year Plan proposes that efforts should be made to comprehensively build a new landscape of opening up, fully press ahead with two-way opening, promote orderly flows of domestic and overseas elements, efficient allocation of domestic and overseas resources and deep integration of domestic and overseas markets, enhance the levels of use of foreign capital and outbound investments, expand two-way liberalization of the financial sector and push ahead with the Belt and Road Initiative. Secondly, it is normal for Chinese enterprises to allocate and deploy their assets at home and abroad as they grow, but the future trends depend on the economic fundamentals. In the first quarter, China's many economic indicators stood out, indicating a good start. The IMF downgraded its expectations of the world's economic growth in the World Economic Outlook it issued on April 12, but upped its expectations of one country's economic growth, and it is China. Overseas long-term capital will remain optimistic about China and Chinese companies will make correct judgment.
As for the recent rapid increase in ODI, the SAFE holds its usual attitude. We have been stressing that we will support competent companies with qualified conditions to make ODI with authentic backgrounds in compliance with laws and regulations. Meanwhile, we will enhance monitoring and site inspections and crack down on false ODI. We will also cooperate with relevant departments to give necessary risk reminders.
2016-04-21 12:29:25
· CRI:
The two-way fluctuations of the RMB exchange rate are obvious at present. What is the SAFE's plan to strengthen the building of the foreign exchange markets? How will the SAFE guide companies and help them mitigate risks?
2016-04-21 12:41:18
· Wang Chunying:
It is been the SAFE's priorities to support the real economy and manage foreign exchange rate risks.
First, continuing to promote the in-depth development of foreign exchange markets and opening up to the inside and outside. Diversifying transaction categories, expanding market players and improving market infrastructure— all will improve the conditions for companies to manage foreign exchange rate risks. Last December, the People's Bank of China and the SAFE announced that the trading time in the inter-bank foreign exchange market would be extended to 23:30, and QFII would be introduced. So far, 16 overseas central banks have become members of the inter-bank foreign exchange markets in three batches. Overseas banks participating in the purchases and sales of RMB can also become members of the inter-bank foreign exchange markets after filing and interfacing systems with China Foreign Exchange Trade System (CFETS) to conduct RMB foreign exchange transactions to support China's efforts to unify RMB exchange rates both at home and abroad. We will also enhance the flexibility of banks to manage the comprehensive positions of foreign exchange settlements and sales to help them manage foreign exchange risks and provide better transactions services. Moreover, we are considering to liberalize derivatives transactions that meet market demands. We also support the CFETS to launch the swap offsetting business, plan to give banks more flexibility to transact in the inter-bank markets, and help clearing houses provide better liquidation services. These are the directions in expanding and extending the foreign exchange markets and conditions for transaction players to manage foreign exchange risks more effectively.
Second, guiding companies to prudentially manage foreign exchange rate risks. The previous panics and insensible trading in the domestic and overseas foreign exchange markets were related to mismanagement of foreign exchange rate risks, simplistic thinking, and bet on RMB exchange rate appreciation or depreciation, as well as failure to build standardized financial discipline for hedging for foreign exchange rate management.
The SAFE will continue to increase data transparency, help market players interpret market situations and make sensible judgment, and promote self-discipline management in the market. The market self-discipline management mechanism contains two aspects: one is the self-discipline organization of Code of Professional Ethics and Market Management Commission for Inter-Bank Foreign Exchange Market launched in 2014 through the push of the SAFE; the other is the self-discipline pact under the three business principles. The two organizations are to standardize compliance operations by banks, urge banks to enhance risk education on customers, guide companies to build correct sense of foreign exchange rate risk and properly use derivatives to manage risk exposures.
Two points need to be added on correct awareness of foreign exchange rate risk. First, efforts should be made to carefully assess the foreign exchange rate risk facing a company in trading and investments, and understand where the risk arises, how heavy the risk is, how to deal with the risk, bear or hedge, and what tools to use. Second, the functions of derivatives should be accurately defined. Derivatives are neither evils nor tools to make money, but the means to manage risks, and will support the development of a company's principal business if properly used.
2016-04-21 12:42:04
· Xi Yanchun:
Thank you, Ms. Director. Thank you for your professional and specific answers. Please contact the press office of the SAFE if you have more questions. This is the end of today's press conference. Thank you all.
2016-04-21 12:46:57
(The original text is available at china.com.cn)
