The State Administration of Foreign Exchange (SAFE) released statistics on foreign exchange settlement and sales by banks and foreign-related receipts and payments through banks in April 2016. The SAFE press spokesperson answered media questions on recent cross-border capital flows.
Q: China's cross-border capital outflow pressure was eased in the first quarter this year, are there any new developments in April?
A: The gradual easing of cross-border outflow pressure of the first quarter continued in April. Since the beginning of this year, both the deficit in foreign exchange settlement and sales and the deficit in foreign-related receipts and payments of banks have been on the decline. In April 2016, banks' deficit in foreign exchange settlement and sales stood at USD 23.7 billion, down by 35percent month on month. In January to March, banks' deficit in foreign exchange settlement and sales was USD 54.4 billion, USD 33.9 billion and USD 36.4 billion respectively. In April, the non-banking sectors posted a deficit in foreign-related receipts and payments of USD 8.9 billion, down by 66 percent month on month. Specifically, the net outflow of foreign exchange funds hit USD 2 billion, down by 67 percent month on month. In January to March, the net outflow of cross-border capital was USD 55.8 billion, USD 30.5 billion and USD 26.1 billion respectively and the net outflow of foreign exchange was USD 20.1 billion, USD 10.5 billion and USD 5.9 billion respectively. Besides, the balance of foreign exchange reserves rebounded in two consecutive months, with an increase of USD 10.3 billion and USD 7.1 billion in March and April respectively. The details are as follows:
Firstly, domestic players were less willing to buy foreign exchange, and their external debt repayment continued to slow down. In April, the foreign exchange sale ratio (or the ratio of foreign exchange purchased by clients from banks to their foreign-related foreign exchange payments) that measures the motivation to buy foreign exchange was 75 percent, down 5 percentage points from the first quarter. Meanwhile, the balance of import financing such as refinancing and forward L/C dropped by USD 1.3 billion, which was 88% lower than the monthly average fall for the first quarter.
Secondly, enterprises and individuals were more willing to settle exchange settlement but less willing to hold foreign exchange. In April 2016, the foreign exchange settlement ratio (or the ratio of foreign exchange sales to banks by clients to their foreign-related foreign exchange receipts) that measures the willingness to settle foreign exchange was 63 percent, 4 percentage points higher than the first quarter. In the same period, the balance of foreign exchange deposit increased by USD 900 million, which contracted by 93 percent from the monthly average growth for the first quarter.
Since the beginning of this year, China has been under easing pressure from cross-border capital outflows, which reflects the changes in internal and external market environments. In the near future, China's economy will continue to operate within the reasonable range and at a relatively high rate compared with those of the rest of the world, which will be conducive to the overall stability of China's cross-border capital flows.
