The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on banks' sales and settlements of foreign exchange and their foreign-related receipts and payments for customers for November 2016. Its press spokesperson has thus answered media questions on the recent cross-border capital flows as follows:
Q: Could you brief us on the changes to cross-border capital flows in China in November?
A: Despite changing external environment, China's cross-border capital flows stayed within a stable range on the whole in November. Due to the heightened expectations of the Fed's interest rate hikes, the strengthening US foreign exchange rate, and the depreciation of non-USD currencies worldwide, China came under heavier pressure from cross-border capital outflows in November than in October, which, however, remained much lower than the level before the first interest rate hike by the Fed in the same period last year. In November, a deficit of USD 33.4 billion was registered under banks' sales and settlements of foreign exchange, down by 39% year-on-year, and higher than the deficit of USD 14.6 billion in October. A deficit of USD 24.6 billion was registered under the foreign-related receipts and payments of non-banking sectors including individuals and enterprises, down by 42% year-on-year, and higher than the deficit of USD 14.1 billion in October.
The positive changes in the preliminary cross-border capital flows continued to take place in November. First, enterprises' demand for cross-border financing in foreign exchange was further strengthened. At end-November, the balance of cross-border financing denominated in foreign currencies by importers such as refinancing and forward L/C went up by USD 5.2 billion month-on-month, continuing to recover for nine straight months. Second, the pressure to repay foreign exchange loans made in the country in a centralized manner was significantly relieved. In the month, enterprises bought USD 5.1 billion in foreign exchange to repay domestic foreign exchange loans, which was consistent with that of October, and down by 57% year-on-year, reaching the three year low. Third, overseas institutions continued to buy domestic bonds. The statistics from China Central Depository & Clearing Co., Ltd. show that the balance of domestic bonds held by overseas institutions went up by RMB 15.8 billion month-on-month as at end-November, growing for nine consecutive months.
Overall, the recently strengthening US dollars have had strong impact on global currencies and international capital flows, but the RMB exchange rate against the US dollars depreciated slightly, and remained stable against a backset of currencies. With the positive factors in its cross-border capital flows continuing to play their roles, China could better adapt to the changing external environment.
