The State Administration of Foreign Exchange (SAFE) has recently disseminated the initial data on the Balance of Payments for the third quarter and the first three quarters this year. The SAFE press spokesperson answered media questions on relevant issues.
Q: What new changes were there to the balance of payments for the third quarter this year?
A: First, the surplus under the current account went up, accounting for 2.5% of GDP for the period, which was within a reasonable range. In the third quarter, the surplus under the current account was USD 71.2 billion, up by 11% quarter-on-quarter. In particular, the surplus under trade in goods hit USD 137.1 billion, up by 9% quarter-on-quarter. Alongside the slow recovery of domestic and overseas markets, imports and exports of goods increased. But a deficit of USD 69.5 billion was registered under trade in services, an increase of 25% quarter-on-quarter, due to seasonal factors. July and August are the peak seasons for overseas travel. As a result, a deficit of USD 62.9 was recorded under travel for the first three quarters, up by 26% quarter-on-quarter.
Second, a deficit of USD 207.3 billion (including net errors and omissions) was posted under the non-reserve financial account, due to active allocation of external assets by domestic players. Of external assets, a net increase of USD 55 billion was recorded under ODI, down by 14% quarter-on-quarter. Incomplete statistics show a net increase of more than USD 30 billion in external portfolio investments including QDII and southbound trading, and of more than USD 40 billion in external debt. Of external liabilities, FDI represented a net increase of USD 23.6 billion, suggesting China is still attractive to long-term investors. Meanwhile, as corporate deleveraging came to a halt, net inflows under portfolio investment and loan liabilities recovered. For example, a net inflow of more than USD 40 billion was recorded under purchases of stocks and bonds by foreign institutions.
Overall, China's economy will continue to grow at a middle and high speed, with the current account led by trade in goods remaining in surplus and its attractiveness to long-term capital to be strong still. As the RMB officially joined the SDR basket, the two-way liberalization of financial markets is pressed ahead with, and domestic stock markets, bond markets and foreign exchange markets are further opened, domestic players' initiative for rationally arranging for cross-border investment and financing will be further strengthened, while international investors will have much stronger demand for China's assets. All these will work together to guide China's cross-border capital towards a pattern of two-way fluctuations featuring alternation between inflows and outflows.
