The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on banks' foreign exchange sales and settlements, and their foreign-related receipts and payments for customers. Its press spokesperson has answered media questions on recent cross-border capital flows.
Q: Could you brief us on cross-border capital flows for October?
A: In October, China was faced with less pressure from cross-border capital outflows. First, a narrower deficit was registered under banks' sales and settlements of foreign exchange. The deficit for October was USD 14.6 billion, down by 49% month-on-month. Of note is that a deficit of USD 10.2 billion was recorded under non-banking sectors like enterprises and individuals, down by 62% month-on-month. Second, a lower deficit was posted under foreign-related receipts and payments by non-banking sectors. The deficit for October was USD 14.1 billion, a month-on-month decrease of 69%. To be specific, a surplus of USD 14.8 billion was registered under foreign exchange receipts and payments, versus a deficit of USD 800 million for the previous month; and a deficit of USD 29 billion was posted under RMB receipts and payments, down by 35% month-on-month.
Some factors that help find an equilibrium between supply and demand of foreign exchange have played their roles. First, market players' willingness to settle foreign exchange remained stable, and the proportion of foreign exchange purchases represented a month-on-month decrease. In October, the ratio of banks' settlement of foreign exchange for customers to foreign-related foreign exchange receipts was 58%, which was stable on the whole; but the ratio of the bank's sales of foreign change to customers to foreign-related foreign exchange payments was 69%, down by 3 percentage points from September. Second, market players' foreign exchange financing rose steadily, and deleveraging slowed down further. At the end of October, the balance of cross-border foreign exchange financing for imports such as refinancing and forward L/C picked up by USD 1 billion month-on-month, representing the eighth consecutive month of growth. In the month, market players' purchases of foreign exchange to repay domestic foreign exchange loans were down by 34% month-on-month. Third, overseas institutions continued to increase their investments in the domestic bond markets. As at the end of October, the balance of domestic bonds held by overseas institutions rose by USD 20.7 billion against September, the eighth consecutive month of growth. Fourth, the seasonal efforts to purchase foreign exchange under ROI and travel declined. In the month, foreign exchange purchases under ROI slumped by 56% month-on-month, and those under travel dropped by a slight 5%. Fifth, Customs foreign trade surplus went up, driving up the surplus in foreign exchange sales and settlement under trade. In October, Customs reported a foreign trade surplus of USD 49.1 billion, up by 17% month-on-month, and the surplus in banks' foreign exchange sales and settlements for customers under trade in goods rose by 46% month-on-month.
The domestic economic growth has become more stable recently, which is favorable for consolidating the foundation for the overall stableness in China's cross-border capital flows. In October, China's official manufacturing PMI hit 51.2%, the highest within more than 2 years; the non-manufacturing PMI was 54.0%, the highest since the beginning of this year; the PPI was up by 1.2% year-on-year, which was higher than before; China's fixed asset investment for the first 10 months grew by 8.3%, up by 0.1 percentage point than the first 9 months. Overall, as China's economy operates more stably, its economic structure are being optimized, and the internal impetus for economic growth becomes stronger, the advantages of its economic fundamentals will be more evident, which will be favorable for withstanding external impact and ensuring the stability of China's cross-border capital flows in the mid and long term.
