The State Administration of Foreign Exchange (SAFE) held a press conference on the foreign exchange receipts and payments for the first quarter of 2017 in the State Council Information Office on Thursday, April 20, 2017 at 10 am and answered press questions.
Moderator Xi Yanchun:
Good morning, ladies and gentlemen. Welcome to the press conference of the State Council Information Office. Today we are here to unveil the latest data on China's economic development in the first quarter of this year. We are very glad to have with us Ms. Wang Chunying, press spokesperson for the SAFE and director of the Balance of Payments Department, to brief us on the foreign exchange receipts and payments for the first quarter and answer your questions. Now let me turn to Ms. Wang Chunying for opening remarks.
2017-04-20 10:00:03
Wang Chunying:
Good morning, everyone! Welcome to today's press conference. First, I would like to disseminate China's foreign exchange receipts and payments data for the first quarter and then I will be taking your questions.
Over the first quarter of 2017, the global economy has continued sluggish recovery and the global financial markets have operated relatively stable. China's economy has sustained a good momentum for growth, with economic growth recovering slightly and the RMB exchange rate staying stable. While adhering to reform and opening up, the SAFE has further enhanced cross-border trade and investment facilitation; on the other hand, the SAFE has guarded against risks arising from cross-border capital flows and sustained a healthy, stable and benign order in the foreign exchange market. Overall, the pressure from cross-border capital outflows on China has been significantly relieved in the first quarter, with the supply and demand finding a basic equilibrium.
2017-04-20 10:00:58
Wang Chunying:
In the first quarter, banks settled foreign exchange of RMB 2.59 trillion (USD 375.5 billion) and sold foreign exchange of RMB 2.87 trillion (USD 416.3 billion) on a cumulative basis, with a deficit of RMB 281.5 billion (USD 40.9 billion). Meanwhile, according to the data on foreign-related receipts and payments via banks, in the first quarter, banks registered cumulative foreign-related receipts of RMB 4.67 trillion (USD 677.5 billion) and made external payments of RMB 4.84 trillion (USD 702.7 billion) on behalf of clients, with a deficit of RMB 173.6 billion (USD 25.2 billion).
2017-04-20 10:02:27
Wang Chunying:
China’s foreign exchange receipts and payments for the first quarter present the following characteristics:
First, the banks' foreign exchange sales and settlements as well as foreign-related receipts and payments registered drastic falls in deficits. In the first quarter, in dollar terms, foreign exchange settlements by banks were up by 7% year on year, and foreign exchange sales by banks, down by 12% year on year, resulting in a deficit of USD 40.9 billion, down by 67% year on year; the foreign-related receipts by banks for customers were up by 2% year on year, while the payments were down by 9%, leading to a deficit of USD 25.2 billion, a decrease of 78% year on year; in particular, the foreign-related foreign exchange receipts and payments recorded a surplus of USD 3 billion, compared with a deficit of USD 36.6 billion in the same period last year.
2017-04-20 10:03:33
Wang Chunying:
Second, the supply and demand of foreign exchange have been moving towards an equilibrium. Turning to the banks' foreign exchange sales and settlements, a deficit of USD 19.2 billion was registered in January 2017, much lower than the deficit of USD 46.3 billion for December 2016, and the deficits of USD 10.1 billion and USD 11.6 billion were recorded in February and March respectively. The foreign exchange sales and settlements by banks for customers contracted month by month, reaching USD 15.6 billion, USD 10.1 billion and USD 7 billion for January-March respectively. Considering the spot and forward foreign exchange sales and settlements as well as options, China's foreign exchange supply and demand has found an equilibrium since February. In addition, according to the foreign-related receipts and payments by the non-banking sector, banks' receipts and payments for customers recorded a deficit of USD 9.7 billion in January, a surplus of USD 1.9 billion in February and a deficit of USD 17.4 billion in March, versus a monthly average deficit of USD 25.4 billion in 2016.
2017-04-20 10:05:13
Wang Chunying:
Third, the foreign exchange sales rate dropped dramatically on a year-on-year basis, indicating enterprises' foreign exchange financing has recovered. In the first quarter of 2017, the foreign exchange sales rate that measures the motives of enterprises for buying foreign exchange, or the ratio of the foreign exchange bought by customers from banks to customers' foreign-related foreign exchange payments was 68%, down by 12 percentage points year on year, which suggests that enterprises are more reasonable in buying foreign exchange, and more rarely buy foreign exchange to repay foreign exchange financing. Since the beginning of 2017, the outstanding domestic foreign exchange loans have recovered month by month, and increased by USD 11.3 billion in the first quarter on an accumulative basis, while the figure kept declining in most of the past two years; The balance of cross-border financing for imports such as refinancing and forward L/C rose by USD 17 billion, and the balance of financing in foreign currencies went up by USD 22.2 billion.
2017-04-20 10:06:45
Wang Chunying:
Fourth, the foreign exchange settlement rate climbed on a year-on-year basis, suggesting individuals' domestic foreign exchange deposits have turned from rises into falls. In the first quarter, the foreign exchange settlement rate that measures the willingness to settle foreign exchange, or the ratio of foreign exchange sold by customers to banks to the foreign-related foreign exchange receipts of customers, was 62%, up by 3 percentage points year on year, indicating market participants' stronger willingness to settle foreign exchange. According to individuals' domestic foreign exchange deposits, the balance increased by USD 300 million in the first quarter, which was down by USD 11.2 billion year on year. Specifically, the balance of individuals' domestic foreign exchange deposits jumped by USD 1.9 billion in January, and went down by ~USD 800 million in February and March respectively.
2017-04-20 10:07:48
Wang Chunying:
Fifth, banks' forward foreign exchange sales and settlements registered a lower deficit. In the first quarter, the number of customers contracting for forward foreign exchange settlements with banks was up by 153% year on year, and the number of customers contracting for forward foreign exchange sales with banks dropped by 25%, leading to a deficit of USD 3.4 billion, which was down by 91%. Specifically, the forward foreign exchange sales and settlements registered a deficit of USD 8 billion in January, a surplus of USD 4.7 billion in February, and a basic equilibrium in March, indicating the expectations of RMB depreciation have been dramatically weakened since the beginning of this year.
These are the major statistics I want to disclose regarding the foreign exchange receipts and payments for the first quarter of 2017. Now I will answer your questions.
2017-04-20 10:10:16
Moderator Xi Yanchun:
Thank you very much, Ms. Wang. Now let us move on to the Q&A session. As usual, please tell us what news agency you are from before raising your questions.
2017-04-20 10:11:45
Economic Daily:
According to the data for the first quarter you just disseminated, the pressure from cross-border capital outflows on China has been relieved since the beginning of this year. Could you tell us why? What would you say about the future trends?
2017-04-20 10:12:10
Wang Chunying:
As shown by the data I just unveiled, the cross-border capital outflows have slowed down remarkably since the beginning of this year, and the supply and demand of foreign exchange have found an equilibrium, which shows that China's cross-border capital flows are moving towards an equilibrium. A review of the performance over the past few years shows that China's cross-border capital flows have registered net outflows since the second half of 2014, while foreign exchange reserves have also turned from large-scale rises into falls, and even fluctuated violently at the end of 2015 and the beginning of 2016. But since 2016, the pressure from cross-border capital outflows on China has been relieved, with the balance of foreign exchange reserves for the whole year dropping by USD 319.8 billion, which was 38% lower than that of 2015. The outflow pressure has been further relieved since the beginning of this year. In particular, the supply and demand of foreign exchange found a basic equilibrium in February and March, and the balance of foreign exchange reserves have recovered for two straight months.
2017-04-20 10:13:08
Wang Chunying:
The enhancement in cross-border capital flows in the first quarter is closely related to the changes in market environment. On the one hand, the stable domestic economic performance has strengthened the market confidence, showing the fundamental roles of the economic fundamentals. In the first quarter, China registered 6.9% in economic growth, up by 0.1 percentage point quarter on quarter, and many economic indicators turned for the better. For example, PMI has been in the expansion range for 8 consecutive months, hitting 51.8 in March, a new record high since May 2012. The data for the first quarter from the National Bureau of Statistics show that the added value of industries above designated size was up by 6.8% year on year, 0.8 percentage point higher than the growth of last year as a whole. The fixed asset investment across China for the first quarter was up by 9.2% year on year, 1.1 percentage points higher than that of last year. Specifically, the private sector's investments grew by 7.7%, 4.5 percentage points higher year on year. On the other hand, the externalities for the first quarter, especially the USD exchange rate, remained stable. Despite the second interest rate hike by the Fed in March, the US dollar index fluctuated by a small margin, going down 1.8% in the first quarter. The global financial markets performed stably as well. Under the combined impacts of domestic and foreign factors, the RMB exchange rate has stayed stable since the beginning of this year, fluctuating in two ways against the US dollar, and expected to remain robust.
2017-04-20 10:18:01
Wang Chunying:
Going forward, China's cross-border capital flows will move towards an equilibrium, with its cross-border receipts and payments continuing to stay robust. First, China's economy will continue to grow at a mid and high rate. As the supply-side structural reform is deepened, industrial structure will be further upgraded, delivering higher quality and efficiency of economic growth. A couple of days ago, the IMF released the latest version of World Economic Outlook, upping the expectation of China's economic growth for 2017 from 0.1 percentage point to 6.6%.
2017-04-20 10:25:02
Wang Chunying:
Second, China will remain one of the most competitive and attractive destinations for long-term foreign capital. According to the analysis report of the United Nations Conference on Trade and Development (UNCTAD), China was ranked No. 3 among the top 10 economies with capital inflows for 2016, only after the US and the UK, and continued to take the top spot among emerging economies. At the beginning of this year, the State Council introduced a wealth of measures to utilize foreign capital, in a bid to further open up, deepen the administration streamlining and power delegation, optimize services, and create a more open, convenient and transparent business environment to enhance the level and quality of foreign capital utilization.
2017-04-20 10:32:00
Wang Chunying:
Third, the financial market will be further liberalized. Last year China boosted the further liberalization of the inter-bank bond market, implemented macro-prudential management of full-scale cross-border financing, and deepened the foreign exchange administration reform for QFIIs and RQFlls, and in October, the RMB joined the IMF's SDR basket of currencies, indicating the policies have begun to deliver results in the markets. We will continue to optimize relevant policies at present and in future. For example, we issued a circular in February to allow foreign investors investing in China's inter-bank bond market to participate in the domestic and overseas foreign exchange derivatives markets based on real demand, which means that efforts will be made to preserve the value of foreign exchange risk exposure. This is typical of our efforts to improve and introduce policies in support of opening up of China's financial market. This is also why China will further liberalize its financial market.
2017-04-20 10:37:01
Wang Chunying:
Fourth, as the market-oriented RMB exchange rate formation mechanism is steadily advanced, the RMB exchange rate elasticity will be strengthened further, which will be favorable for promoting the inflows and outflows, and two-way fluctuations of China's cross-border capital.
Fifth, China's current account remains in surplus and foreign exchange reserves are adequate, suggesting China is capable of ensuring stable receipts and payments of foreign exchange.
Therefore, China's cross-border capital flows will continue to move towards an equilibrium in the future. Thank you.
2017-04-20 10:46:12
CRI:
Ms. Wang, according to the data you just released, the Fed's interest rate hike in March had a moderate impact on China's cross-border capital flows. What would you say about this? The Fed will continue to raise interest rates this year, and may consider contracting the balance sheet. What impact will this have on China's cross-border capital flows?
2017-04-20 10:50:52
Wang Chunying:
We talk about the Fed's interest rate hikes at every press conference we have held. This issue also attracts our attention and concern in our daily work. The contraction of balance sheet is a new issue that emerges this year, and we are monitoring and assessing it in real time. I would here like to share some of my ideas with you:
First, a comprehensive look and analysis is needed as to the Fed's policy adjustment such as interest rate hikes. For the moment, the US meets the conditions for stable hikes based on its economic performance, but there are also uncertainties. For example, in the US, there are uncertainties in the course of policy implementation by the new administration and in the implementation outcomes. It is difficult to reduce taxes and add infrastructure investment, which will impact the fiscal revenues and expenditures of the country, while loosening financial regulation may heighten the risks facing the financial market. The overly strengthening of the USD exchange rate will also be unfavorable for addressing trade imbalances in the country while the USD appreciation will impact its import prices and may slow down the recovery of inflation. Externally, there are still many uncertainties facing the global financial markets. The volatilities in the global markets will also impact the adjustment of the US' domestic policies. For example, the 2016 referendum on Britain's exit from the EU had postponed the Fed's interest rate hikes. Moreover, although the Fed's interest rate hikes are the important factors that boost the strengthening of the US dollars, there are more complicated factors that impact the USD exchange rate. For example, the US government's attention to the appreciation of the US dollars may hamper the strengthening of the US dollars. The recent stabilization of Europe's economy compared with previous years is also an important variable that impacts the USD exchange rate. The Fed's contraction of balance sheet and interest rate hikes are the policy adjustments in the same direction, and will also be subject to the uncertainties discussed above.
2017-04-20 10:52:10
Wang Chunying:
Second, a look at China's cross-border capital flows shows that the impact of the Fed's three interest rate hikes is declining. Since its exit from the QE policy, the Fed has raised interest rates three times. In December 2015, the interest rates were raised for the first time. Before the hike the US dollar index had grown by 7% at most. Due to the combined impact of this and other factors, China's balance of foreign exchange reserves for the fourth quarter of that year fell by USD 183.8 billion. In the run-up to the second interest rate hike in December 2016, driven by the interest rate hike expectations and the presidential election, the US dollar index surged by up to 9%. China's balance of foreign exchange reserves for the fourth quarter of that year fell by USD 155.9 billion. Before the Fed's third interest rate hike in March, the US dollar index rose by 2.7% at most. In the first quarter, China's balance of foreign exchange reserves fell by a slight USD 1.4 billion. To be specific, the reserves for January dropped by USD 12.3 billion and grew by USD 6.9 billion and USD 4 billion in February and March respectively.
2017-04-20 11:00:04
Wang Chunying:
Third, the different impacts from the Fed's three interest rate hikes on China indicate that China's responsive and adaptive capabilities have been strengthened significantly. First, China's economic performance has been more stable than it was during the Fed's first interest rate hike at the end of 2015. At the end of 2015, China's economy was on a downward trend, with PMI dropping below the boom and bust line for 7 months in a row; by comparison, China's economy remains stable with good momentum for growth at the moment. As I said earlier, PMI has been expanding for 8 consecutive months, and China's GDP for the fourth quarter of last year and the first quarter of this year grew by 6.8% and 6.9% respectively. Second, the supply and demand on the foreign exchange market have remarkably improved. As the adjustments of the structure of assets and liabilities in domestic and foreign currencies by domestic participants are gradually completed, the recent changes are being stabilized. For instance, China's outstanding external debt in domestic and foreign currencies for the fourth quarter of 2015 fell by USD 172.4 billion, but has recovered quarter by quarter since the second quarter of 2016. Third, the financial market has been further liberalized. Particularly, the channels for foreign capital inflows have been extended and the level of facilitation has been gradually enhanced. Since the beginning of 2016, the reform measures such as liberalization of the domestic bond market and macro-prudential management of full-scale cross-border financing have begun to deliver results. Last but not least, the expectations of the depreciation of RMB exchange rate against the USD have been weakened remarkably. We usually look at the expectations of the RMB exchange rate based on the risk reversal indicators for the options market. Risk reversal indicators refer to the volatility gap between call options of the USD/put options of the RMB and put options of the USD/call options of the RMB. A positive gap shows short selling of the RMB and long selling of the USD, and the higher the positive gap, the stronger such expectations. This indicator at home and abroad has dropped substantially from the end of 2015 and 2016, indicating the RMB exchange rate expectations are being stabilized.
Overall, China will continue real-time monitoring and assessment of the Fed's interest rate hikes and contraction of the balance sheet. China's responsive and adaptive capabilities show that we are still confident. Thank you.
2017-04-20 11:04:46
Nihon Keizai Shimbun:
Some experts say that the Chinese government's control of capital outflows have caused hikes in real estate prices. What would you say about this? Thank you.
2017-04-20 11:23:41
Wang Chunying:
In recent years, China has witnessed many normal outbound investments, and China's capital outflows are mainly the external investments by the private sector. Since the second half of 2014, China's cross-border capital outflows have been mainly comprised of outbound investments and repayments of external debt. But since the second quarter of 2016, repayment of external debt has come to an end. External debt has begun to rise in size and the private sector's outbound investments have become the major form of capital outflows. The BOP data shows that between the second half of 2014 and 2016, China's non-reserve financial account registered a deficit of USD 950.1 billion. To be specific, net inflows were still recorded in FDI and portfolio investment and totaled more than USD 670 billion. Items with net outflows include: first, outbound investments by market participants, or the private sector, such as direct investment, portfolio investment and loan, which totaled USD 1.24 trillion. Second, outflows of liabilities under other investments, which totaled more than USD 380 billion net between the second half of 2014 and 2016, and were mainly comprised of repayments of overseas loans and trade credit by market participants. Such outflows were high in 2015, but have been replaced by net inflows since the second quarter of 2016. Overall, of the capital outflows since the second half of 2014, the private sector's outbound investments constituted the majority, with the ratio of outbound investments to repayments of liabilities being 3.2:1. The external assets held by China's private sector constitute more than half of China's total for the first time at the moment, which is testimony to domestic market participants' capabilities of engaging in normal outbound investments and foreign-related economic activities.
Certainly, Chinese enterprises also should make outbound investments in a healthy and orderly manner. On November 28 and December 6 last year, the heads of the NDRC, MOC, PBC and SAFE pointed out in the two Q&A sessions that regulators have paid close attention to the unreasonable outbound investments in the real estate, hospitality, cinemas, and entertainment industries and sports clubs, and risks and dangers arising from large-sum investments that do not belong to the principal businesses, outbound investments by limited partnerships, "small parent company and large subsidiaries", and "quick investment and quick exit", and suggested relevant enterprises to make decisions prudentially. They also pointed out that China follows the fundamental principles in outbound investments that under the guidance of the government, enterprises will play a dominant part based on market orientation and international practices, to press ahead with outbound investment management by "streamlining administration, delegating more powers, improving regulation and providing better services", to support domestic enterprises with required capacities and conditions to carry out true outbound investment activities in compliance with regulations, and participate in the Belt and Road Initiative and international production capacity cooperation, so as to promote the transformation and upgrading of China's economy and deepen the mutual benefits and cooperation between China and the rest of the world.
2017-04-20 12:08:23
China News Service:
The Currency Composition of Official Foreign Exchange Reserves (COFER) released in April by the IMF lists the RMB assets in the official foreign exchange reserves of other economies for the first time. My question is what the specifics on the RMB assets held by foreign central banks are? What's your view about this? Thank you.
2017-04-20 12:12:46
Wang Chunying:
We also have taken notice of the information released by the IMF. The statistical data of the SAFE shows that as at the end of last year, the RMB assets directly held by foreign central banks for the Chinese residents were equivalent to USD 81.1 billion, up by 13% from the end of last year, or by 563.5 billion in RMB terms. In particular, debt securities accounted for 92.5%, and equity and investment funds, 7.4%.
We also have noted that the data released by the IMF is USD 84.5 billion, a little different from the figure we have observed on the RMB assets directly held by foreign central banks for the Chinese residents. Our analysis shows that besides the conversion factor, the difference is a result of other contributing factors. For instance, it might be that foreign central banks held the RMB securities issued by non-residents, and non-residential issuers invested in domestic RMB assets after fundraising; it might also be that foreign central banks held RMB assets through agencies, who will be recognized as non-residential issuer or agency in our statistics.
2017-04-20 12:14:13
Wang Chunying:
We are pleased to find that the RMB assets held by foreign central banks rise. This shows that a growing number of foreign institutions accept the products denominated in RMB and are willing to hold RMB assets alongside the liberalization of China's financial market and the RMB's official inclusion in the SDR basket of currencies. In the past, foreign central banks usually held a limited portion of products denominated in RMB, but at present they hold the products denominated in the RMB on a large scale, which is favorable for stabilizing China's foreign exchange supplies. That foreign central banks hold more RMB bonds, especially treasury bonds, is in line with the requirements for high liquidity and low risk of allocation of reserve assets, and also shows that foreign investors are optimistic about the long-term performance of the RMB assets and have confidence in China's economic and financial system.
In fact, the RMB has been playing a more important role in cross-border capital flows in recent years. Statistics from the Bank for International Settlements (BIS) show that the RMB accounted for 4% of global foreign exchange transactions in 2016. SWIFT statistics show that the RMB made up 1.84% of global payments in February 2017. Therefore, foreign participants' holding of the RMB assets and the emergence of the RMB denominated products are the embodiments of the confidence in China's economy, finance, foreign exchange rate and cross-border capital flows that.
2017-04-20 12:15:43
Phoenix Satellite TV:
My first question is about China's foreign exchange reserves. We have learned from a lot of analysis that China's foreign exchange reserves returning to the stable range is a result of the country's control over foreign exchange outflows, including control over external payments such as for real estate and insurance. What would you respond to such views? My second question is about RMB exchange rate. US President Trump's recent policy did not include China in the list of currency manipulators. What would you say about this? The market has responded positively to this on the expectations of stable RMB exchange rate for this year.
2017-04-20 12:19:39
Wang Chunying:
Let me first answer your question about the US Department of the Treasury choosing not to label China a currency manipulator. China is not a currency manipulator by objective standards. It is not necessary for China to stimulate exports by depreciating the RMB. A look at several aspects shows that China has sustained mid and high economic growth, its productivity has been higher than other major economies, and its exports are globally competitive and account for a high proportion in the global markets. In 2007, China's exports accounted for 8.8% of the global markets, and over 13% in 2015 and 2016 respectively. Moreover, China does not meet the criteria for a currency manipulator set by the US Department of the Treasury.
2017-04-20 12:24:14
Wang Chunying:
For foreign exchange administration, the foreign exchange authorities have not adopted any new measures on exchange and cross-border receipts and payments since China's cross-border capital outflows were registered, but require that banks observe the existing foreign exchange administration regulations, and perform the operation principles to intensify authentication and compliance reviews. The foreign exchange policies remain consistent with the previously published ones, without any change.
When formulating and implementing foreign exchange administration policies, we will follow two basic principles: first, we will persevere in reform and opening up to support and boost two-way liberalization of the financial market, further enhance trade and investment facilitation and serve the real economy. Second, we will be on guard against risks arising from cross-border capital flows and the impact from the disorderly flows of cross-border capital on the macro economic and financial stability, so as to maintain the stability of the foreign exchange market and create a sound market environment for reform and opening up.
Based on the above two principles, foreign exchange administration policies have several connotations: firstly, an open window will not be closed. China's foreign exchange administration will not step back onto the path of capital control. In 1996, China achieved the full convertibility of the current account. Since the advent of this century, the capital account's convertibility has been gradually enhanced. Secondly, we will boost the capital account liberalization in a prudential and orderly way. In 2016, there were many highlights in the liberalization of China's capital account, including macro prudential management of full-scale cross-border financing, further opening up the capital account and facilitating foreign institutions' investments in inter-bank bond markets. The liberalization of the capital account shall be aligned with the stage of economic development, the situations of financial markets and financial stability. At different time, internal and external factors should be taken into full consideration, to identify the priorities, cadence and steps in the course of liberalizing the capital account. Thirdly, the macro-prudential management and micro regulatory system should be established for cross-border capital flows to safeguard a healthy, stable and sound order in the foreign exchange market. Fourthly, efforts will be made to improve the exchange rate formation mechanism, and increase exchange rate elasticity. I hope that my answer could be of some help to you in understanding foreign exchange administration policies. Thank you.
2017-04-20 12:31:15
Bloomberg:
How would you judge the late movement of the RMB exchange rate against the USD? Which will be more stable, the bilateral exchange rate of the RMB against the USD or against a basket of currencies?
2017-04-20 12:37:19
Wang Chunying:
In the long term, exchange rate is decided by the economic fundamentals by nature. China's economic fundamentals will continue to support the RMB exchange rate to stay stable at the reasonable and balanced level. But in the short run, the RMB exchange rate may appreciate or depreciate due to expectations and financial market contingencies, which is normal.
2017-04-20 12:46:05
China Global Television Network:
Since the beginning of this year, China's foreign trade surplus has been declining, which means that the surplus under the current account may fall too. Would this become true? What would you say about the receipts and payments under China's current account? Thank you.
2017-04-20 12:53:53
Wang Chunying:
In recent years, China's current account surplus as a percentage of GDP has stayed stable, making it possible to effectively guard against risks associated with the balance of payments. The historical experiences of other countries in the BOP crisis show that it is a critical early warning indicator that the deficit under the current account exceeds 4-5% of GDP; According to the six pack introduced by the EU in 2011 on enhancing the economic and fiscal integration, one early warning indicator is that the ratio of deficit under the current account to GDP should not exceed 4% and the ratio of surplus under the current account, not surpass 6%. China's current account surplus as a percentage of GDP peaked at 9.9% in 2007 and then has gradually fallen. In recent years, quarterly data have fluctuated sharply, exceeding 3% in some quarters, hitting the lowest level of 0.2% in the first quarter of 2014, and reaching 1.8% the previous year. Overall, they are all within the reasonable range. The increasing balance between receipts and payments under the current account is testimony to optimizing domestic economic structure and strengthening domestic demand, and does not mean the weakening of export competitiveness. As I answered earlier, China's exports accounted for 8.8% of the global markets in 2007, and over 13% in 2015 and 2016 respectively. As a result, the share of China's current account surplus has remained reasonable, making it possible for China to effectively guard against the BOP risks.
2017-04-20 12:55:09
Wang Chunying:
Looking ahead, China's current account surplus will continue to stay stable and keep aligned with the development stage of China's foreign-related economy and economic structure. The surplus under the current account covers trade in goods, trade in services and return on investment, which will all be more stable in the future.
First, trade in goods will remain in surplus and be more stable. On the one hand, exports will continue to stay stable. Despite the likelihood that trade frictions may rise, there will be factors that are favorable for China's exports to be stabilized. For example, many institutions predict that the global economic growth for 2017 will be higher than that of 2016, and the IMF's latest expectations show that the global economic growth will be 3.5% in 2017, 0.4 percentage point higher than that of 2016. All of this indicates that external demand is recovering slowly. The Baltic Dry Index that measures the global trading trends has been on an upward trend recently, recovering from the all time low of 290 points in the beginning of February 2016 and exceeding 1200 points since late March, which suggests that global trade is recovering too. Along with the stable advancement of the Belt and Road Initiative, the countries within the region will benefit in their exports. Although the land and labor costs have risen, the industry chain of China's manufacturing industry is sound, putting it at an advantage in the international division of labor. This is why China's exports will remain stable. On the other hand, China's economy has sustained mid and high growth, the domestic demand has rebounded somewhat, and international commodity prices stay stale, which will push higher China's export volume. Therefore, China's trade in goods will remain in surplus and be more balanced.
2017-04-20 13:00:14
Wang Chunying:
Second, deficit in trade in services will continue to grow at a stable rate. In recent years, the deficit in China's trade in services has grown rapidly, mainly driven by travel and study abroad of domestic residents, which shows the higher incomes of residents and the further facilitation of relevant policies. From 2011 to 2014, the travel deficit grew at an average rate of 112%. But as relevant demand is rapidly unleashed, the travel deficit has reached a relatively stable size. In 2015, the growth plummeted to 12% and further to 6% in 2016.
Third, the deficit in return on investment may be contracted stably. China has witnessed rising ODI recently, and may see the increases in returns on outbound investment, which will be favorable for stably reducing the deficit in China's returns on investment.
2017-04-20 13:05:43
Wang Chunying:
In addition, in terms of the domestic economic structure, the surplus under the current account as a percentage of GDP shows that the savings rate is higher than investment rate. In the future, the gap between the two rates will remain at a stable and reasonable level. On the one hand, as China's economic structure is stably adjusted, the domestic demand will play a greater role in boosting economic growth, and consumption will make greater contribution, and accordingly, the savings rate will be on a stable downward trend. On the other hand, however, the investment rate will slow down stably. As the supply-side structural reform is deepened and the decapacity policies are effectively implemented, the rapid increase in extensive investments will be inhibited. Therefore, China may see the downturns of the savings rate and the investment rate, but the gap between them will stay stable, and the surplus under the current account will remain at a reasonable level.
2017-04-20 13:07:23
Moderator Xi Yanchun:
I would like to extend thanks again to Ms. Wang Chunying for her professional and elaborate explanations as well as every one of you for coming. Now I would like to wrap up today's press conference.
2017-04-20 13:09:34
(The original text is available at china.com.cn)
