The State Administration of Foreign Exchange (SAFE) has recently released data on banks' foreign exchange sales and settlement and their foreign-related receipts and payments for customers forOctober 2018. The SAFE press spokesperson Wang Chunying answered media questions on cross-border capital flow situations in October.
Q: What would you say about China's cross-border capital flows in October?
A: China’s deficit in foreign-related receipts and payments narrowed substantially, with cross-border capital flows remaining stable on the whole, and supply and demand on the foreign exchange market maintained basic equilibrium. In this month, banks posted deficit of USD2.9 billion in foreign exchange settlement and sales, down by 83% from September. The non-banking sectors such as domestic enterprises registered a deficit of USD7.4 billion in foreign-related receipts and payments, narrowing by 73% on a month-by-month basis. Specifically, foreign exchange receipts and payments turned from deficit in September to a surplus of USD4.6 billion. The deficit in foreign exchange settlement and sales and foreign-related receipts and payments in October fell significantly, indicating that China’s cross-border capital flows are still showing two-way fluctuations and overall steady development. In the first ten months of this year, banks' deficit in foreign exchange settlement and sales declined 72% year on year, while foreign-related receipts and payments decreased 43% on a year-on-year basis.
Foreign exchange transactions of market players are stable and rational, and foreign exchange market has been operating normally and orderly. First, the settlement of FDI increased steadily, with the settlement of FDI capital in October increasing by 11% year on year. Second, the foreign exchange purchase by enterprises forODI is rational and stable. In October, the purchase of foreign change with ODI capital was basically the same with that of the same period last year. Third, foreign exchange purchase with investment income fell seasonally and declined on the whole. In October,relevant foreign exchange purchase decreased by 55% month on month, while the figure of the first ten months this year fell by 16% on a year-on-year basis. Fourth, the foreign exchange settlement and sales of individuals remained rational. In October, net purchase of foreign exchange by individuals was stable with slight decline, down by 6% from September. Fifth, the contracts for forward settlement and sales of foreign exchange showed a slight surplus of USD2.8 billion, up from a surplus of USD300 million in September.
At present, the global economic and financial operation is confronted with some uncertainties, and China still has some advantages in coping with them. First of all, in the complex and changing international environment, China’s stable economic and political patterns have become more prominent, the intensity of reform and opening-up has been more highlighted, and the huge market potential has become more attractive. China will persist in advancing structural reform at the supply side and doing a good job in stabilizing employment, finance, foreign trade, foreign investment, investment and expectations, which is expected to effectively cope with changes in external environment and lay a solid foundation for the overall stability of China’s foreign exchange market.Secondly, the two-way floating elasticity of RMB exchange rate has been enhanced in recent years, and market players have become more rational in the face of changes in foreign exchange market situations. Meanwhile, China has accumulated rich practical experience and adequate policy tools in coping with such situations, and can play a more flexible role in macro-prudential regulation to maintain stability of the foreign exchange market.
