The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on banks' foreign exchange settlement and sales as well as their foreign-related receipts and payments for customers for November 2018. The SAFE spokesperson and Chief Economist Wang Chunying answered media questions on foreign exchange receipts and payments for November.
Q: What would you say about the foreign exchange receipts and payments in China in November?
A: Supply and demand in the domestic foreign exchange market maintained basic equilibrium in November. The supply and demand of China’s foreign exchange market mainly consists of two parts: one is the difference in foreign exchange settled and sold by banks. The other is foreign exchange transactions of domestic banks, overseas clearing banks and other market entities in the inter-bank foreign exchange market. For example, in November, the changes in the forward settlement and sales of foreign exchange for customers made the banks increase foreign exchange supply to the market by USD 11.2 billion, which achieved a basic balance between supply and demand with the deficit of banks' foreign exchange settlement and sales. Under the combined effect of basic balance of supply and demand, exchange rate conversion and asset price changes in the domestic foreign exchange market, China’s foreign exchange reserves stood at USD 3,061.7 billion at the end of November 2018, up by USD 8.6 billion from the end of October.
Currently, the foreign exchange market expectations are stable. First of all, with the change of market environment, the RMB exchange rate against the US dollar has appreciated on the whole since November, and the exchange rate expectations of market players have been reasonably differentiated. As a result, the value of foreign exchange contracted for forward settlement and sales by banks in November has maintained a surplus for the third month consecutively, pushing the banking sector to supply more foreign exchange to the market. Secondly, enterprises’ utilization of foreign capital, investment abroad, cross-border financing as well as onshore guarantees for offshore loans remained basically stable. The purchase of foreign exchange by individuals continued to maintain stable with slight decline. The scale of foreign exchange purchases by individuals in October and November was at a low level this year, with a year-on-year decline of 9% in November.
In recent years, the international environment has been complex and external pressure has continued to exist. However, China’s foreign exchange market displays a pattern of two-way fluctuation and basic stability, with no trend change. On the one hand, this indicates the fundamental impact of China’s stable economic operation; on the other hand, it also shows that the players in the foreign exchange market are becoming more sensible and their ability to adapt to changes in the external environment has been constantly improving.
In the future, China will continue to deepen market-oriented reform, expand high-level opening-up and maintain sustained and healthy economic development, which will be conducive to further consolidating the foundation for the stability of China’s foreign exchange market.
