The State Administration of Foreign Exchange (SAFE) held a press conference on the foreign exchange receipts and payments for the first quarter of 2019 in the State Council Information Office on Thursday, April 18, 2019 at 10 am and answered press questions.
Moderator Shou Xiaoli
Good morning, ladies and gentlemen, and friends from the press. Welcome to the press conference of the State Council Information Office. Today we are very glad to have with us Ms. Wang Chunying, press spokesperson, chief economist and director of the Department of Balance of Payments of the SAFE. She will brief us on the foreign exchange receipts and payments for 2019 and take your questions. Now I would like to invite chief economist Ms. Wang Chunying to brief on the situation.
2019-04-18 10:03:40
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.
In the first quarter of 2019, growth in the global economy and international trade slowed down to certain extent. China's economy continues to operate within a reasonable range, maintaining overall stability and making steady progress. The RMB exchange rate was generally stable, China's cross-border capital flows remained stable, and supply and demand in the foreign exchange market was basically balanced.
In the first quarter, banks settled foreign exchange in the amount of RMB 2.94 trillion (equivalent to USD 436.2 billion) and sold foreign exchange in the amount of RMB 3.01 trillion (equivalent to USD 445.4 billion), with a deficit of RMB 60.7 billion (equivalent to USD 9.1 billion). The data on banks' foreign-related receipts and payments for customers show that banks' foreign-related receipts for customers amounted to RMB 5.94 trillion (equivalent to USD 880 billion), and their external payments hit RMB 5.57 trillion (equivalent to USD 825.8 billion), representing a surplus of RMB 367.6 billion (equivalent to USD 54.2 billion).
2019-04-18 10:04:41
Wang Chunying:
China’s foreign exchange receipts and payments for the first quarter present the following characteristics:
First, the deficit in banks’ foreign exchange settlement and sales narrowed significantly, and foreign-related receipts and payments for customers registered a surplus. In the first quarter, in dollar terms, foreign exchange settlement by banks increased by 0.5% year on year, while foreign exchange sales fell by 2%. The deficit of USD 9.1 billion was registered under foreign exchange settlement and sales, down by 50% year on year, while the monthly average decreased by 74% from the second half of 2018. Banks' foreign-related receipts for customers increased by 4% year on year, while the payments decreased by 1%. The surplus of foreign-related receipts and payments was USD 54.2 billion, compared with a surplus of USD 10.7 billion in the same period of last year, and the overall deficit in the second half of 2018. In the first quarter, foreign-related foreign exchange receipts and payments recorded a surplus of USD 33.4 billion, up by 1.1 times year on year.
Second, the supply and demand of foreign exchange maintained basic equilibrium. Affected by the Spring Festival holiday and other factors, the monthly foreign exchange receipts and payments fluctuated to certain degree, but the overall balance was maintained. Based on the data of banks' foreign-related receipts and payments for customers, the surplus from January to March was USD 25.7 billion, USD 4.4 billion and USD 3.3 billion respectively. According to the data of foreign exchange settlement and sales by banks, the surplus of January was USD 12.1 billion, and the deficit of February and March was USD 15 billion and USD 6.1 billion respectively. If other supply and demand factors such as forward settlement and sales of foreign exchange and option trading are taken into account, the supply and demand of China's foreign exchange market has continued to maintain an independent balance since the beginning of 2019.
2019-04-18 10:07:01
Wang Chunying:
Third, the foreign exchange sales rate remained stable with a slight decrease, and the domestic foreign exchange loans of enterprises increased slightly. In the first quarter, the foreign exchange sales rate that measures the willingness to buy foreign exchange, or the ratio of foreign exchange purchased by customers from banks to the customer's foreign-related foreign exchange payments was 65%, down by 2 percentage points from the previous quarter. Meanwhile, willingness of enterprises for foreign exchange financing increased. As of the end of March 2019, domestic foreign exchange loan balance of Chinese banks increased slightly by USD 2.4 billion from the end of last year.
Fourth, the foreign exchange settlement rate remained stable, and the current willingness of market players to hold foreign exchange was stable on the whole. In the first quarter, the foreign exchange settlement rate that measures the desire to settle foreign exchange, or the foreign exchange sold by customers to banks as a percentage of their foreign-related foreign exchange income, was 61%, consistent with that of the previous quarter. Foreign exchange deposits of enterprises and individuals rose slightly. By the end of March 2019, the balance of foreign exchange deposits of banks in China increased by USD 5 billion compared with that at the end of last year, representing a drop of USD 14.1 billion year on year.
Fifth, banks’ forward foreign exchange settlement and sales maintained a surplus, and market expectations become more stable. In the first quarter, banks recorded a surplus USD 34.5 billion in contracts signed for forward settlement and sale of foreign exchange with clients, compared with a surplus of USD 17 billion in the previous quarter and a deficit of USD 17.8 billion in the same period last year, indicating that the current expectation for RMB exchange rate has become more stable. On a monthly basis, the surplus in contracts for forward settlement and sales of foreign exchange from January to March was USD 6.6 billion, USD 9.6 billion and USD 18.3 billion respectively.
Sixth, foreign exchange reserves rose steadily. As at the end of March 2019, the balance of China's foreign exchange reserves was USD 3.0988 trillion, up by USD 26 billion from the level of the end of 2018.
These are the major statistics regarding the foreign exchange receipts and payments for the first quarter of 2019. Next, I will be taking your questions.
2019-04-18 10:08:08
Moderator Shou Xiaoli:
We are moving into the Q&A session. Please tell us what news agency you are from before raising your questions. Now please ask your questions.
2019-04-18 10:09:45
Reporter from CCTV of China Media Group:
Since the beginning of this year, the Fed’s interest rate hike has slowed down, and China's financial sector has continued to open up to the outside world. In such context, what new features will the operation of our foreign exchange market have? What will the market look like for some time to come?
2019-04-18 10:11:12
Wang Chunying:
Thank you for your question! Generally speaking, the foreign exchange market has been in a more stable state since the beginning of this year, and there have been some positive changes in cross-border capital flows of major channels. This is reflected through data of several indicators. First, the performance of RMB exchange rate was relatively outstanding among the world's major currencies. In the first quarter, the US dollar index rose by 1.2%, the emerging market currency index rose by 0.7%, and the middle rate of RMB against the US dollar appreciated by 1.9%. The RMB rose 1.9% against a basket of currencies of the China Foreign Exchange Trade System. Second, the cross-border capital flows were generally stable and supply and demand in the foreign exchange market was basically balanced. This is clearly evidenced by the data on foreign exchange settlement and sales, foreign-related receipts and payments, as well as foreign exchange reserves which we have just disseminated. Third, the RMB exchange rate expectation is stable, the market sentiment is steady, and the cross-border capital flow through major channels has further improved as well. In the first quarter, the net inflow of cross-border capital for trade in goods increased significantly. Cross-border capital inflow and foreign exchange settlement under direct investment and securities investment both increased. In addition, individual foreign exchange settlement and sales remained stable, with individual net foreign exchange purchases down by 22% year on year. Judging from these major statistics, China's foreign exchange market has been running more smoothly so far this year.
2019-04-18 10:11:53
Wang Chunying:
There are several analyses and judgments on how to view the development and changes of foreign exchange receipts and payments in the next step: the current internal and external environment is generally conducive to maintaining the basic balance of foreign exchange supply and demand. Let’s look at several major influencing factors. First, the fundamentals of the domestic economy are generally sound. From the data released during this period, it can be seen that macroeconomic policies have strengthened counter-cyclical adjustment and proactive fiscal policies and prudent monetary policies will continue to be implemented, all of which are conducive to the sustained operation of the national economy within a reasonable range. In the first quarter of this year, China's GDP grew by 6.4% year on year. The manufacturing purchasing managers' index rose to 50.5% in March, exceeding market expectations, indicating that the countercyclical adjustment effect of macro policies has played an active role, which is conducive to boosting market confidence. In general, China is in and will remain in a period of important strategic opportunities for a long time to come. Therefore, our economy is resilient enough and has huge potential, and the long-term positive situations of economic growth will not change. We are confident that the economic growth target of between 6% and 6.5% set in this year's Government Work Report will be achieved, and these are the internal basis for the smooth operation of the foreign exchange market.
2019-04-18 10:16:58
Wang Chunying:
Second, all-round opening-up provides an excellent policy foundation for cross-border capital flows or balanced development of cross-border investment. The Foreign Investment Law promulgated some time ago is conducive to further opening up, protecting the legitimate rights and interests of foreign investment, creating a stable, open, transparent, predictable and fair competition environment and promoting foreign investment. Meanwhile, steady progress has been made in opening up the financial market. After the second quarter, the practical efforts for incorporating domestic bond and stock markets into the international mainstream indexes will be intensified. In addition, with the improvement of our own strength and the needs of international development, the reasonable demand for overseas investment by the Chinese market players will continue to exist and will be effectively met. Therefore, no matter from the perspective of capital inflow or outflow, all-round opening-up provides a very good policy foundation for balanced development of cross-border investment. Our opening-up is bidirectional.
Third, the Sino-US economic and trade consultations have made substantial progress and played an important role in stabilizing market sentiment. Maintaining the sound and steady development of Sino-US relations will help reduce uncertainties in the global economy and international trade and stabilize market expectations.
2019-04-18 10:21:53
Wang Chunying:
In addition, the FOMC meeting in March signaled that Fed will not raise interest rates in 2019, and it plans to stop balance sheet reduction at the end of September. This will have some impact on the trend of the US dollar exchange rate and interest rates, which will provide more favorable conditions for the smooth operation of China's foreign exchange market.
Of course, there are still some unstable and uncertain factors among the external factors, which we will continue to pay attention to. For example, global economic growth has slowed down, trade protectionism affects the development of international trade and market confidence, there are also destabilizing factors in international politics, and there are still risks of fluctuations in some emerging economies. Therefore, we have not only observed positive factors, but also paid high attention to the uncertainties. However, we need to look at the mainstream. On the whole, under the dominating stabilizing factors in terms of domestic economy and policies, we expect that China's cross-border capital flows will maintain a stable and basically balanced development pattern in the future. Thank you.
2019-04-18 10:28:55
Reporter from China Radio International of China Media Group:
My question is: what are the policy orientations and specific measures of SAFE to further promote reform and opening up in 2019?
2019-04-18 10:34:47
Wang Chunying:
Thank you for your question. Your question is actually one that we've been asked many times in our communication with the market and the media. People are all very concerned about what reform actions or policy orientations the SAFE will adopt under the current situations at the start of this year. In terms of general principle, we will stick to the following two basic considerations: first, we will deepen the reform of foreign exchange administration, promote two-way opening up of the financial market and serve the new pattern of all-round opening of the country. This is the first principle. Second, we will maintain the stability of the foreign exchange market, guard against the risk of cross-border capital flows, safeguard the security, liquidity, value preservation and appreciation of foreign exchange reserves, and safeguard the national economic and financial security. Specifically, I’ll brief you on what we are going to do:
2019-04-18 10:36:35
Wang Chunying:
The first is to continue to facilitate cross-border trade and investment. First of all, we will further support innovation in trade patterns and optimize foreign exchange administration policies. Efforts will be made to further facilitate foreign-invested enterprises to transfer funds, and support qualified and capable Chinese enterprises to make authentic and compliant outbound investments. Secondly, in the course of steadily and orderly opening up the capital account, we will reform the qualified institutional investor system, simplify access management, and expand the scope of investment. In other word, we will reform the QFII and RQFII systems. Efforts will be made to promote open channel integration of the inter-bank bond market. Meanwhile, the SAFE will standardize the management of RMB bonds issued by foreign institutions in China and promote the development of the "panda bond" market in an orderly manner. In addition, we will fully implement the reform on the centralized operation and management of multinational companies' cross-border funds and significantly simplify procedures. Active support will be given to pilot free trade zones, the Guangdong-Hong Kong-Macao Great Bay Area and the XiongAn New Area for taking the lead in pilot implementation of foreign exchange administration reform, and efforts will be made to support Hainan in comprehensively deepening reform and opening up.
2019-04-18 10:37:43
Wang Chunying:
The second is constantly developing an open and competitive foreign exchange market. We will support securities companies and fund companies to participate in the foreign exchange market and diversify the types of foreign exchange market players. Only when more types of players are involved, can the supply and demand of foreign exchange market become diversified. We support innovation in foreign exchange derivatives to launch more types of options products, and support innovation of banks which have innovative capabilities. The introduction of these innovations will provide better and more convenient methods and approaches for market players to achieve value preservation and appreciation. We will optimize the exchange rate risk management of the foreign institutions which invest in inter-bank bond market. In the course of opening up, we will collect their demand in terms of exchange rate and value preservation by communicating with foreign investors.
2019-04-18 10:42:40
Wang Chunying:
The third is refining the two-pronged “macro-prudential + micro-regulatory” management framework of cross-border capital flows. Efforts will be made to improve the monitoring, early warning and response mechanisms for macro-prudential management of cross-border capital flows, enrich the policy tool kit for macro-prudential management of cross-border capital flows, and counter-cyclically regulate cross-border capital flows in an open, transparent and market-based manner. In terms of micro regulation, the SAFE will continue to maintain the stability, consistency and predictability of micro regulatory policies across different cycles, crack down upon illegal and irregular activities in foreign exchange, and ensure the real, legitimate and compliant demands of the real economy.
To sum up, the foreign exchange administration will continue to strike a balance between promoting reform and preventing risks, serve China's overall opening up and safeguard its economic and financial security. Thank you.
2019-04-18 10:43:59
Reporter from CBN:
Recently, we have observed that it is quite obvious that foreign capital flows into China through the bond market and the stock market, could you please brief us on the scale of relevant fund based on the statistics of the SAFE? People are very concerned about whether these funds will exit at a certain point of time, and how will the risks brought about by inflow and outflow of such funds be guarded against?
2019-04-18 10:45:43
Wang Chunying:
Thank you for your question. In the course of opening up of the securities market, China's balance of payments and foreign exchange market has kept stable on the whole. Based on the statistics of the SAFE, foreign institutions bought a net USD 96.6 billion of domestic bonds in 2018, up by 68% from 2017. Net purchases of domestically listed shares reached USD 42.5 billion, representing an increase of 85%. In the first quarter, net purchases of bonds and listed shares by foreign institutions were USD 9.5 billion and USD 19.4 billion respectively. Statistics show that, with the gradual deepening of opening up of the securities market, the domestic market has maintained a strong attraction for foreign investment, and the capital inflow under securities investment in China is relatively stable. In this period, the balance of payments remained basically balanced and the foreign exchange market functioned smoothly.
In the future, the opening up of domestic securities market will be mainly reflected by orderly net inflow of overseas capital. Currently, in China's bond and stock markets, the proportion of foreign investment is still relatively low, accounting for only about 2% to 3% in the above two markets. This level is not only significantly lower than that of developed countries, but also lower than that of some major emerging markets. Therefore, from this point of view, China will still have relatively large room for improvement in the future. Moreover, from the arrangement of the domestic market being integrated into the international mainstream index, this process is expected to be a gradual and stable process, and its related impact is stable as well. For example, for the inclusion of stocks in the MSCI index, the integration factor is from 2.5%, 5%, 10%, 15% to 20%, which is an orderly process. Of course, steady progress in the two-way opening up of the financial market will also enable the overall cross-border capital flows to maintain a balanced development.
2019-04-18 10:47:23
Wang Chunying:
People are also concerned about the stability of China's foreign exchange market operation in the event of capital inflow or outflow. In our opinion, in terms of the depth and width of China's foreign exchange market, it is still able to absorb the impact of the opening up of the securities market. First, since the establishment of a unified inter-bank foreign exchange market in 1994, China's foreign exchange market has made significant progress in its development and construction. At present, the domestic foreign exchange market has established a basically complete product system and a trading and clearing mechanism which is the mainstream in the international market, and the width and depth of the foreign exchange market have been continuously enhanced. Second, in recent years, in order to support the opening up of the financial market, we have vigorously promoted the trading mechanism that meets the demands of the real economy and the market, to facilitate foreign currency exchange and foreign exchange risk hedging for foreign institutional investors. On the whole, we have solid foundation for smooth operation of the foreign exchange market, the foreign exchange market has been constantly developing in an innovative manner, the market players have become more diversified, the products for trading have been enriched on an ongoing basis, the infrastructure has been constantly improved, the exchange rate flexibility has been further enhanced, the resource allocation efficiency of the foreign exchange market has been further raised, thus possessing better capabilities to absorb the impact of opening up of the financial market. Third, the opening up and connectivity of the capital market will help enhance the flexibility of the RMB exchange rate, enrich diversified trading players and trading channels, further expand the width and depth of the foreign exchange market, and more effectively absorb the impact from opening up of the securities market.
2019-04-18 10:56:15
Wang Chunying:
On the issue of stability in the opening up of the securities market you mentioned, we need to look at it in the light of development. First of all, the economic fundamentals are the most important factor, and also a fundamental support for us to attract foreign investment. China's economic fundamentals remain sound and the economic structure has continued to optimize, which is conducive to the sustained and steady operation of the financial market. Second, by continuing to improve the RMB exchange rate formation mechanism and enhancing the flexibility of RMB exchange rate, the "automatic stabilizer" role of exchange rate in adjusting the macro economy and balance of payments will be given better play. Third, we will continue to deepen reform of the foreign exchange market, improve the supporting mechanisms for foreign currency exchange and foreign exchange risk hedging for foreign investors, and release the demand for exchange rate hedging in advance, all of which are conductive to stabilizing market supply and demand. Fourth, we will closely monitor developments at home and abroad and proactively guard against risks of cross-border capital flows. Thank you.
2019-04-18 11:06:33
Reporter of China Daily:
Recently, the SAFE released the Regulations on the Centralized Operation and Management of Cross-border Capital of Multinational Companies. Could you please brief us on this issue?
2019-04-18 11:13:14
Wang Chunying:
Thank you for your question. The SAFE recently released the Regulations on the Centralized Operation and Management of Cross-border Capital of Multinational Companies. The Regulations aim to further implement the reform requirements of the State Council on "delegation, administration and service", continue to promote trade and investment facilitation as well as investment and financing liberalization and facilitation, and further deepen the reform on the centralized operation and management of cross-border capital of multinational companies. The main contents are as follows:
The first is further streamlining administration and delegating power. Simplifying the registration and management of external debt and overseas loan granting, and implementing one-time registration of external debt and overseas loans under the centralized operation of cross-border capital will greatly reduce the cost of trading players for conducting business, and bring greater convenience to market players.
The second is expanding the new policy dividends. Pilot reform will be conducted to facilitate foreign exchange settlement and payment with regard to receipts of Multinational companies under the capital account after filing. When relevant funds are used for foreign exchange settlement and payment, authenticity certification materials are not required to be provided on a deal-by-deal basis in advance.
2019-04-18 11:14:41
Wang Chunying:
The third is adjusting and optimizing account functions. When the host enterprise of a multinational company deals with cross-border capital to conduct centralized operation of various businesses mainly through the main account of domestic capital, the main account of domestic capital is a multi-currency account, and there is no limit on the currency and quantity of the account.
The fourth is canceling the restriction that the number of cooperative banks shall not exceed three, and abolishing the restriction that enterprises shall clarify the specific allocation of external debt and centralized overseas loan amount in each opening bank" before filing. Therefore this represents a great simplification in this aspect as well.
The fifth is canceling the manual reports. Relevant information is collected electronically and directly through banks, which greatly facilitates the operation of multinational companies.
2019-04-18 11:16:41
Wang Chunying:
The sixth is strengthening the ongoing and ex-post regulation. Efforts will be made to exercise macro-prudential management over the centralized operation of cross-border capital by multinational companies, strengthen statistical monitoring, and guard against risks from cross-border capital flows through risk assessment, off-site monitoring, on-site verification and inspection.
In general, the Regulations on the Centralized Operation and Management of Cross-border Capital of Multinational Companies reflects the principles of serving the real economy, coordinating the use of funds and effectively preventing risks, which is conducive to the faster and more convenient business operation of multinational companies in China. Thank you.
2019-04-18 11:18:58
Reporter of Economic Daily:
As for the balance of payments, last year China's current account surplus narrowed. What is your assessment of this year's trend? Just now we talked about the opening up of the financial market. In your opinion, will China's capital account surplus increase by a large margin with the further opening up of the financial market?
2019-04-18 11:20:19
Wang Chunying:
Thank you for your questions. In 2018, China once had a current account deficit in the first quarter, but it returned to surplus in the second, third and fourth quarters, and the whole year showed a surplus. This situation has aroused wide concern and we have also conducted continuous monitoring and analysis.
Presently, China's current account is within a reasonable range of basic equilibrium. This is a basic judgment, which is not likely to have major changes. The current account balance is the external manifestation of a country's economic development and economic structure. It is not realized in a short period of time, nor will it change in a short period of time. Generally speaking, it is a relatively moderate evolution process. Presently, as China's economy enters a new stage of development, the domestic economic structure becomes more reasonable, and the current account will maintain a balanced development pattern in the medium and long run.
Preliminary estimates for the first quarter of 2019 suggest a current account surplus of a certain scale. Specifically, the surplus of trade in goods expanded year on year, and the deficit of trade in services narrowed year on year. In the future, from the perspective of trade in goods, with the support of mature and complete manufacturing base, China's relevant products will maintain relatively strong international competitiveness with the continuous promotion of transformation and upgrade. From the perspective of trade in services, with the constant improvement of domestic service quality, ecological environment and education level, the improvement of the above "soft power" will make the cross-border consumption of domestic residents more rational and stable, which is conducive to the balanced development of current account.
2019-04-18 11:21:37
Wang Chunying:
When the current account is more balanced, China's capital account will also show a relatively balanced development trend, and the balance of payments will maintain basic equilibrium on the whole. First, foreign capital inflows will continue to rise. Based on the balance of payments in 2018, the net inflow of various types of foreign capital reached USD 483.8 billion, up by 9% from 2017. Specifically, the net capital inflow of direct investment increased by 23%, accounting for 42%; The net capital inflows from securities investments rose by 29%, accounting for 33%. In the future, with the gradual expansion of the opening-up field, the rise of importance of the domestic market and the constant refinement of relevant laws, there will still be great potential to attract foreign direct investment in China. With respect to securities investment, the current proportion of foreign investors in the domestic capital market is relatively low, and the proportion of foreign capital in the bond market and the stock market is only at the level of 2%-3%. Under the policy of further opening up and facilitation, China is expected to become an important destination for global investors to diversify their assets allocation in the future. In addition, we have observed that the investment in China attracted by China's bond market is mainly the capital inflow from foreign central banks and other institutions for the purpose of medium - and long-term asset allocation. Therefore, the future inflow of foreign capital still has considerable room for improvement.
2019-04-18 11:27:16
Wang Chunying:
Second, China's outbound investment will also grow steadily. In 2018, China's outbound investment of various types increased by a net USD 353.2 billion, which is 6% higher than the 2017 figure. Specifically, outbound investment with the nature of direct investment and foreign loans has increased by a large margin. In the future, the investment demand of the domestic players under ODI, securities investment and loans will still exist, and the overall growth will remain stable, which is conducive to the balanced development of cross-border capital flow under the capital account.
In general, it is expected that in 2019, China's balance of payments will continue the development pattern of basic balance of current account and overall stability of cross-border capital flows. Thank you.
2019-04-18 11:29:13
Moderator Shou Xiaoli:
This is the end of today's press conference. Thank you, Ms Wang. Thank you, friends from the press. Goodbye!
2019-04-18 11:30:19
(The original text is available at www.china.com.cn)
