The State Administration of Foreign Exchange (SAFE) has recently released the Balance of Payments (BOP) for the first quarter of 2019 and the International Investment Position (IIP) as of the end of March, 2019. The SAFE spokesperson and Chief Economist Wang Chunying answered media questions on relevant issues.
Q: Could you brief us on China's balance of payments for the first quarter of 2019?
A: Based on the balance of payments, China's current account and financial account (excluding reserve assets) both registered surplus for the first quarter of 2019. The foreign reserves rose and the balance of payments maintained basic equilibrium.
First, the surplus under the current account remained within a reasonable range, the surplus under trade in goods increased and the deficit under trade in services narrowed. In the first quarter of 2019, a surplus of USD 49 billion was recorded under the current account, and its ratio to GDP for the period was 1.5%. The surplus in trade in goods under balance of payments reached USD 94.7 billion, up by 83% year on year. The deficit under trade in service was USD 63.4 billion, down by 14% year on year. Specifically, tourism posted a deficit of USD 57.6 billion, down by 9%.
Second, the financial account (excluding reserve assets) was in surplus, featuring net cross-border capital inflows. In the first quarter, the financial account (excluding reserve assets) registered a surplus of USD 48.8 billion, and the main net inflow items are direct investment and portfolio investment. Net inflows of foreign exchange by direct investment amounted to USD 26.5 billion. Specifically, the net inflows of inward foreign direct investment to China approached USD 47.6 billion; the net outflows of China’s outbound direct investment reached USD 21 billion. The net inflows of portfolio investment reached USD 19.5 billion. Specifically, the net increase of foreign portfolio investment in China reached USD 35.7 billion; China's external portfolio investment posted a net increase of USD 16.2 billion.
Third, reserve assets rose. In the first quarter, China's reserve assets rose by USD 10 billion as a result of the BOP transactions (excluding the impact of non-transaction factors such as exchange rate and price), among which, foreign exchange reserves increased by USD 10 billion.
In 2019, China will continue to promote high-quality economic development and all-round opening-up, which is conducive to consolidating the foundation for stable operation of the balance of payments. It is expected that China's balance of payments will continue the development pattern of basic balance of current account and overall stability of cross-border capital flows.
Q: What would you say about China's International Investment Position as at the end of March 2019?
A: According to the international investment position statement, China's international investment position remained robust at the end of March 2019. The main characteristics are as follows:
Firstly, the total size of external financial assets increased. China's external assets reached USD 7.3817 trillion at the end of March, up by 0.8% over the end of 2018, mainly because China's ODI increased by USD 28.5 billion, or 1.5%; portfolio investment assets picked up by USD 47.6 billion or 9.6%; and reserve assets rose by USD 28.2 billion or 0.9%.
Secondly, external liabilities continued to increase. China's external liabilities reached USD 5.4306 trillion at the end of March, up by 4.6% over the end of 2018. Specifically, FDI rose by USD 101.2 billion or 3.7%; Portfolio investment liabilities (foreign purchases of securities issued by China) rose by USD 159.3 billion, or up by 14.5%.
Thirdly, the decline in net external assets mainly reflects the increase in the stock market capitalization of China's listed companies in the first quarter. At the end of March, China's net external assets (asset-liability) totaled USD 1.9511 trillion, down by 8.4% from the end of 2018, mainly affected by valuation factors such as asset price changes. In the first quarter, the domestic stock market and Hong Kong stock market witnessed a significant rise, and the market value of shares issued by Chinese enterprises held by non-residents increased, which belonged to China's external portfolio investment liabilities. The increase of market value led to the increase of liabilities, so the scale of China's net external assets decreased correspondingly.
Overall, China sustained its No. 1 position worldwide by reserve assets. With orderly outbound investments and rising inbound investments, China's international investment position is still robust.
