The State Administration of Foreign Exchange (SAFE) has recently released the data on banks' sales and settlements of foreign exchange and their foreign-related receipts and payments for customers for February 2020. SAFE Press Spokesperson and Chief Economist Wang Chunying answered media questions on foreign exchange receipts and payments for the month.
Q: Could you brief us on the characteristics of China's foreign exchange receipts and payments for February 2020?
A: China's foreign exchange market, despite the impact of the epidemic of COVID-19, stayed generally stable in February, with key highlights as follows: first, the supply and demand remained balanced in the foreign exchange market. Banks' sales and settlements of foreign exchange registered a surplus of USD 14.2 billion in the month, indicating a basic equilibrium in the supply and demand in China's foreign exchange market considering other supply and demand factors including forward foreign exchange sales and settlements and options. Second, non-banking foreign-related receipts and payments continued to record net inflows. In the month, non-banking sectors including firms and individuals registered a surplus of USD 9.6 billion in foreign-related receipts and payments, up by 5% month-on-month. Third, China's foreign exchange reserves remained generally stable, with changes in size being a result of valuation factors like exchange rate conversion and asset price changes. Fourth, the RMB exchange rate fluctuated in two ways within the reasonable range and its expectations remained stable.
China's foreign exchange market has become more rational, systematic and mature, with cross-border capital flows through major channels staying generally stable. On one hand, players' desire to settle and sell foreign exchange remained stable. In February, the settlement ratio, a measure of the desire to settle foreign exchange or the ratio of customers' selling foreign exchange to banks to their foreign-related foreign exchange receipts, hit 59%, up by 5 percentage points year-on-year; the sales ratio, a measure of the desire to buy foreign exchange, or the ratio of customers' buying of foreign exchange from banks to their foreign-related foreign exchange payments, was 62%, down by 3 percentage points year-on-year. On the other hand, foreign exchange sales and settlements and foreign-related receipts and payments under trade in goods and direct investment remained in surplus in February; and foreign investors increased their net holdings of domestic bonds by USD 14 billion, compared with a net increase of USD 1.4 billion in January.
For the moment, epidemic prevention and control is gaining momentum, businesses are reopening in a systematic way, and policy measures to keep foreign trade and investment stable have been introduced one after another in China, suggesting the fundamentals sustaining long-term economic growth and the aspiration for development have not been changed. Moreover, China is opening its markets wider to the outside, keeps improving its business environment, and further internationalizes the capital market, with its RMB assets highly attractive in the globe, thus laying a solid foundation for the stability of China's foreign exchange market.
