The State Administration of Foreign Exchange (SAFE) has recently released the data on foreign exchange settlement and sales by banks and foreign-related receipts and payments by banks for customers for May 2020. Wang Chunying, press spokesperson and chief economist of the SAFE, answered media questions on relevant issues.
Q: Could you brief us on the changes in foreign exchange receipts and payments for May 2020?
A：China's foreign exchange market remained stable in May, with supply and demand at basic equilibrium. First, China continued to post a surplus in foreign exchange settlement and sales by banks, which was US$ 23.8 billion, up by 61% month on month. With transactions of foreign institutions in the interbank foreign exchange market and changes in banks' foreign exchange position considered, foreign exchange supply and demand stayed generally stable in May. Second, non-banking sectors continued to record a slight net inflow in cross-border capital, which amounted to US$ 5.7 billion. Third, foreign exchange reserves rose slightly. The amount reached US$ 3.1017 trillion by the end of May, up by US$ 10.2 billion month on month.
Foreign exchange transactions by market players were rational and orderly, and cross-border capital flows through major channels stayed generally stable. On the one hand, market players' desire to settle foreign exchange strengthened, but their desire to purchase foreign exchange weakened. And market expectations of foreign exchange rate remained steady on the whole. In May, the foreign exchange settlement ratio, a measure of market players' desire to settle foreign exchange, or the ratio of sales of foreign exchange by customers to banks to the customers' foreign-related foreign exchange receipts, was 73%, representing a year-on-year increase of three percentage points. The foreign exchange sales ratio, a measure of market players' desire to purchase foreign exchange, or the ratio of purchase of foreign exchange by customers from banks to the customers' foreign-related foreign exchange payments, was 64%, down by four percentage points year on year. On the other hand, cross-border receipts and payments and foreign exchange settlement and sales under trade in goods registered rising surpluses, and more foreign capital flowed into the securities market. In May, the surplus in cross-border receipts and payments under trade in goods grew by 28% year on year, and the surplus in foreign exchange settlement and sales went up by 82% year on year. Foreign investors increased their net holdings of domestic bonds and listed shares of US$ 23.6 billion combined, up by 25% month on month. Particularly, their net holdings of domestic bonds shot up by US$ 19.4 billion or an increase of 106%.
Currently, the COVID-19 pandemic and the world economic conditions are becoming more challenging and complicated, and external uncertainties are increasing. Notwithstanding, China has been committed to driving high-quality growth through reform and opening up, and therefore, the foreign exchange market has become more resilient and the renminbi assets have shown great attractiveness. Looking ahead, as the economic structure continues to improve, and the regional layout is optimized, work and production are resumed, businesses and markets are reopened, and more positive changes are yielded, all this will provide fundamental support for the stable operations of the foreign exchange market. Meanwhile, as the foreign exchange market is maturing, and the risk prevention mechanism improves, China's foreign exchange reserves will stay stable, enabling China to respond to various external shocks and challenges.