The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on foreign exchange settlement and sales by banks and foreign-related receipts and payments by banks for customers for July 2020. The SAFE deputy administrator and press spokesperson Wang Chunying answered media questions on foreign exchange receipts and payments for July 2020.
Q: Could you brief us on the changes in China's foreign exchange receipts and payments for July 2020?
A: China’s foreign exchange market remained generally stable in July, with basically balanced supply and demand. First, banks posted a deficit of US$ 2.5 billion in foreign exchange settlement and sales, mainly attributed to the climax of seasonal dividend payouts. But the size of the deficit narrowed by 59% year on year. Given foreign exchange trading of foreign institutions in the inter-bank foreign exchange market and changes in banks’ foreign exchange positions, the supply and demand of the foreign exchange market was generally balanced. Second, non-banking sectors posted a basical balance in foreign-related receipts and payments. Non-banking sectors like enterprises and individuals recorded a deficit of US$ 2 billion in foreign-related receipts and payments in July. Third, the foreign exchange reserves rose steadily. At the end of July, China's foreign exchange reserves amounted to US$ 3.1544 trillion, up by US$ 42.1 billion month on month, experiencing positive growth for four consecutive months.
The transactions of market players were rational and orderly, and capital flows through major channels remained generally stable. First, market players were active to settle foreign exchange while their desire to purchase foreign exchange remained stable. In July, the settlement rate that measures customers' desire to settle their foreign exchange, or the ratio of foreign exchange customers sold to banks to their receipts of foreign exchange from foreign-related transactions, was 64%, up by 7 percentage points month on month; the foreign exchange sales rate that measures customers' desire to buy foreign exchange, or the ratio of foreign exchange bought by customers from banks to their foreign-related foreign exchange payments, stood at 66%, consistent with a month earlier. Second, cross-border capital inflows through major channels grew steadily. In July, the surplus in cross-border receipts and payments under trade in goods registered a year-on-year increase of 12%, foreign holdings of domestic listed shares and bonds grew 1.4 times net year on year, and the capital flows related to FDI and ODI remained generally stable.
For now, China has basically contained the epidemic, and its economy has been recovering steadily, laying a solid foundation for the stability of foreign exchange market. Going forward, despite the complex and challenging external environment and considerable destabilizing factors and uncertainties, China’s economy will remain resilient and highly potential. The new development pattern, featured as domination by domestic cycle and mutual promotion between domestic and international cycle, is expected to take shape with a faster pace, which is conducive to providing further support for the sound and steady performance of China’s foreign exchange market.