The State Administration of Foreign Exchange (SAFE) has recently released the Balance of Payments (BOP) for the third quarter and the first three quarters of 2020 as well as the International Investment Position (IIP) as at the end of September 2020. The SAFE deputy administrator and press spokesperson Wang Chunying answered media questions on relevant issues.
Q: Could you brief us on China's balance of payments for the first three quarters of 2020?
A: In the first three quarters, the current account surplus hit US$168.7 billion, with its ratio to GDP reaching 1.6%, which fell within a reasonable and balanced range. Cross-border capital flows remained generally stable, and investment and financing continued to be fairly stable.
First, trade in goods recorded a higher surplus and trade in services registered a narrower deficit. Trade in goods in the Balance of Payments recorded a surplus of US$340.2 billion, up by 12% year on year, mainly driven by the better-than-expected imports and exports under trade in goods. Trade in services registered a deficit of US$116.8 billion, down by 42% year on year, primarily driven by less cross-border trips during COVID-19 outbreak, with deficit in travel narrowing by 46% from the same period last year.
Second, outbound investment and foreign investment in China (excluding reserve assets) were both robust. Inflows and outflows were witnessed under cross-border transactions like direct investment, portfolio investment, deposits and loans. Transactions by foreign investors to hold renminbi assets and by domestic players to allocate global assets were both brisk. In the first three quarters, outbound investment outgrew foreign investment. Assets under the financial account excluding reserve assets grew by US$408 billion net, or an increase of 1.7 times year on year, while external liabilities grew by US$337.6 billion net and became twice that of a year earlier.
Overall, China is the only major economy sustaining positive growth this year, but due to considerable uncertainties in COVID-19 and external environment, the foundation for economic recovery has not been solid enough. China’s balance of payments is expected to remain generally stable and balanced throughout the year.
Q: What would you say about China's international investment position at the end of 2020?
A: By the end of September 2020, China’s international investment position was generally robust. Driven by transactions, changes in asset prices and foreign exchange rate conversion, external financial assets and liabilities both grew and reserve assets remained generally stable.
Firstly, the total size of external financial assets increased. By the end of September 2020, China posted external assets of US$8.1666 trillion, up by 3.9% quarter on quarter. Among this, assets under direct investment were US$2.1643 trillion, gaining 1.9%; assets under portfolio investment were US$772.8 billion, up by 10.3%; assets under other investments including overseas deposits and loans hit US$1.9340 trillion, representing an increase of 8.5%; and reserve assets amounted to US$3.2812 trillion, rising by 1.2%.
Secondly, total external liabilities went up. By the end of September 2020, China recorded external liabilities of US$6.0128 trillion, up by 6.2% quarter on quarter. Among this, liabilities under direct investment were US$3.1068 trillion, an increase of 5.4%; liabilities under portfolio investment were US$1.5069 trillion, up by 9.3%; and liabilities under other investments including deposits and loans absorbed reached US$1.3878 trillion, rising by 4.8%.
