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- Index number:
- 000014453-2012-00144
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- Dispatch date:
- 2012-05-15
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- Publish organization:
- State Administration of Foreign Exchange
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- Exchange Reference number:
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- Name:
- Responses by an Official in the Relevant Department of the SAFE to Questions Raised by Journalists on the Current Foreign Exchange Situation
Question: At the end of last year, against the background of the more serious international financial turmoil, in the fourth quarter China experienced capital outflows, with a current account surplus but a capital account deficit in terms of the balance of payments. What is the situation this year?
Answer: In the first quarter of this year, the situation of the fourth quarter of last year, whereby China had a current account surplus but a capital account deficit in terms of the balance of payments, was changed, and there was a return of the “twin surplus,” i.e., there was a current account surplus as well as a capital account surplus. However, the status of the overall balance of payments more closely approached equilibrium, mainly embodied in the following respects: First, the current account surplus was narrowed, accounting for a lesser proportion of GDP. According to preliminary estimates, the current account surplus in the first quarter was USD 24.7 billion, a decrease of 14 percent compared with that during the same period of last year, and the proportion of the current account surplus to GDP in the same quarter was 1.4 percent, a decrease of 1.4 percent compared with last year. Second, once again there was a capital account surplus. The size of net inflows of capital (including errors and omissions, the same below) in the first quarter was USD 49.9 billion, a decrease of 56 percent compared with the same period of last year, whereas there was a deficit of USD 48.1 billion in the fourth quarter of 2011. Third, the trend of increasing foreign exchange reserves further slowed down. After adjusting for the change in the exchange rate and asset prices, foreign exchange reserves calculated on the basis of the coverage of the balance of payments in the first quarter increased by USD 74.8 billion (including foreign exchange reserve earnings in the current period), a 46 percent decrease in the increment compared with the same period of last year.
In other words, although since the beginning of this year net inflows of foreign exchange rebounded somewhat compared with the end of last year, there were still on a downward trend compared with the same period of last year. This is consistent with our earlier basic judgment that
Question: According to data published by the People’s Bank of
China
(PBC), there was a new increase of USD 123.8 billion in foreign exchange reserves in the first quarter of this year. Does this mean that
China
will again face pressures of massive capital inflows?
Answer: This does not mean that
Question: The PBC announced that the range of fluctuations in the RMB exchange rate against the USD would be expanded as of April 16. What effect will this have on
China
’s foreign exchange situation?
Answer: This is a major move to further deepen the reform of the RMB exchange rate formation mechanism under the circumstances that
Overall, deepening the reform of the RMB exchange rate mechanism is conducive to allowing market supply and demand play a larger role in the formation of the exchange rate and allowing the RMB exchange rate to approach a reasonable equilibrium level, promoting China’s balance of payments status to develop toward an equilibrium, improving the self-balancing capability of the foreign exchange market, and slowing down the accumulation of foreign exchange reserves.