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- Index number:
- 000014453-2014-00225
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- Dispatch date:
- 2014-08-18
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- Publish organization:
- State Administration of Foreign Exchange
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- Exchange Reference number：
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- Name：
- “Foreign Exchange Receipts and Payments during the First Half of 2014” Press Conference Transcript
· Hu Kaihong:
Good morning, ladies and gentlemen. Welcome to the press conference of the Information Office of the State Council. Mr. Guan Tao, director of the Balance of Payments Department in the State Administration of Foreign Exchange (SAFE), has been invited to unveil data on foreign exchange receipts and payments during the first half of 2014 and to answer your questions. Now, let us welcome Director Guan.
July 23, 2014, 09:37:09
·Guan Tao:
Good morning, ladies and gentlemen. Welcome to today's press conference. I am delighted to meet you again. Today I am going to release the data on the foreign exchange receipts and payments during the first half of 2014 and to answer your questions on behalf of the SAFE.
July 23, 2014, 09:52:17
·Guan Tao:
In the first half of 2014, the global economy grew slowly, the economic recovery in the developed and emerging economies remained obviously imbalanced, and the monetary policies of the major economies were polarized. In the meantime, growth of the Chinese economy was stable. The economic restructuring progressed but maintained stability and enhancement of the economic transformation and upgrading was stable. Based on the philosophy of seeking progress while maintaining stability and instituting reforms and innovations, the SAFE has persistently improved the capability of foreign exchange administration to serve the real economy. Overall, during this period China's cross-border capital flows were basically balanced amid oscillations.
Banks settled foreign exchange in the amount of RMB 5.92 trillion (USD 964.5 billion) and sold foreign exchange in the amount of RMB 4.77 trillion (USD 776.3 billion) during the first half of the year, with a surplus of RMB 1.15 trillion (USD 188.3 billion). Meanwhile, according to the data on foreign-related receipts and payments through banks, banks registered cumulative foreign-related income in the amount of RMB 10.03 trillion (USD 1.63 trillion) and made external payments in the amount of RMB 9.50 trillion (USD 1.55 trillion) on behalf of clients, with a surplus of RMB 528.9 billion (USD 86.2 billion),
July 23, 2014, 09:52:51
·Guan Tao:
Currently China's foreign exchange receipts and payments are characterized by the following:
First, China has witnessed net inflows of cross-border capital. In the first half of the year, after adjustments for foreign exchange rate factors (the same below), the foreign exchange settled by banks was up 6 percent year on year and the foreign exchange sold by banks was up 0.4 percent year on year, representing an increase in the surplus of 36 percent; the foreign-related income received via the banks was up 15 percent year on year, and external payments made through the banks were up 20 percent year on year, representing a decrease in the surplus of 31 percent..
Second, the imbalance between supply and demand of foreign exchange has been significantly eased. According to the data on foreign-related receipts and payments through the banks, the surplus in foreign exchange settled and sold by banks stood at USD 159.2 billion in the first quarter, up 57 percent year on year, and stood at USD 29 billion in the second quarter, down 21 percent year on year or 82 percent quarter on quarter. The surplus in foreign-related receipts and payments amounted to USD 45.5 billion in the first quarter, down 57 percent year on year, and amounted to USD 40.7 billion in the second quarter, up 122 percent year on year or down 10 percent quarter on quarter.
July 23, 2014, 09:53:48
·Guan Tao:
Third, the motivation among market players to settle foreign exchange has been weakened while their willingness to buy foreign exchange has been strengthened. Foreign exchange settled via banks, which measures the willingness of enterprises and individuals to settle foreign exchange as a percentage of the foreign-related foreign exchange income (or the foreign exchange settlement rate), was on the decline, down from 77 percent in the first quarter to 68 percent in the second quarter; foreign exchange sold via banks, which measures the motivation to buy foreign exchange as a percentage of the foreign-related foreign exchange payments (or the foreign exchange sales rate), was on the rise, up from 61 percent in the first quarter to 69 percent in the second quarter.
Fourth, forward foreign exchange settlements and sales have changed from a surplus to a deficit, while the balance of undue net forward foreign exchange settled changed from an increase to a decrease. Forward contracts for foreign exchange settlements and sales achieved a monthly average surplus of USD 24 billion during the first two months, and dropped to USD 1.7 billion from March to May, experiencing an average monthly deficit of USD 2.7 billion in June. With the adjustment in the performance of forward contracts for foreign exchange settlements and sales, the undue settled net forward foreign exchange increased by a cumulative USD 15.2 billion in January and February, and underwent a correction during the four following months from March to June, dropping USD 36.1 billion on accumulative basis, thus spurring banks to increase their foreign exchange position. At the end of June, the balance of undue settled net forward foreign exchange reached USD 31.8 billion, the lowest since September 2013. In the second quarter, the combined surplus of foreign exchange settled and sold by banks and the balance of undue settled net forward foreign exchange combined to a surplus of USD 2.5 billion, much lower than the surplus of USD 164.9 billion during the previous quarter, indicating that the supply and demand for foreign exchange in the retail banking market for spot and forward foreign exchange were voluntarily tending to be balanced.
July 23, 2014, 09:55:06
·Guan Tao:
These are the major statistical data I am going to disclose regarding foreign exchange receipts and payments during the first half of the year. You can find related data on the SAFE's official Website.
Next, I would like to answer your questions on these issues.
July 23, 2014, 09:57:47
·Hu Kaihong:
Thank you, Director Guan. Now please ask your questions.
July 23, 2014, 09:58:09
·Journalist from CCTV:
The Customs data show that the trade surplus during the second quarter increased against the first quarter, while the surplus in foreign exchange settled and sold by banks dropped significantly. Does this mean that with respect to China’s cross-border capital flight is serious? What are your thoughts about cross-border capital flows in the future? Furthermore, China's foreign exchange reserves are nearing USD 4 trillion; I am wondering how these reserves are invested and managed.
July 23, 2014, 10:00:20
·Guan Tao:
Thank you for your questions. I'd like to answer them according to the following: First, China's foreign exchange receipts and payments did fluctuate markedly in the first half of the year. Customs statistics show that China witnessed a trade surplus of USD 16.9 billion during the first quarter. The statistics from the Ministry of Commerce reveal that China achieved a net inflow of USD 11.7 billion in cross-border direct investments during the first quarter, excluding net inflows of cross-border direct investments by financial institutions, or the balance between foreign capital actually utilized and outbound direct investments. The combined surpluses of these trading and investment activities associated with the real economy amounted to USD 28.6 billion. In the meantime, banks witnessed a surplus of USD 159.2 billion in the foreign exchange that they settled and sold, which was way in excess of USD 28.6 billion, suggesting that China was under heavy pressure from the net inflows of cross-border capital at the beginning of the year. In the second quarter, China's trade surplus was USD 86 billion and net inflows of direct investments were USD 8.3 billion, which combined came to USD 94.3 billion, up 230 percent from the first quarter, indicating that the trade and investment surpluses associated with real economic activities had rebounded significantly during the period. But at the same time, the surplus in foreign exchange settled and sold by banks reached USD 29 billion, down 8 percent quarter on quarter. Moreover, this surplus was far lower than USD 94.3 billion, revealing that during the period China was under pressure due to the outflow of cross-border capital.
July 23, 2014, 10:00:57
·Guan Tao:
Second, such changes are explainable. It indicates that as bidirectional fluctuations in the RMB exchange rate intensify amid many uncertainties and instabilities both at home and abroad, institutions like domestic companies have adjusted some of their behavior in terms of the receipts and payments of foreign exchange. First, their willingness to hold foreign exchange rather than to settle foreign exchange has been strengthened. Domestic foreign exchange deposits in the second quarter increased by USD 86.3 billion, or 104 percent, from the first quarter. Second, the banks’ willingness to buy foreign exchange has been enhanced while their motivation to borrow foreign exchange loans has been weakened. The balance of the domestic banks' foreign exchange loans decreased by USD 2.3 billion in the second quarter, compared with an increase of USD 62.6 billion in the first quarter. This comparison indicates that significant changes have occurred. Third, since the RMB exchange rate began bidirectional fluctuations in mid-February at a remarkably higher rate, the number of domestic enterprises contracting for forward foreign exchange settlements has decreased, while the number of domestic enterprises contracting for forward foreign exchange purchases has risen. The monthly average of forward foreign exchange settled from March to June was down 49 percent from January to February, while that of foreign exchange purchased was up 14 percent, thus leading to a significant decrease in the surplus in forward foreign exchange settled and sold by banks to customers and eventually leading to a deficit in June. As substantial preliminary forward foreign exchange contracts matured and were performed, the balance between the banks' undue forward foreign exchange settled and sold changed, leading to an increase in the banks’ foreign exchange position. As I have just now unveiled, the balance of undue net forward foreign exchange settled fell significantly from March to June, offsetting the increase in the balance of undue net forward foreign exchange settled during the first six months, which was due to the increase in the surplus in forward foreign exchange settled and sold. This also led to a remarkable change in the relationship between supply and demand in the foreign exchange market during the same period.
July 23, 2014, 10:03:15
·Guan Tao:
In the second quarter, banks registered a surplus of USD 29 billion in the spot foreign exchange that they settled and sold. Allowing for the impact from the increase in the banks’ foreign exchange position due to the decrease in the balance of net forward foreign exchange settled in the forward market, the monthly supply and demand of foreign exchange were basically balanced during the second quarter. Based on the combined spot and forward foreign exchange, banks reported a surplus of only USD 3.8 billion in April, a deficit of USD 3.5 billion in May, and a surplus of USD 2.2 billion in June, indicating that both the surplus and the deficit were very small. With forward factors taken into consideration, banks recorded a surplus of only USD 2.5 billion in the second quarter. As I have just now disclosed, in the second quarter the supply and demand for foreign exchange were roughly balanced.
Third, such a change is positive. Why? First, the RMB exchange rate is now going through bidirectional fluctuations, not trend adjustments. Such fluctuations have not led to consistent and strong expectations of a RMB depreciation. In fact, since China's economic conditions improved in May and June, the RMB exchange rate, trading price, and standard price have rebounded to a certain extent. In particular, we have noted that there are two prices since RMB transactions are carried out both at home and abroad and the difference between these two prices also can reflect the degree of market acceptance of the exchange rate. The daily average difference between the domestic trading price and the overseas trading price of the RMB against the USD was 169 basis points in the first quarter and it was reduced significantly to 37 basis points in the second quarter, which was far lower than the 61 basis points in 2012 when the supply and demand of foreign exchange struck a balance. This indicates that the price was widely recognized and accepted by the market and it also reflects a situation of market clearing.
July 23, 2014, 10:14:30
·Guan Tao:
Second, compared with the first quarter, banks registered a low surplus in foreign exchange settled and sold in the second quarter, but the foreign exchange settled and sold on a monthly basis was still in surplus. In the first half of the year, the combined trade surplus and the net inflow of direct investments amounted to USD 122.8 billion, while the surplus in foreign exchange settled and sold by banks reached a cumulative USD 188.3 billion, which was higher than the former, indicating that during the period China was under inflow pressures. This can be described as a pendulum effect. The pendulum swung to the right at the beginning of the year, indicating high inflows. In the second quarter, despite the outflow pressures, the pendulum remained on the right side, suggesting that as a whole outflows remained lower than inflows during the period.
Third, the change is an expected normal adjustment. We know that the heavy inflow pressures at the beginning of the year were primarily because the RMB exchange rate was high while the exchange rates of overseas foreign currencies were low, and the RMB exchange rate had been unilaterally appreciating for a long time, with a low fluctuation rate. Under such circumstances, carry trade was quite resilient, leading to substantial capital inflows. According to the BOP data for the first quarter, the current account surplus was only USD 7 billion whereas the capital account surplus was USD 94 billion, indicating that foreign exchange reserves increased by more than USD 100 billion during the period, 90 percent of which was from inflows under the capital account. However, after the RMB began bidirectional fluctuations in the second quarter, institutions such as domestic enterprises have adjusted their behavior in terms of receipts and payments of foreign exchange, decreasing settlements and increasing purchases of foreign exchange, either spot or forward, thus leading to a change in the relationship between the supply and demand of foreign exchange and ultimately balancing supply and demand. This balance means China's overall BOP has improved. As preliminarily projected, the current account surplus may increase further but net inflows under the capital account will decline significantly or may even become a deficit. This will not change the equilibrium in the BOP but it is a change that we expect. It is not an unexpected impact on the market, but an expected control target.
July 23, 2014, 10:22:42
·Guan Tao:
Fourth, as for China's cross-border capital flows in the near future, we believe the flows will continue to oscillate during the second half of the year. China's economy has stabilized, which will be favorable for strengthening market confidence. Foreign trade has also begun to rebound. There will continue to be an interest rate spread between China and other countries. All of these factors will lead to capital inflow pressures. However, it should be noted that China faces some uncertainties since at present its economy is going through three phases at the same time, and many instabilities, such as in the monetary policies of the major economies, are being adjusted. Overall, the RMB exchange rate is balanced and rational. Therefore, the bidirectional fluctuations of cross-border capital flows will become a new normal. Domestic market players have been warned that they should adapt to this new normal, adjust their financial management strategies, and change their traditional one-dimensional thinking to bidirectional thinking, to effectively manage the risks associated with the bidirectional fluctuations of capital and the exchange rate.
The recent online interview reported that China's foreign exchange reserves are operated and managed based on the principle of ensuring safety, liquidity, and profitability, thus effectively achieving the goal of retaining and increasing the value of the foreign exchange reserve assets. The operating income from the foreign exchange reserves in the areas of investment has exceeded the local inflation levels, ensuring an increase in the value realized of the foreign exchange reserves.
July 23, 2014, 10:31:14
·Journalist from the People's Daily:
Premier Li Keqiang said on his recent overseas tour that China's mounting foreign exchange reserves were actually a heavy burden on the country. How do you understand this, and how should this burden be dealt with? Thank you.
July 23, 2014, 10:34:17
·Guan Tao:
In my opinion, an accumulation of foreign exchange reserves is beneficial as it enhances China's strength, improves its capability to fend off external impacts, strengthens its international solvency, and increases its international clout. But it also has some adverse effects. As the foreign exchange reserves increase significantly, the central bank has to launch a large amount of base currencies, which may lead to inflationary pressures as well as to upward pressures on asset prices. Massive foreign exchange reserves will also be more difficult to operate and manage. With excessive foreign exchange, China may have to face great challenges in the unstable international financial market and in the operation and management of foreign exchange. Huge foreign exchange reserves also will likely draw much concern from the international community and trigger trade or investment frictions. The increase in foreign exchange reserves has both pros and cons, which should be weighed. At the beginning when foreign exchange is in shortage, an increase in foreign exchange reserves will be beneficial, but as the reserves reach a certain level, an increase in the foreign exchange reserves will have a more negative influence, so we should actively deal with this.
As we are doing, we should address these challenges in two respects: first, controlling the flows. We should continue to be committed to promoting an equilibrium in the BOP to strike a more stable trade balance. While encouraging the use of foreign capital, we need to encourage outbound investments. We also should develop the foreign exchange market by improving the RMB exchange rate formation mechanism to further utilize the decisive role of the market in allocating foreign exchange resources. As the BOP reaches an equilibrium, efforts should be made to slow down the increase in foreign exchange reserves, thus effectively controlling the adverse effects. Furthermore, we should activate stock assets by innovating the channels and ways to use the existing foreign exchange reserve assets to improve efficiency in the utilization of the foreign exchange reserve resources. We have actively done this in recent years.
July 23, 2014, 10:34:56
·Journalist from the Economic Daily:
The SAFE has recently proposed that foreign exchange options should be developed and exchange risk mitigation tools should be increased to support the growth of foreign trade. But in reality, there could be arbitrage using foreign exchange options. My question is how will regulators guard against speculation by banks and enterprises using foreign exchange derivatives, and what are their suggestions for enterprises to mitigate risks during the marketization of the RMB exchange rate. Thank you.
July 23, 2014, 10:40:34
·Guan Tao:
The SAFE's stance on this question is based on two factors. On the one hand, it has been vigorously supporting and encouraging enterprises to engage in rational hedging activities for their real trading and investment activities, while the purpose of developing the foreign exchange market is also to support enterprises to effectively manage exchange risks. On the other hand, the SAFE does not support, and even prohibits, speculation and arbitrage by enterprises, especially through the structuring of trade or the counterfeiting of documents.
To guide market players to accurately use exchange risk mitigation tools, the SAFE has been persistently following the following principles: first, developing the foreign exchange market step by step. To serve the real economy, efforts shall be made to gradually develop foreign exchange products that are really needed in the market, such as from simple to complex products and from basic to derivative products, based on the banks' abilities to manage risks and pricing, and the enterprises' capabilities to identify risks and their affordability. Second, guiding banks to carry out careful operations. To serve the real trade, constant efforts shall be made to improve regulation of foreign exchange derivatives and to guide banks to implement regulatory requirements in their internal operations based on the operating principles of "understanding your customers, understanding your business, and carrying out due diligence investigations," turning the "asked to do" attitude to the "I will do" attitude, thus further arousing the banks' enthusiasm and initiatives in verifying the truth of the relevant businesses and their compliance with the law, while the SAFE shall focus on intensifying interim and ex-post regulation on banks. Third, enhancing risk education for enterprises. The SAFE shall constantly educate enterprises and guide them to develop an accurate awareness of the exchange risks and an accurate understanding of the exchange risk mitigation tools, and how to conduct a proper hedging of exchange rate exposures, while making sure enterprises do not deviate from their primary business but carry out their business based on reality.
July 23, 2014, 10:41:31
·Guan Tao:
How enterprises prudentially use foreign exchange derivatives to manage exchange risks is an experience-based process that requires learning from doing. There are some tips for enterprises for the use of foreign exchange derivatives based on the lessons from the development of the derivatives markets both at home and abroad: first, enterprises should adapt to the new normal of bidirectional fluctuations of the RMB exchange rate by changing their linear and unilateral thinking, shifting from merely managing risks associated with a unilateral RMB appreciation to comprehensively managing risks from the RMB bidirectional fluctuations, and focus on their main business by changing the uncertainties of bidirectional fluctuations into certainties through hedging activities. Second, enterprises should understand their deals and not make unfamiliar deals. They should assess the value of derivatives and determine the level of risk limitations before conducting deals. Third, the financial departments of enterprises should not function as profit centers but should regard derivative transactions as a tool to lock up risks, not a tool to make profits. Fourth, enterprises should properly conduct hedging activities as excessive hedging is a form of speculation and can be risky.
July 23, 2014, 10:55:01
·Journalist from China News Service:
My question is about China's external debt. A recent research report by the Bank for International Settlements (BIS) states that China has recently seen rapid growth in her external debt, of which short-term external debt constitutes a large part. The BIS has indicated concern about the size of China's external debt. What do you think about this? Thank you.
July 23, 2014, 11:05:32
·Guan Tao:
We too have noticed this report. This issue is highlighted in the BIS's latest annual report. We should pay attention to this and also analyze it rationally. Our judgment is based on two points: the macro debt is secure while individual debt risks require more attention. First, on the macro level, China's external debt risks are basically within control, suggesting its debt security is guaranteed. Recent statistics show that the balance of China's external debt was USD 883.9 billion at the end of this March, 1.3 times higher than that at the end of 2008. The balance of short-term external debt was USD 690.8 billion, 2.1 times higher than that at the end of 2008. Given this, short-term external debt grew faster than overall external debt, indicating that since the global financial crisis the growth of the short-term external debt was the primary source for the growth of China's overall external debt. As of the end of March, the short-term external debt accounted for 78 percent of overall external debt, which was 20 percentage points higher than that at the end of 2008 and exceeded the 25 percent international warning line. That is why the BIS warned of the risks associated with China's short-term external debt. However, in addition to the short-term external debt there are many other indicators to measure a country's debt security. Other indicators show that China's overall external debt is secure. China is also below the warning line with respect to traditional debt security indicators, such as the foreign debt ratio, liability ratio, and debt servicing ratio. Moreover, the SAFE has paid much attention to the growth of the short-term external debt in recent years, prudentially controlling the allocation of quotas on the short-term external debt, and has made special efforts to administer and clamp down upon fake trade financing without a real trade background. The SAFE will continue to enhance and improve itsmonitoring of external debt statistics and actively build management systems for the external debt and capital flows under a framework of macro-prudential management to guard against the relevant risks. This is our basic judgment regarding China's overall external debt, which on the whole is secure.
July 23, 2014, 11:06:26
·Guan Tao:
Macro debt security cannot simply substitute for micro debt security and relevant market players should continue to watch out for individual debt risks. It has been noted in its annual report that the BIS underscores another risk, that is, "excessive risk-taking by financial institutions," amid low interest rates throughout the world and low fluctuation rates in the market, should be guarded against, which can serve as a reference for China. A key reason behind the rapid growth in China's external debt in recent years is the QE monetary policies adopted by the major economies, which led to low interest rates of the major currencies worldwide and relatively high interest rates of the RMB, while the RMB exchange rate has long been appreciating unilaterally, with a low fluctuation rate. Under this circumstance, most domestic enterprises introduced "debt dollarization." They borrowed foreign exchange rather than bought foreign exchange when they had to make outbound payments, thus incurring a huge debt in dollars. Such enterprises must pay close attention to debt risks. They should rationally conduct external debt financing based on their real production and operation situations and guard against bidirectional fluctuation risks associated with cross-border capital and the RMB exchange rate to avoid problems of foreign exchange liquidity or exchange losses in the future. The macro risks of China’s external debt are under control, which means that foreign reserves can be used to guard against systemic debt risks when the government becomes the lender of last resort. However, individuals should deal with the risks associated with debt liquidity and security on their own and not count on implicit guarantees like the rigid honoring of the external debt. To sum up, on the whole China's external debt is secure, while the relevant individuals should continue to pay close attention to debt security. Thank you.
July 23, 2014, 11:17:48
·Journalist from Dragon TV:
It was reported recently that the Bank of China in 2011 introduced a project entitled "You Hui Tong" that allows RMB transferred overseas to be converted into foreign currency with no limitation on the amount of the RMB, thus dodging China's foreign exchange regulations. How will the SAFE position such a foreign-related financial project? Is it legitimate or a grey area? Does the SAFE have some new measures to meet current demands as more domestic funds will be provided overseas and more investments will be made overseas?
July 23, 2014, 11:30:48
·Guan Tao:
Regarding your second question, I'd like to say that efforts will be made to accelerate the RMB capital account convertibility, gradually expand channels for capital outflows, and encourage people to hold more foreign exchange and individuals to make external investments, which are the pre-set directions of the reform. When and how to implement these measures shall be based on the overall plan and arrangements, which are currently being researched. Since the "You Hui Tong" issue is not the SAFE's responsibility and has nothing to do with today's press conference, I will not make any comment. Thank you.
July 23, 2014, 11:32:31
·Journalist from Xinhua News Agency:
I have two questions about the foreign exchange data. First, are the data on the outstanding foreign exchange funds released yesterday in line with the pendulum-like movement of the BOP in the first half of the year, as you have just mentioned? Second, if the deficit of trade in services under the current account that is increasing on a yearly or even a quarterly basis continues, will the current account surplus turn into a deficit in the future? Will China have
a current account deficit? Does the SAFE have any measures to sustain a BOP equilibrium in the future? Thank you.
July 23, 2014, 11:37:15
·Guan Tao:
The changes in the data on the outstanding foreign exchange funds of financial institutions released by the People's Bank of China (PBC) are consistent with the analysis of the foreign exchange receipts and payments data I have just now released, indicating significant fluctuations. However, as the definition of outstanding foreign exchange funds disclosed by the PBC is different from the definition of foreign exchange settlement and sales, the two data cannot fully match each other, and you need to make inquiries with the department releasing the former data for further details.
July 23, 2014, 11:39:15
·Guan Tao:
Regarding your second question, I would say that the deficit in trade in services has widened. In the mid-1990s when China began to conduct trade in services, it saw a deficit, and the deficit reached USD 124.5 billion in 2013, which is rather high. This issue should be viewed in two respects: on the one hand, the deficit in trade in services reflects the objective situation in the current stage of economic development in China. As China's service sector is less competitive in the global market, there is a deficit in trade in services. On the other hand, with the increase in their income in recent years, the consumption power of Chinese residents has strengthened and many residents have begun to travel and study abroad, all of which are calculated under the trade in services. But the deficit in trade in services is favorable for promoting the BOP equilibrium, which means that not every item under the current account, including trade in goods, trade in services, the earnings account, and current transfers, must be in surplus, and there are surely surpluses and deficits. As I have mentioned, China saw a surplus of USD 124.5 billion in trade in services in 2013, which accounted for -1.4 percent of GDP that year, while the surplus in trade in goods, as defined in the BOP, accounted for 3.9 percent of GDP, so taking into consideration both trade in goods and trade in services, the trade surplus accounted for 2.6 percent of GDP, which was very helpful to balance the current account in China. The current account surplus accounted for 2.0 percent of GDP in the year, which was within the rational range as recognized by the international community. To sum up, the deficit in trade in services has played a positive role in promoting the BOP equilibrium.
July 23, 2014, 11:42:21
·Guan Tao:
When looking into China's future current account balance, we should not merely focus on trade in services, which is just one item under the current account. Rather, we should focus on the economic fundamentals. First, the situation of economic restructuring. Efforts should be made to look at the level of transformation of the economic development pattern and the degree of the shift from being investment- and export-driven to being consumption-, investment-, and export-driven. Second, changes in the age structure of the population. What is being heatedly discussed now is whether China has reached the Lewis turning point with a decreasing demographic bonus, which may have a negative impact on China's current account. Third, changes in productivity. If productivity increases with an appreciation of the RMB exchange rate, the current account may continue to sustain a surplus. But if productivity does not grow with an appreciation of the RMB exchange rate, the current account may be adversely affected. No matter whether the current account sustains a surplus or a deficit, it will reach a balance so long as the surplus or the deficit is within the rational range. We believe that the current account will be basically balanced in the future. But others have different findings, some arguing for a surplus and some arguing against a surplus, and we are open to suggestions.
July 23, 2014, 11:50:10
·Journalist from the International Business Daily:
The data you have released just now show that China's FDI growth has slowed down. What do you think about that for the second half of the year? Are you going to take measures to keep it stable? Thank you.
July 23, 2014, 11:58:17
·Guan Tao:
Good question. But I recommend you inquire of the other relevant authorities about how to use foreign capital. They are more authoritative. Thank you.
2014-07-23 11:59:28
July 23, 2014, 11:59:28
·Hu Kaihong:
Thank you for attending today's press conference.
July 23, 2014, 12:01:56
(The original text was released at www.china.com.cn )
