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- Index number:
- 000014453-2016-00461
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- Dispatch date:
- 2016-11-08
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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 for First Half of 2016”Press Conference Transcript
Moderator Xi Yanchun:
Good morning, ladies and gentlemen. Welcome to the press conference of the State Council Information Office. We have organized several press conferences on economic data since the beginning of July. Today we are very glad to have with us Ms. Wang Chunying, press spokesperson and director of the Department of Balance of Payments of the State Administration of Foreign Exchange (SAFE). She will brief us on the foreign exchange receipts and payments for the first half of 2016 and take your questions. Now let me introduce you to Ms. Wang.
2016-07-21 09:47:51
Wang Chunying:
Friends from the press, good morning. Welcome to today's press conference. I would first like to unveil foreign exchange receipts and payments for 2016 and then I will be taking your questions.
In the first half of this year, the global economy was still undergoing profound adjustments, featuring heavy downward pressure and increasingly complex global financial markets; China's economic operation basically met expectations, with stable financial markets and RMB exchange rates. The SAFE continued to promote the foreign exchange administration reform to facilitate trading and investing activities by market players; and on the other hand, it was committed to enhancing monitoring of cross-border capital flows to guard against associated risks. Overall, the pressure on China from cross-border capital outflows was gradually eased in the first half.
2016-07-21 09:51:41
Wang Chunying:
Banks settled foreign exchange of RMB 4.75 trillion (USD 726.7 billion) and sold foreign exchange of RMB 5.88 trillion (USD 900.5 billion) in the first half, with a deficit of RMB 1.13 trillion (USD 173.8 billion). Meanwhile, banks registered cumulative foreign-related income of RMB 8.85 trillion (USD 1.3545 trillion) and made external payment of RMB 9.95 trillion (USD 1.5233 trillion) for their customers, with a deficit of RMB 1.10 trillion (USD 168.8 billion), according to the data on banks' foreign-related receipts and payments for customers.
2016-07-21 09:54:12
Wang Chunying:
China’s foreign exchange receipts and payments for the first half present the following characteristics:
First, banks' foreign exchange settlements and sales, and foreign-related receipts and payments were both in deficit. In the first half, in US dollar terms, the foreign exchange settled by banks was down by 16% year on year, while the foreign exchange sold, down by 7% year on year, leading to a deficit of USD 173.8 billion. Banks' foreign-related receipts for customers went down by 18% year on year, and foreign-related payments made by banks for customers went down by 5%, indicating a deficit of USD 168.8 billion, including a deficit of USD 25.9 billion in the balance of foreign-related foreign exchange receipts and payments.
Second, pressure from cross-border capital outflows was gradually eased. According to banks' foreign exchange sales and settlements data, China posted a deficit of USD 124.8 billion in the first quarter, which plummeted to USD 49 billion in the second quarter. In particular, the monthly deficit dropped from USD 54.4 billion in January to USD 12.5 billion and USD 12.8 billion in May and June respectively. According to the data on banks' foreign-related receipts and payments for customers, China posted a deficit of USD 112.3 billion in the first quarter, which contracted to USD 56.5 billion in the second quarter. In particular, the deficit in banks' foreign–related receipts and payments for customers dropped month-on-month from January to April to USD 20.1 billion, USD 10.5 billion, USD 5.9 billion and USD 2 billion respectively; But the deficit changed into a surplus of USD 200 million and USD 12.5 billion in May and June respectively.
2016-07-21 09:55:19
Wang Chunying:
Third, foreign exchange sales rate dropped, and foreign exchange financing through some channels picked up. The foreign exchange sales rate, the measure of enterprises' motive to buy foreign exchange, or the ratio of foreign exchange customer bought from bank to customer's foreign-related foreign exchange payments, was 80% in the first quarter, and 74% in the second quarter, down by 6 percentage points quarter on quarter. In the first half, the outstanding domestic foreign exchange loans fell by USD 58.3 billion, including declines of USD 35 billion and USD 23.4 billion in the first and second quarters respectively. Further, the balance of cross-border financing for imports such as refinancing and forward L/C dropped by USD 34.9 billion in the first quarter, and by USD 5 billion in the second quarter. In particular, the balance of cross-border financing for imports has picked up for four straight months since March, indicating enterprises' deleveraging of external debt slowed down.
Fourth, the foreign exchange settlement rate rose, indicating market players' willingness to hold foreign exchange was weakened. Foreign exchange sold by customers to banks as a percentage of their foreign-related foreign exchange receipts, or the foreign exchange settlement rate that measures the willingness of companies and individuals to settle foreign exchange, was 59% in the first quarter, and 63% in the second quarter, up by 4 percentage points quarter on quarter. In the first half, the balance of banks' foreign exchange deposits rose by USD 28.8 billion, including an increase of USD 38.6 billion in the first quarter and a fall of USD 9.8 billion in the second quarter. All of this pointed to a weakened desire among individuals and enterprises to hold foreign exchange.
2016-07-21 09:58:27
Wang Chunying:
Fifth, banks registered a drastic decline in the deficit in forward settlements and sales of foreign exchange. In the first half, the number of clients contracting for forward foreign exchange settlement with banks was down by 61% year on year, while that of clients contracting for forward foreign exchange sales with banks was down by 55%, leading to a deficit of USD 37 billion in forward foreign exchange settlements and sales contracted with banks, down by 46% year on year. In particular, the deficit for the first quarter was USD 36.3 billion, and contracted to USD 800 million in the second quarter, indicating an equilibrium between foreign exchange supply and demand in forward markets, and stable expectations of the RMB exchange rate.
These are the major statistical data I want to unveil regarding foreign exchange receipts and payments for the first half. Now I will answer your questions.
2016-07-21 10:01:36
Moderator Xi Yanchun:
We are moving into the Q&A session. Please tell us what news agency you are from before raising your questions. Let's get started.
2016-07-21 10:03:00
Economic Daily:
China's cross-border capital flows have been fluctuating violently these days. Will this be a normal in the foreseeable future?
2016-07-21 10:04:02
Wang Chunying:
As internationally recognized, the Balance of Payments can fully reflect a country's cross-border capital flows. We have published the balance of payments data for the first quarter, and will be disseminating the data for the first half soon.
2016-07-21 10:04:47
Wang Chunying:
China's balance of payments for recent years presents a pattern of surplus under the current account while deficit under the non-reserve capital and financial account. In making analysis, we usually remove reserves from the capital and financial account and observe the non-reserve capital and financial account. If reserves are included and net errors and omissions are not taken into consideration, the surplus under the current account can be offset by the deficit under the capital and financial account.
First of all, the surplus under the current account lays a foundation for China's cross-border capital flows. According to the statistical principle of the balance of payments, the surplus under the current account is actually the basis for China's sustained exports of capital and accumulation of external claims. For example, China's foreign exchange receipts from exports of goods or services need to be used overseas through investments, among others, which will be shown in a deficit under the capital and financial account. Since the 1990s, China has witnessed continued surpluses under the current account. The surplus as a percentage of GDP for the first quarter was 1.6%, which was within the internationally recognized reasonable range, compared with the historical peak of 10% or so.
2016-07-21 10:09:58
Wang Chunying:
Second, the non-reserve financial account is becoming the dominant force in China's cross-border capital flows. The non-reserve financial account reflects NGOs' cross-border capital flows. Around the second quarter of 2014, China witnessed dramatic changes under the non-reserve financial account. Except in a few quarters, China had registered continued surpluses under the non-reserve capital and financial account before 2014. Between 2003 and 2013 in particular, along with a tremendous influx of foreign capital, China reported fast growth in foreign exchange reserves. From 2014 onward, China's non-reserve capital and financial account has remained in deficit, which, however, was not caused by withdrawal of investment by foreign capital, but by the private sector's increasing outward investments for internationalization. In the first quarter, for example, the external financial asset of Chinese enterprises and individuals rose by RMB 109.8 billion, of which more than 50% was ODI. On the other hand, China's external debt fell by USD 13.5 billion, which is favorable for reducing the currency mismatch risk and lowering society's leverage ratio. In the meanwhile, China attracted a net inflow of USD 41.1 billion in FDI, indicating that overseas long-term capital is still optimistic about China.
2016-07-21 10:23:25
Wang Chunying:
Going forward, China's cross-border capital flows will continue to reflect China's economic fundamentals. Along with the domestic economic transformation and upgrades, China's economy will maintain a mid and high growth rate, and the current account dominated by trade in goods will continue to remain in surplus. Meanwhile, China's foreign exchange reserves will remain abundant, and its ability to guard against cross-border capital flow risks will be strong. China will also remain highly attractive to long-term capital. As reform and opening up is pushed forward, domestic enterprises and individuals will become more sensible and reasonable about adjusting the asset and liability structures, which will guide China's cross-border capital flows towards a stable direction. Thank you.
2016-07-21 10:34:19
CCTV:
According to the data you disseminated just now, the pressure from cross-border capital outflows facing China was eased in the first half. Could you tell us why? What would you say about China's cross-border capital flows in the future?
2016-07-21 10:43:18
Wang Chunying:
Thank you for your questions. According to the data I disseminated, the pressure from cross-border capital outflows facing China was indeed eased, which reflected the changes in domestic and overseas market environments.
First, the macro economic and financial environments remained stable. Externally, global financial markets were stable in most part of the first half, except at the beginning of the year and the end of June. The Fed was slow in raising interest rates, with the US Dollar Index falling by 2.6% in the period. Domestically, China's economic operation stayed within a reasonable range, with stable growth in the first quarter continuing in the second quarter, the roles of domestic demand further strengthened, reforms achieving positive progress, and some economic indicators performing well. For example, employment and prices stayed stable, sales grew steadily, and the official PMI fell within the expansion phase in most of the time.
Second, market sentiment remained stable and reasonable, and expectations of RMB depreciation were weakened. As the RMB exchange rate was further marketized, market players had gradually adapted to the new mechanism and expectations of exchange rate had been stabilized. The daily average spread between CNY/CNH against the US dollars was shrinking from January to April, hitting 419, 111, 94 and 80 basis points respectively; the spread rose to 162 basis points in May but fell to 97 basis points in June. In all, the stabilization of market sentiment was a very exciting change.
2016-07-21 10:43:50
Wang Chunying:
Overall, China's cross-border capital flows will remain basically stable in the future. On the one hand, there are many uncertainties in both domestic and foreign environments, which will challenge the stability of China's cross-border capital flows. But on the other hand, there are still many factors that support the stability of China's balance of payments. First, China's economy is operated within a reasonable range, its economic structure is being optimized, and economic growth is high at the global level. Moreover, China's fiscal position is sound, its financial system is robust, and the features of its economy, namely, strong resilience, great potential and broad room to maneuver, remain unchanged. According to the latest forecast issued by the IMF on July 19, the global economic growth will reach 3.1% this year, which is down by 0.1 percentage point from the forecast of April, but China's economic growth will be upped by 0.1 percentage point to 6.6%, the second time the IMF has upgraded its forecast of China's economy since the beginning of this year. Second, the current account remains in surplus, which is within the reasonable range. Third, there is still a gap between the return on assets both at home and abroad. For example, as at the end of this June, the yield of China's treasury bond due in one year was 1.8 percentage points higher than that of the US, and the yield of China's treasury bond due in a decade was 1.2 percentage points higher. Fourth, China still takes the top spot across the world by the balance of its foreign exchange reserves. Further, the global communication and coordination for guarding against risks are being strengthened, which will be favorable for maintaining stable markets.
2016-07-21 10:45:44
China Daily:
Since Britain's exited from the EU, global financial markets have been struggling with heightened fluctuations. I wonder what impact Brexit has had on China's cross-border capital flows, and what moves China will take to guard against relevant risks? Thank you.
2016-07-21 10:48:57
Wang Chunying:
Britain's exit from the EU has attracted wide concerns in society. China has doubled its efforts of highly frequent statistical monitoring and early warning before and after the referendum on Brexit. So far, no significant impact from Brexit has been spotted on China's cross-border capital flows.
First, over the short run, the impact will be chiefly from the fluctuating global markets, but the pressure will be effectively unleashed, hence limited impact on domestic supply and demand. In the wake of the announcement of the Brexit referendum outcome, global financial markets experienced violent volatilities, with the US Dollar Index surging, and risk aversion rose dramatically, and the RMB exchange rate against USD was depreciated, while China's cross-border capital flows and supply and demand remained stable, which indicates that the exchange rate's role in adjusting supply and demand has been strengthened.
2016-07-21 10:49:58
Wang Chunying:
Second, in the mid and long term, impact will be complex and rendered step-by-step, but will not change the stability of China's overall cross-border capital flows. Market evolution and conduction will be under great uncertainties after the Brexit referendum, and may affect the cadence of the Fed's adjustment of its monetary policy, which combined will impact China's cross-border capital flows. For example, if Brexit repeatedly impacts the market, China's cross-border capital flows may be affected by market volatilities, rising risk aversion and strengthened US dollars caused therefrom, but the progress of the Fed's interest rate hikes may slow down due to market volatilities. Further, Brexit's impact on the British and European economies, and then on the trade and investments of China, Britain and Europe will not be felt or lead to dramatic adjustments in the short run, and as a result, its impact on China's cross-border capital flows will not be rendered right away.
2016-07-21 10:51:18
Wang Chunying:
Third, historically, China's cross-border capital flows have withstood external impact in recent years, suggesting a solid foundation for China to sustain stability. From the global financial crisis in 2008 to the European debt crisis in 2011, and to the exit of Fed's QE policy in 2014 and the first interest rate hike in 2015, global financial markets have experienced violent volatilities. China's cross-border capital flows, somewhat affected though, had been re-stabilized after short-term fluctuations, with relevant risks within control, which was closely related to China's sound economic fundamentals, robust external account and abundant foreign exchange reserves. This will hold true for the Britain's exit from the EU. With a robust internal basis, China's cross-border capital flows will remain stable.
To be sure, we will continue to intensify monitoring, assess impacts in real time, and keep refining existing policy programs to guard against risks arising from cross-border capital flows.
2016-07-21 10:59:49
CBN Daily:
According to China's foreign exchange reserves and banks' foreign exchange settlements and sales data, China's cross-border capital outflows are contracting. But in comparison, the depreciation pressure on the RMB exchange rate, especially in May and June, was heightened. This means that the RMB exchange rate depreciation was decoupled with cross-border capital flows, and the amount ran counter to the price of the RMB. Could you tell us why? Is this related to China's foreign exchange administration policy?
2016-07-21 11:04:44
Wang Chunying:
We have noted this too. It is normal that the deficit in foreign exchange sales and settlements contracts, cross-border capital flows drop while the RMB exchange rate changes. In the 8·11 foreign exchange administration reform last year, the People's Bank of China refined the mechanism of the central parity rate of the RMB against the USD, and announced the RMB exchange rate index last December, thereby further improving the formation mechanism that is adjusted based on supply and demand and with reference to a basket of currencies, in a bid to better adapt to market changes. Under the dual impact of the recent changes in supply and demand, and in exchange rates of a basket of currencies, the RMB exchange rate against the US dollar has been depreciated, but remained stable against a basket of other currencies.
The changes in the deficit in foreign exchange sales and settlements are actually subject to many factors. For example, just as mentioned earlier, along with the introduction of the new policies in favor of cross-border investment and financing, many enterprises will consider enhancing overseas financing, and reducing purchases of foreign exchange. Therefore, despite the foreign exchange rate depreciation, the deficit in foreign exchange sales and settlements may not necessarily rise.
2016-07-21 11:09:15
BTV:
We noted that China's foreign exchange reserves rose in March and April, dropped in May and picked up in June. Could you tell us why foreign exchange reserves picked up in June? What's your view on the current levels of China's foreign exchange reserves?
2016-07-21 11:40:00
Wang Chunying:
Four categories of factors will impact the changes in the size of foreign exchange reserves: first, reserve changes caused by the balance of payments transactions, including adjustments by the central bank to balance the supply and demand of foreign exchange, and operating revenues of reserves; Second, price fluctuations of investments with foreign exchange reserves, or price revaluation; Third, exchange rate conversion. Since China's foreign exchange reserves are denominated in US dollars and subject to diversified operations, the changes in the exchange rates of other currencies against the USD may lead to changes in the size of China's foreign exchange reserves; Fourth, as defined by the IMF, foreign exchange reserves used to support going global will be excluded from the entry of foreign exchange reserves in accounting.
As at the end of June 2016, China posted USD 3.2052 trillion in foreign exchange reserves, up by USD 13.4 billion from the end of May, thanks to the rising prices of the assets invested with foreign exchange reserves. Certainly, the recent equilibrium of domestic supply and demand of foreign exchange and reserves income also helped stabilize foreign exchange reserves.
2016-07-21 11:41:40
Wang Chunying:
For the moment, China still takes the first place worldwide by foreign exchange reserves, which are much higher than nearly USD 1.3 trillion in Japan, who ranks No. 2, and USD 600 billion in Switzerland and Saudi Arabia respectively, who rank No. 3 and No. 4. The IMF statistics show that China's foreign exchange reserves accounted for 30% of the world's total as at the end of the first quarter, which was still astonishing.
There are various opinions on the suitable size of foreign exchange reserves, but traditionally, indicators such as imports for 3-6 months or 100% short-term external debt are used for measurement. Overall, measured by the absolute size of foreign exchange reserves or by other adequacy indicators such as the shares of foreign exchange reserves in imports and external debt, China's foreign exchange reserves are abundant, which lays a solid foundation for the government to withstand external impact.
2016-07-21 11:46:02
Wang Chunying:
Going forward, it may be a normal that foreign exchange reserves will fluctuate around the reasonable level. The changes in foreign exchange reserves are the result of macroeconomic operations both at home and abroad. As China is deeply integrated into the world economy, it will face some uncertainties, but there are still many fundamental factors that support the stability of China's balance of payments, such as economic operation within the reasonable range, optimizing economic structure, continued surplus under the current account, and continued inflows of long-term capital. China's cross-border capital will continue to present a pattern of bidirectional fluctuations. By the same token, fluctuations of foreign exchange reserves around the reasonable level may also be a normal.
2016-07-21 11:48:32
Nihon Keizai Shimbun:
This press conference is professional with many data disseminated. Could you give me some materials? Such a data dissemination press conference usually provides materials.
2016-07-21 11:49:43
Moderator Xi Yanchun:
Let me make a clarification. Relevant data were disseminated at the website of the SAFE this morning. The Q&A session is also uploaded in real time. If you have any questions or want more detailed materials, please contact the news department of the SAFE. I am sure they will help you.
2016-07-21 11:52:28
Guangming Daily:
The media has paid close attention to China's loss of the second largest creditor for a while. What's the SAFE's view about such attention?
2016-07-21 11:53:28
Wang Chunying:
I would like to say something more to the previous reporter. We would like to provide some historical data in advance to help you understand. The data disseminated today are being uploaded to the website of the SAFE in real time, where you can also acquire the historical data already disseminated.
2016-07-21 11:54:58
Wang Chunying:
Well, for this question, we should look at the relationship between the Balance of Payments and the International Investment Position. In 2015, China's ranking dropped by net external assets. The net external asset was USD 1.6 trillion in 2015, down by USD 6.3 billion year-on-year. As at the end of 2014, the figure was down by USD 393.2 billion year-on-year. The slump since 2014 was attributable to China's adoption of a new statistical method. The rise or fall in China's net external asset is subject to the financial account transaction under the balance of payments, the increase or decline in China's assets or liabilities arising from outward investment or attraction of capital and the non-transaction changes such as in price and foreign exchange rate.
2016-07-21 11:59:24
Wang Chunying:
Judging from transaction factors, the net external assets under the financial account under the balance of payments rose by USD 311.8 billion in 2014 and 2015 combined, bringing the balance of China's net external assets up by USD 311.8 billion too, rather than bringing it down. This could be explained by the increased outward investments by China, or the significant increase in the non-reserve external assets. In the two years, China registered a net increase of more than USD 800 billion in outward investments. On the other hand, due to the changes in exchange rates and interest rates both at home and abroad, domestic players have voluntarily adjusted their asset and liabilities structures and serviced external debt, and non-residents also reduced their domestic deposits, thus bringing down China's external debt.
2016-07-21 12:03:39
Wang Chunying:
In terms of non-transaction factors, the loss in valuation arising from the adjustment of statistical method and the changes in prices and exchange rates has been the major cause of the decrease in China's net external assets in recent years.
First, the adjustment of statistical method led to an increase of nearly USD 300 billion in China's external equity and liabilities in the past two years. For example, an enterprise issued 10 shares in its IPO at RMB 1 per share, which were bought up by non-residents. In this way, China owed a total of RMB 10 to non-residents at RMB 1 per share. Two years later, the enterprise and non-residents did not make any deals, and the non-residents still held these shares, but the unit price rose to RMB 3 per share, which means China owed a total of RMB 30 to non-residents, representing an increase of RMB 20 in debt due to the valuation factor, thus bringing down China's net external assets. Likewise, with market capitalization replacing historical costs to measure China's external equity and debt, China's external equity and debt as at the end of 2015 rose by nearly USD 300 billion from the end of 2013, and its net external assets dropped by nearly USD 300 billion.
2016-07-21 12:07:35
Wang Chunying:
Second, changes in asset prices and exchange rates led to the changes in external asset valuation. In 2014 and 2015, China's external assets fell by USD 396.9 billion due to the changes in asset prices and foreign exchange rates But China was not extraordinary. Our observations of Japan and Germany, who ranked No. 2 and 3 by net external assets, show that similar changes in valuation had taken place in the two countries. For example, at the end of 2015, Japan's net external assets fell by nearly USD 500 billion, and Germany, more than USD 200 billion, due to the valuation factor. After the adjustment of incomparable factors such as historical valuation and improvement of data sources, the change in valuation as a percentage of net assets was similar in China, Japan and Germany.
2016-07-21 12:26:44
Wang Chunying:
Since such changes in valuation reflect the changes in the carrying value at different points of time, and do not represent actual losses, the increase or decrease in net assets arising from changes in exchange rates and asset prices should be looked at rationally.
Last but not least, we also should be sensible about the size of China's net claims. On the one hand, the size of net external claims should be appropriate, which should be analyzed in combination with the return on investment and the domestic demand for capital. On the other hand, it would be economical and reasonable if foreign investments are attracted and overseas low-cost financing is rationally used. Many developed economies including the US are net debtors who attract massive investments to develop their economies. Therefore, we should be sensible about this issue.
2016-07-21 12:31:48
Moderator Xi Yanchun:
As time is running short, I have to end today’s conference here. Please allow me to thank Ms. Wang for her professional and detailed explanations, and thank you all.
2016-07-21 12:39:27
(The original text is available at china.com.cn)
