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- Index number:
- 000014453-2019-0322
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- Dispatch date:
- 2019-10-25
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- Publish organization:
- State Administration of Foreign Exchange
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- Exchange Reference number：
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- Name：
- Press Conference on Foreign Exchange Receipts and Payments Data for the First Three Quarters of 2019 — A Transcript
2019-10-25 14:16
Moderator Liu Fang
Good afternoon, friends from the press. Welcome to today's press conference on foreign exchange receipts and payments data for the first three quarters of 2019. I am Liu Fang, deputy director of the General Affairs Department of the SAFE. We are pleased to have with us Ms. Wang Chunying, press spokesperson, chief economist, and director of the Department of Balance of Payments of the SAFE. She will first brief us on foreign exchange receipts and payments for the first three quarters of 2019.
2019-10-25 14:17
Wang Chunying
Good afternoon, everybody. Welcome to today's press conference. I will first present to you China's foreign exchange receipts and payments data for the first three quarters of 2019 and then take your questions.
2019-10-25 14:17
Wang Chunying
Over the first three quarters of 2019, due to the slowing global economy and mounting downside pressure, global financial markets have become more volatile. Nevertheless, China's economy has remained within a reasonable range, with major economic indicators meeting expectations and economic structure being optimized. Despite the heightened two-way fluctuations of the RMB exchange rate against the dollar, expectations have stayed stable. As a result, China has posted stable cross-border capital flows and balanced supply and demand in foreign exchange markets for the first three quarters of 2019.
2019-10-25 14:17
Wang Chunying
In the same period, banks settled USD 1.38 trillion and sold USD 1.43 trillion in foreign exchange, representing a deficit of USD 48.2 billion; and banks received USD 2.632 trillion and paid USD 2.629 trillion in foreign exchange for customers in foreign-related transactions, representing a surplus of USD 2.6 billion.
2019-10-25 14:17
Wang Chunying
China's foreign exchange receipts and payments presented the following features in the period: first, a shrinking deficit has been observed in banks' settlements and sales of foreign exchange while a surplus has been recorded in banks' foreign exchange receipts and payments for customers for foreign-related transactions. Since the second half of 2018, despite a complex external environment and increased uncertainty, a contracting deficit has been observed in China's foreign exchange sales and settlements. In the first three quarters, a deficit of USD 48.2 billion was recorded in banks' foreign exchange settlements and sales, down by 54% from the second half of 2018 by monthly average. In the same period, a surplus of USD 2.6 billion was registered in banks' foreign-related foreign exchange receipts and payments for customers, versus a deficit for the second half of 2018.
2019-10-25 14:18
Wang Chunying
Second, the supply and demand in foreign exchange markets have been in balance. In the first three quarters, a monthly average deficit of USD 5.4 billion was recorded in banks' foreign exchange settlements and sales, but with forward settlements and sales and options considered, the supply and demand were in an equilibrium. The deficit for the third quarter contracted by 38% from that of the second quarter, or by 64% year-on-year, which is a strong indicator of increased stability of foreign exchange markets.
2019-10-25 14:18
Wang Chunying
Third, the foreign exchange sales ratio has stayed stable and foreign exchange financing by enterprises has become steadier. In the first three quarters, the foreign exchange sales ratio that measures customers' desire to buy foreign exchange, or the ratio of foreign exchange customers bought from banks to their foreign-related foreign exchange payments, stood at 67%, consistent with that of the second half of 2018. Meanwhile, the decline in domestic foreign exchange loans by enterprises narrowed. As at the end of September, the outstanding foreign exchange loans in Chinese banks fell by USD 12.3 billion from the figure of the beginning of the year, compared with a drop of USD 59.9 billion in the second half of 2018. Further, foreign exchange financing under foreign trade has stabilized. As at the end of September, the balance of cross-border financing for imports denominated in foreign currencies including refinancing and usance letter of credit contracted by a slight USD 1 billion from the end of 2018, versus a drop of USD 13.2 billion in the second half of 2018.
2019-10-25 14:18
Wang Chunying
Fourth, the settlement ratio has risen steadily and market players' foreign exchange deposits have fallen. In the first three quarters, the settlement ratio 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 65%, up by 0.6 percentage point from the second half of 2018. Foreign exchange deposits of market players, companies and individuals alike, have dropped. By the end of September, the balance of domestic foreign exchange deposits with banks was USD 32.4 billon lower than that of the end of 2018.
2019-10-25 14:18
Wang Chunying
Fifth, a surplus has been observed in banks' forward settlements and sales of foreign exchange. In the first three quarters, banks' forward settlements and sales of foreign exchange represented a surplus of USD 105.5 billion, versus a deficit of USD 45.3 billion in the same period last year. A surplus in the contract amount for forward settlements and sales of foreign exchange reached USD 34.5 billion, USD 43.2 billion, and USD 27.8 billion in the first, second and third quarter respectively.
2019-10-25 14:18
Wang Chunying
Sixth, the balance of foreign exchange reserves has risen steadily. By the end of September 2019, the balance of foreign exchange reserves amounted to USD 3.0924 trillion, USD 19.7 billion more than that of the beginning of the year.
2019-10-25 14:18
Wang Chunying
These are what I am supposed to present today. Now I would like to answer your questions.
2019-10-25 14:38
Xinhua News Agency
As the global economy slows down and global financial markets become more volatile, how have China's cross-border capital flows performed? What would you say about the future trends?
2019-10-25 14:39
Wang Chunying
In the year to date, China's foreign exchange markets have stayed stable amid the complex and changing external environment. First, the supply and demand has been in balance. According to the data released just now, banks' settlements and sales of foreign exchange for the first three quarters represented a monthly average deficit of USD 5.4 billion, much lower than those of the previous years and accounting for only 1.8% of the monthly average of banks' sales and settlements of foreign exchange, indicating an equilibrium. The non-banking sector's cross-border receipts and payments represented a slight surplus and foreign exchange reserves rose steadily. All these indicators, whether for supply and demand, cross-border receipts and payments, or the balance of payments, show that China's foreign exchange markets have been generally stable and balanced in the year to date.
2019-10-25 14:39
Wang Chunying
Second, the RMB exchange rate has remained stable against other currencies. In the first three quarters, the central parity rate of the yuan against the dollar depreciated by 3.0%, and the CFETS RMB Index fell by 1.9%. In the meanwhile, the USD index rose by 3.3% while the EMCI index dropped by 3.1%. All of these show that the RMB exchange rate is still stable.
2019-10-25 14:39
Wang Chunying
Third, market players' cross-border investing and financing activities and their desire to settle or sell foreign exchange have remained stable. On the one hand, foreign capital has continued to flow in. According to the statistics of the Ministry of Commerce, for example, China used USD 100.8 billion in foreign capital under direct investment in the first three quarters, up by 2.9% year-on-year. Statistics from the SAFE show that, under securities investment, overseas investors bought an extra USD 71.3 billion in bonds net and an extra USD 18.5 billion in listed stocks net in the first three quarters. On the other hand, China's outbound investment has been stable and in a good order. Statistics from the Ministry of Commerce show that the non-financial sector made ODI of USD 81 billion in the first three quarters, consistent with that of the same period last year. Besides, statistics from the SAFE show that foreign exchange purchased by individuals contracted by 20% net year-on-year.
2019-10-25 14:39
Wang Chunying
Now I would like to share with you my ideas why China's foreign exchange markets could sustain stability in the year to date.
First, economic fundamentals have provided a strong support. While the global economy is slowing down, China's economy has delivered a good performance. It continues adopting the positive fiscal policy and robust monetary policy and deepens the supply-side structural reform, effectively shoring up economic stability.
2019-10-25 14:39
Wang Chunying
Second, the policies that encourage opening wider to the outside world have continued to take positive effects. Since the beginning of this year, a range of policies for opening wider to the outside world have been introduced such as the new foreign investment law, the updated negative list for market access of foreign investment, and the removal of foreign shareholding restrictions for securities and fund companies, which have provided a strong boost to market confidence. In the global business environment ranking unveiled by the World Bank yesterday, China has moved up by a further 15 places from last year's position, which climbed by 32 places year-on-year.
2019-10-25 14:39
Wang Chunying
Third, the foreign exchange market's self-adjustment capability has been improving. Recent data shows China's foreign exchange markets have been maturing and market players have become more sensible. For example, as the RMB exchange rate became increasingly fluctuating in the past few months, market players settled their foreign exchange when the RMB foreign exchange rate was high and purchased foreign exchange when the rate was low, which helped to regulate the supply and demand of foreign exchange and curb the exchange rate volatility and in turn facilitate market stability. Despite the complexities of the external environment, we have observed some positive factors, such as loose monetary policies around the world, moderate spread between domestic and overseas interest rates, and continued China-US trade talks, which are positive signs to the market.
2019-10-25 14:40
Wang Chunying
Overall, we believe these factors including strong economic fundamentals, continuity of the policies that encourages opening wider to the outside world, and the maturing markets will dominate the performance of China's foreign exchange markets in the future and help to maintain stability in China's cross-border capital flows.
2019-10-25 14:53
People.cn
The current account surplus increased in the first half of 2019. Could you explain why? And what will be the future trends?
2019-10-25 14:53
Wang Chunying
Generally speaking, China's current account has maintained a basic equilibrium amid small fluctuations. In the first half, a surplus of USD 88.2 billion was observed under the current account, accounting for 1.3% of China's GDP. In comparison, a deficit of USD 28.8 billion was observed in the first half of 2018 and a surplus of USD 77.9 billion in the second half. But actually, they were all within the reasonable range of a basic equilibrium. As a result, despite the complex external environment, China's current account has shown strong adaptability and stability recently.
2019-10-25 14:54
Wang Chunying
The increasing balance of the current account in the year to date is a result of the combined changes in trade in goods, trade in services and returns on investment. First, a larger surplus was registered under trade in goods, amounting to USD 208.4 billion in the Balance of Payments in the first half, up by 34% year-on-year. Second, a lower deficit was recorded under trade in services, reaching USD 129.3 billion in the first half, down by 12% year-on-year. Third, returns on investment were improved, representing a slight surplus of USD 1.5 billion in the first half, versus a deficit for the same period last year.
2019-10-25 14:54
Wang Chunying
In the near future, China's current account is expected to remain in the reasonable range. First, trade in goods will maintain a reasonable surplus. A host of factors can help to sustain export stability in China: first, the diversification of export markets is delivering impacts. In dollar terms, China's export to ASEAN grew by 9.5% and to Africa, rose by 5.9% in the first three quarters, which are much higher than its overall export growth, indicating companies are proactively expanding their markets and optimizing their global presence. Second, trade facilitation and the initiatives to boost foreign trade growth such as the requirements to implement the reform of "combining power delegation with regulation & optimizing services", the incubation of new growth dynamics for foreign trade and the strengthening of core competitiveness, will continue to take effect. Third, the manufacturing sector, featuring a wide variety of sub-sectors, sound supporting facilities, increasing productivity and deep integration into the global industry chain, is being transitioned and upgraded, and will continue to lay a solid foundation for China-made products to sustain their competitiveness. In addition, China and the US have moved on with their trade talks.
2019-10-25 14:54
Wang Chunying
A review of trade in service and returns on investment shows that the deficits are shrinking, which will enable them to continue to shore up the current account stability. On the one hand, the history of major countries shows that, with the changes in residents' concept of consumption and the strengthening of a country's soft power, expenditures for trade in service like overseas tourism will grow and then stabilize, and therefore, the deficit in trade in service will not grow as quickly as before. On the other hand, China has been committed to optimizing its foreign investment structure in recent years. With a growing share, direct investment will help drive up returns on outbound investment and in turn increase returns on investment.
2019-10-25 14:54
Wang Chunying
Overall, China's current account is now in a basic equilibrium, and will possibly continue and sustain this pattern in the future.
2019-10-25 15:11
CBN Daily
The Balance of Payments shows high net errors and omission in the first half of 2019. Could you tell us why? Does this point to high capital outflows?
2019-10-25 15:11
Wang Chunying
Thank you for your questions. As the preparer and analyst of the Balance of payments and policymaker, we have also paid close attention to this issue.
2019-10-25 15:11
Wang Chunying
"Net errors and omission" is a standard component of the Balance of Payments. By nature it is a netting item that is susceptible to the impact from the current account, and the capital and financial account. According to international practices, the Balance of Payments is a double-entry accounting statement, with "net errors and omission" created to balance debits and credits therein. In fact, "net errors and omission" is a residual item since all items in the Balance of Payments may have "net errors and omission".
2019-10-25 15:11
Wang Chunying
For an economy frequently involved in foreign-related businesses, the large size and high frequency of cross-border transactions poses a great challenge to statistical work, leaving high "net errors and omission" sometimes. This challenge is not confronted by China alone. Any economies that are engaged in large and frequent cross-border transactions are facing this challenge. In the US, for example, the "net errors and omission" hit USD 99.5 billion in the first quarter of this year, accounting for 9% of the total trade in goods in the Balance of Payments. With increasing communications with the rest of the world, China's foreign-related economy has grown rapidly, in terms of both the number of declarers and the size of foreign-related transactions. In 2018, millions of players declared a total of nearly 50 million foreign-related transactions. Such fragmented distribution has rarely been seen in the world. As a result, long-term careful efforts are needed in the promotion of concepts on the declarations of the BOP statistics, data collection and improvement of data quality. Moreover, the preparation of BOP is also a complex and systematic task. Apart from the breakdown data or aggregate data collected by banks, we also use the data collected in corporate sample surveys as well as from other departments. These data, with different concepts, coverage, and recording principles, may result in "net errors and omission" when synthesized in the Balance of Payments.
2019-10-25 15:11
Wang Chunying
Therefore, you can understand that "net errors and omission" is a statistical issue occurring in preparing the Balance of Payments, not about cross-border capital flows. The SAFE has surely paid close attention to this issue and been studying a more scientific statistical approach, with a view to ensuring the integrity, timeliness and accuracy of BOP statistics at a lower cost and in a more reliable way by reducing misjudgment based on "net errors and omission". We also expect you to do objective analysis instead of blindly mistaking "net- errors and omission" for capital flows. In addition, the SAFE will continue to oversee data collection, processing and cleaning to improve data quality further. Thank you.
2019-10-25 15:26
China News Service
China's full-scale outstanding external debt is nearing USD 2 trillion. What would you say about this? How to assess the risks ensued?
2019-10-25 15:26
Wang Chunying
China's outstanding external debt for the second quarter reportedly amounted to USD 1.9980 trillion, which is close to USD 2 trillion. But based on our judgment, China's external debt risk is controllable on the whole. I would explain this in several dimensions.
2019-10-25 15:27
Wang Chunying
First, China's external debt is modest compared with other major countries, in both absolute and relative terms. Along with economic growth and the advance of globalization, it is natural that one country's external debt will grow steadily, especially in a large economy whose debt is huge too. This is an indication of a country's comprehensive use of both domestic and foreign resources for reasonable and effective resource allocation. For China, its debt is modest in absolute terms and at a lower-middle level in relative terms, as compared with other major countries. In absolute terms, China was ranked No. 12 globally by outstanding external debt by the end of 2018, which was 10 times lower than that of the US, 4 times lower than the UK, and 2 times lower than Japan, according to the World Bank's statistics. In relative terms, China's outstanding external debt accounted for 14% of national income by the end of 2018, ranking below No. 150 globally, according to incomplete statistics. Further, the liability ratio and debt ratio of its external debt are within the internationally recognized safe ranges and lower than the overall levels of developed and emerging market economies.
2019-10-25 15:27
Wang Chunying
Second, China's external debt and external assets have both grown in an orderly and coordinated way. International experience shows that to measure external debt risk and external vulnerabilities, focus should be on the size and solvency of external assets. In the International Investment Position released by the SAFE, China's external assets totaled USD 7.4 trillion by the end of June 2019, up by 16% from the end of 2014; its external debt reached USD 5.4 trillion, up by 12% from the end of 2014, a bit lower than that of assets. What's more, its external debt growth is slowing down. By the end of June 2019, its outstanding external debt rose by 1.7% from that of the end of 2018, much lower than those of the previous years.
2019-10-25 15:27
Wang Chunying
Third, as for growth trends, China's external debt, with a remarkably optimized structure, has been further stabilized, which is indicated in several aspects. By maturity, China's external debt growth has chiefly stemmed from middle and long-term debt in recent years. By the end of June 2019, outstanding middle and long-term external debt rose by 63% from the figure of the end of 2014, and its share in total outstanding debt was 12 percentage points higher than that of the end of 2014, while outstanding short-term external debt dropped 6% at the same time. By debt instrument, increase in debt securities has been the main driver of the stable growth in external debt. At the end of June, the balance of debt securities was 2.3 times more than that of the end of 2014, and its share was 24%. As foreign investors invest in debt securities mainly to diversify their asset allocation, debt securities grew and stayed stable in 2015 despite shrinking external debt. By currency, the recent external debt increased is chiefly denominated in RMB. As at the end of June, outstanding RMB external debt rose by USD 38.7 billion from the end of 2018 while external debt denominated in foreign currencies fell by USD 5.9 billion. For the moment, the RMB external debt accounts for one third of China's total external debt, indicating foreign investors' confidence and recognition in China's economic growth and RMB assets.
2019-10-25 15:27
Wang Chunying
Therefore, we would say China's external debt risk is basically controllable.
2019-10-25 15:34
China Securities Journal
What would you say about the impact of the recent reform to QFII and RQFII programs by the SAFE on China's cross-border capital flows and balance of payments? How to mitigate relevant risks?
2019-10-25 15:34
Wang Chunying
With the approval of the State Council, we have decided to remove the investment quota limits on qualified foreign investors. As a key reformative initiative during the course of financial liberalization in China, this will facilitate stable cross-border capital flows and structural optimization of the balance of payments.
2019-10-25 15:34
Wang Chunying
First, this will help to attract more foreign capital into China. With the removal of investment quota limits on QFIIs and RQFIIs, qualified foreign investors will only need to register with foreign exchange authorities and then can remit money to invest in securities in compliance with regulations. As a result, it will be much more convenient for foreign investors to invest in China's financial markets, and China's bond markets and equity markets will be recognized by the international community to a larger extent.
2019-10-25 15:34
Wang Chunying
Second, this will increase the stability of foreign investments in China. Our dozen years of observation and monitoring shows that those investing in China's capital markets through QFII and RQFII programs are mostly value-oriented long-term investors. With a robust investment philosophy, they pursue middle and long-term returns, rather than short-term gains through frequent transactions. Even when cross-border capital flows fluctuated sharply, foreign investment through QFII and RQFII programs remained stable. The removal of quota limits on these quality investors will facilitate capital inflows and further attraction of long-term quality investors to invest in China.
2019-10-25 15:35
Wang Chunying
Third, this will provide a boost to the development of China's financial markets. In a broader sense, this reform will continue to help improve the structure of domestic investors and their transaction style, and contribute to the long-term evolution of China's financial markets.
2019-10-25 15:35
Wang Chunying
As the financial market is being liberalized, we are confident in keeping China's foreign exchange market stable. I would like to share with you a couple of figures. With the increase in the balance of payments and the optimization of transaction structure, China's risk resilience is improving. For example, from 2002 when the QFII program was launched to the current removal of quota limits, China's balance of payments expanded from USD 810 billion to more than USD 6.6 trillion in 2018, which is sufficient to offset the impact from the opening up of securities markets. Certainly the capital account is opened up in a proactive, step-by-step and controllable manner, and we will continue to intensify monitoring, early warning and analysis. We will assess market conditions in prompt response to domestic and overseas developments, to guard against risks arising from cross-border capital flows.
2019-10-25 15:35
Moderator Liu Fang
Thank you, Ms. Wang. Also thanks to the friends from the press for your attention and participation. Thank you all for your support for the SAFE. This is the end of today's press conference. Thank you for coming.
(The original text is available on people.cn)
