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- Index number:
- 000014453-2020-0102
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- Dispatch date:
- 2020-07-17
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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 Data for the First Half of 2020— Press Conference Transcript
The State Council Information Office (SCIO) held a press conference at 10 a.m. on Friday, July 17, 2020. Wang Chunying, deputy administrator and press spokesperson of the State Administration of Foreign Exchange (SAFE) was invited to share the foreign exchange receipts and payments data for the first half of 2020 and answer questions from the press.
Shou Xiaoli, Press Bureau of the SCIO:
Ladies and gentlemen, good morning. Welcome to the press conference of the SCIO. Today we are pleased to welcome Ms. Wang Chunying, deputy administrator and press spokesperson of the SAFE. She will share with us the foreign exchange receipts and payments data for the first half of 2020 and answer the questions of your concern.
Now I will give the floor to Ms. Wang Chunying.
2020-07-17 10:00:02
Wang Chunying:
Good morning, everyone. Welcome to today's press conference. First, I'd like to brief you on the foreign exchange receipts and payments situations for the first half of this year. Then I will take your questions.
In the first half of 2020, the COVID-19 pandemic dealt a great blow to the world economy, with sharp ups and downs seen in global financial markets. Currently the pandemic and the world economic conditions are still challenging, complicated and full of uncertainties. While domestically, as epidemic control and resumption of work and production yielded significant results in recent phase, the economy has gradually recovered since the second quarter, with economic indicators recording marginal improvements and the renminbi exchange rate becoming increasingly elastic and staying generally stable. Overall, cross-border capital flows stayed generally stable, and the foreign exchange market witnessed balanced supply and demand, and demonstrated stronger resilience against external shocks.
According to the data on foreign exchange settlement and sales by banks in the first half of 2020, banks settled US$ 953.5 billion and sold US$ 874.9 billion in foreign exchange, representing a surplus of US$ 78.6 billion, or in renminbi terms, banks settled 6.7 trillion yuan and sold 6.1 trillion in foreign exchange, recording a surplus of 553.1 billion yuan. At the same time, banks handled foreign-related receipts of US$ 1.9066 trillion and payments of US$ 1.9045 trillion for customers, representing a surplus of US$ 2 billion, or in renminbi terms, banks handled foreign-related receipts of 13.4 trillion yuan and payments of 13.4 trillion yuan for customers, recording a surplus 15.6 billion yuan.
China's foreign exchange receipts and payments showed the following features in the first half of 2020:
2020-07-17 10:03:23
Wang Chunying:
First, the supply and demand of the foreign exchange market remained basically in balance, with a surplus registered in foreign exchange settlement and sales by banks. In the first half of 2020, foreign exchange settlement and sales by banks reached a surplus of US$ 78.6 billion, including US$ 39.1 billion and US$ 39.5 billion in the first and second quarters respectively. In monthly terms, the monthly average surplus was US$ 15.5 billion from January to May, then contracted to US$ 900 million in June due to the climax of seasonal dividend payouts. Taking other supply and demand factors into consideration, such as net purchase of foreign exchange by foreign institutions in the interbank foreign exchange market and increase in foreign exchange position of banks, the supply and demand on China's foreign exchange market remained generally stable in the first half.
Second, cross-border capital flows stayed steady, with a higher net inflow registered in the second quarter. In the first half, foreign exchange receipts and payments by banks for customers registered a slight surplus of US$ 2 billion. A deficit of US$ 30.1 billion was recorded in the first quarter, primarily due to higher outflow of the renminbi under stock investment, fueled by fluctuations in global financial markets in March. As two-way cross-border stock investments have returned to normalcy since April, a surplus of US$ 32.2 billion was posted in foreign exchange receipts and payments by banks for customers in the second quarter. Therefore China's cross-border capital flows remained stable in the first half, with a higher net inflow recorded in the second quarter than in the first quarter.
2020-07-17 10:04:14
Wang Chunying:
Third, a lower foreign exchange sales rate was recorded, and enterprises' desire for foreign exchange financing in and outside China rose steadily. In the first half, the foreign exchange sales rate, the measurement of customers' desire to buy foreign exchange, or the ratio of foreign exchange purchased by customers from banks to foreign-related foreign exchange payments made by customers, stood at 63%, down by 3.5 percentage points year on year. By the end of June, the outstanding domestic foreign exchange loans rose by US$ 52.4 billion from the level at the end of 2019, indicating a stronger demand for foreign exchange financing among enterprises. Also by the end of June, the balance of foreign currency financing for cross-border trade such as import refinancing and forward L/C for imports fell by 3% from that of the end of 2019, but imports in the same period dropped by 7%, indicating stable desire for cross-border foreign exchange financing among enterprises. Therefore, we can see that despite a decreased foreign exchange sales rate, enterprises' desire for foreign exchange financing in and outside China strengthened steadily in the first half.
Fourth, the foreign exchange settlement rate climbed steadily and market participants' desire to hold foreign exchange weakened. In the first half, the foreign exchange settlement rate, the measurement of customers' desire to settle foreign exchange, or the ratio of foreign exchange customers sold to banks to foreign-related foreign exchange receipts received by customers reached 66%, up by 2.0 percentage points year on year. By the end of June, the balance of foreign exchange deposits held by domestic market participants including individuals and enterprises dropped by US$ 5 billion from that of the end of 2019. Therefore, it is clear that market participants' desire to hold foreign exchange weakened along with steady growth in the foreign exchange settlement rate.
Fifth, foreign exchange reserves rose steadily. By the end of June, the balance of foreign exchange reserves amounted to US$ 3.1123 trillion, up by US$ 4.4 billion from that of the end of 2019. In particular, the balance of foreign exchange reserves for June increased by US$ 10.6 billion, representing the third consecutive month of growth in the second quarter. Overall, the supply and demand on China's foreign exchange market remained basically balanced in the first half, while the changes in the balance of foreign exchange reserves were primarily driven by foreign exchange conversion and assert price changes.
The above are the major statistics I'd like to share with you about China's foreign exchange receipts and payments for the first half. Next, I will take your questions.
2020-07-17 10:08:14
Shou Xiaoli:
We will now move on to the Q&A session. Please tell us your news agency before raising your questions.
2020-07-17 10:11:37
CCTV:
You've just said that the global spread of COVID-19 significantly impacted the world economic and financial performance in the first half. What's your understanding of China's foreign exchange receipts and payments under this circumstance? What changes would occur to China's foreign exchange receipts and payments in the second half in your opinion? Thank you.
2020-07-17 10:13:06
Wang Chunying:
Thank you for your questions. As we all know, due to COVID-19 outbreak, the world economy has been sluggish in the year to date, with violent fluctuations seen in global financial markets. Under such a circumstance, China's foreign exchange receipts and payments have remained generally stable, and its foreign exchange market has shown strong resilience and risk-resistance capabilities, as indicated by the data I have just shared with you. This can also be seen from major figures, quantity and price indicators alike.
2020-07-17 10:13:51
Wang Chunying:
On the one hand, as shown by the quantity indicators, the supply and demand on the foreign exchange market were in basic equilibrium. In the first half, bank customers' cross-border receipts and payments remained in surplus, and so did foreign exchange settlement and sales, denoting foreign exchange receipts and payments of domestic market participants including enterprises and individuals were in surplus. This was reflected by strong supply on the foreign exchange market. Then where did the surplus go? We can get a clue from net purchases of foreign exchange by foreign institutions and increased holdings of foreign exchange positions by banks in the first half. This shows that the supply and demand found an equilibrium among different market participants. This is the whole picture. The supply and demand of foreign exchange between domestic and foreign market participants were on the opposite ends of a seesaw. The state changed from one point of time to another, but an equilibrium was maintained on the whole.
On the other hand, the price indicators suggest that the renminbi exchange rate went through ups and downs but remained generally stable in the first half. This was primarily driven by the domestic macro environment and changes in market sentiment. A review of the movements of the renminbi exchange rate shows that the exchange rate depreciated after a pickup between January and February, oscillated in March, and fluctuated in May again due to the impact from global markets and other events, and appreciated again recently, demonstrating significant features of two-way fluctuations. The band between the peak and trough of the renminbi exchange rate was 4.4% in the first half, which was stable and showed certain elasticity. Overall, the renminbi exchange rate remained robust. Although the trading price of the renminbi exchange rate against the US dollar in the domestic market depreciated by a slight 1.5% in the first half, yet the renminbi Index compiled by the China Foreign Exchange Trade System (CFETS) picked up by a slight 0.7% and the Emerging Market Currency Index for the same period fell by 11.8%.
In my opinion, the changes in China's foreign exchange market in the first half show that China's epidemic response and resumption of work have delivered positive impacts and China's foreign exchange market is becoming increasingly open and mature. Let me explain this in detail.
First, the stable performance of China's foreign exchange market shows China's epidemic response has achieved significant strategic results. In the year to date, the spread of COVID-19 and epidemic response have been decisive to changes in market sentiment and remained key factors to financial stability both at home and abroad. China's epidemic response has delivered significant impacts, with the spread of COVID-19 swiftly contained, which has been critical to maintaining strong market confidence and stable market sentiment.
2020-07-17 10:14:11
Wang Chunying:
Second, the stable performance of China's foreign exchange market in the first half also shows positive results yielded by resumption of work. With resumption of work accelerated and monetary and fiscal support stepped up, economic growth turned positive from negative in the second quarter, with major indicators in recovery and domestic economic fundamentals at an advantage, which have laid a foundation for the continued economic recovery in the second half. The IMF anticipates that China may become the only major economy that can maintain positive growth this year.
Third, the stable performance of China's foreign exchange market in the first half shows the policy impacts of expanding opening-up. We have been committed to improving our business environment and extending opening-up ranges in recent years, which has laid a solid foundation for attracting foreign investments. Encouragingly, China utilized 472.2 billion yuan in foreign capital in the first half, with the utilization rate growing by 8.4% in the second quarter, despite the fact that global direct investments have remained sluggish in the year to date due to COVID-19 outbreak. As the opening-up process of China's capital markets, foreign investors will find it more convenient to invest in China. The SAFE statistics show that foreign investors increased their net holdings of domestic bonds and stocks by US$ 72.9 billion in the first half, including US$ 59.6 billion in domestic bonds and US$ 13.3 billion in domestic stocks.
Fourth, the stable performance of China's foreign exchange market in the first half shows that the market is trending towards more rational and orderly development. The strengthening elasticity of the renminbi exchange rate is favorable for the renminbi exchange rate to regulate the balance of payments as an automatic stabilizer, maintaining general stability of market expectations, driving market participants to trade rationally, and effectively boosting the supply-demand balance on the foreign exchange market, in which the renminbi exchange rate can play an important role.
For your second question, I'd say that the above four points, epidemic response, resumption of work, opening-up policy and maturity of foreign exchange market, will continue to play their roles. Therefore, cross-border capital flows should stay stable in the second half. Granted, the COVID-19 will remain uncertain around the world, we will continue to ensure monitoring, tracking and full preparedness. We will also continue to adopt the two-faceted management framework of "macro-prudence and micro-regulation", which I mentioned in previous press conferences, while ensuring sound epidemic response and full preparedness. Therefore, we believe cross-border capital flows will be steady in the second half. Thank you.
2020-07-17 10:14:34
Economic Daily:
The Balance of Payments data for the first quarter released shows a slight deficit under the current account. What are the major contributing factors behind this? What was the situation for the second quarter? What about the future trends? Thank you.
2020-07-17 10:55:27
Wang Chunying:
Thank you for your attention to the current account. We have communicated with you issues on the current account many times in previous press conferences, which might have caused your concerns. The current account has drawn wider attention given its crucial role in the foreign-related economy as well. The data we released shows a deficit of US$ 33.7 billion under the current account in the Balance of Payments in the first quarter, which we believe is slight. This deficit accounts for -1.1% of China's GDP, which is still within the reasonable and balanced range.
You may wonder what caused the deficit. This deficit, we believe, is due to COVID-19 outbreak. Customs statistics show that China's export slumped by 17% and its import dropped by 4% between January and February, leading to a deficit of US$ 6.8 billion under trade in goods, which was very rarely seen. As businesses reopened in March, China's import and export improved, but a much lower surplus was recorded. This impacted the balance of the current account for the first quarter. But generally speaking, the deficit under the current account as a percentage of GDP is within the balanced and reasonable range.
2020-07-17 10:55:40
Wang Chunying:
As for the second quarter, we believe that impactful epidemic response and strengthened policy support would take effect. Production activities were also returning to normalcy at a faster pace in the quarter. The statistics available show that the current account was rebounding to a surplus step by step, but the ultimate data is not available yet. With regard to trade in goods, customs data shows China's export for the second quarter rose by 30% from the first quarter, and its import shrank by 10% year on year as crude oil prices plummeted. So a surplus of US$ 154.7 billion was recorded under trade in goods in the second quarter, which was greatly recoverd from the deficit for the first quarter. As for trade in services, the deficit under trade in services contracted further, driven by lower foreign exchange required for overseas trips due to COVID-19 outbreak. Therefore, the current account in the balance of payments for the second quarter should be in surplus, which is highly likely to contribute to a surplus under the current account for the first half.
We are concerned about your response. But it is needless to fret over the slight deficit under the current account for the first quarter. Remember what we have been telling you how to evaluate the balance of the current account? It is normal that a slight surplus or deficit doesn't mean trendy changes, especially when the account is relatively balanced. We often study how to value the range of a surplus or deficit, using the current account as a percentage of GDP to assess the imbalance of the current account. Any percentage falling within the range of ±4% or ±5% can indicate the basically balanced current account.
The current account will possibly remain within the reasonable and balanced range in the future, based on the following conditions and foundations: first, the developments of manufacturing and domestic economic structure, which determine the long-term trends of the current account. China has established a complete industry chain for manufacturing and its economic structure keeps being upgraded and updated. Second, the relationship between the deposit rate and the investment rate, which is key to the balance of the current account. China's deposit rate remains at a high level worldwide, which is fundamental to ensuring stability of the current account. Last but not least, China is currently leading the world in epidemic control, work resumption and economic activities, and its policy to stabilize foreign trade is taking effect, which makes it possible for the current account to stay within the reasonable range. These are what I want to respond to your questions. I hope better delivery can be made via you when viewing China's balance of payments in a more objective manner, especially the alternation between surpluses and deficits under the current account. Thank you.
2020-07-17 10:55:53
Haibao News:
To support and improve business environment for foreign exchange in the Hainan Free Trade Port, what measures has the SAFE introduced to enable financial support for the construction of the port? What are the impacts? Thank you.
2020-07-17 11:07:02
Wang Chunying:
Thank you for your questions. To support the development of the Hainan Free Trade Port, the SAFE approved six new foreign exchange administration measures to be taken in the port in January this year. Three of them have been officially implemented: cancelling itemized registration of external debt of non-financial companies, piloting outbound transfers of domestic credit assets and simplifying foreign exchange registration procedures for FDI. Relevant detailed rules are being developed for the remaining three measures: piloting foreign exchange receipts and payments facilitation for trade in goods and trade in services, further facilitating outward and inward remittance management of qualified foreign limited partner (QFLP) and piloting qualified domestic limited partner (QDLP). In March, the SAFE approved a pilot quota program for external debt facilitation in the Hainan Free Trade Port, which will give free rein to eligible high-tech companies in making borrowings no more than the equivalent of US$ 5 million from overseas markets, in the hope of supporting high-tech companies in external financing.
We will continue to closely track the developments of innovative foreign exchange businesses under the capital account and policy impacts in the Hainan Free Trade Port in the future. We will strengthen ongoing and ex-post management and monitoring analysis and promptly address issues arising during implementation. We will also endeavor to adopt the early and pilot opening-up policies in the port and further study facilitation measures for cross-border financing. It is likely that some new measures will be first launched in the port. Thank you.
2020-07-17 11:07:42
Hong Kong China Review News Agency:
We've noticed massive and frequent cross-border capital flows in recent years, especially under Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. Would such flows impact China's foreign exchange market? As the pandemic is still raging abroad, what changes will occur to foreign holdings of renminbi assets in the future?
2020-07-17 11:35:51
Wang Chunying:
This issue has drawn wide attention. As China continues to advance the two-way opening-up of its capital markets, cross-border capital flows have been on the rise in recent years. This is favorable for optimizing investor structure in domestic market, expanding investment and financing channels, and developing domestic capital markets to support the real economy. Therefore, two-way opening-up of domestic capital markets is of great benefits.
As the capital markets are opened up, cross-border capital flows will become more fluctuating especially in the case of dramatic changes in market environment, which is normal though. But your concerns are understandable, and we have communicated with you before to address your concerns. In the process of opening-up we have been insisting on the principle of proactivity, gradualness and controllability, as well as reconciling the relationship among opening-up, development and stability. This principle has proved effective.
As for your question, we believe that while the market environment changes rapidly and cross-border capital flows are fluctuating, the overall upward trend in foreign investors’ holdings of renminbi assets has not been impacted. Nor have cross-border capital flows under the capital account disrupted the supply-demand balance and general stability of China's foreign exchange market.
2020-07-17 11:37:59
Wang Chunying:
First, the upward trend in foreign holdings of renminbi assets in the mid and long term has not been changed. Here is some data: in the year to date, the balances of foreign holdings of domestic stocks and bonds have increased. By the end of June, the balance of foreign holdings of domestic bonds amounted to US$ 369.1 billion and the balance of foreign holdings of domestic stocks, US$ 368.4 billion, approaching US$ 370 billion and up by 13% and 16% from those of the end of 2019 respectively, which both represented two-digit growth. The balance of foreign holdings of domestic bonds was three times as much as that of the end of 2016 and the balance of foreign holdings of domestic stocks, 3.4 times. We believe this mid and long term trend will continue for a while.
On the one hand, China's opening-up policy will continue to deliver positive impacts. China is the world's second largest bond and stock markets, in which foreign holdings only account for 2%-4%, much lower than those of developed countries. In the US, foreign investors hold 26% of its bonds and 18% of its stocks, way higher than the 2%-4% in the Chinese market. This share is also lower than the levels of Japan and South Korea. Therefore, we believe this indicates better outlooks and large room for growth.
On the other hand, renminbi assets are highly worthy of investment from a global perspective. During COVID-19 outbreak, China's economy has been quick to recover, indicating strong internal robustness, and all the indicators show marginal improvements, suggesting our economic fundamentals are at an advantage. China is also one of the few economies maintaining normal monetary policy, while other major economies adopt expansionary monetary policies. By the end of June, the gap between China and the US in the yield of 10-year Treasury bonds had exceeded 2 percentage points, reaching 2.24 percentage points, 1 percentage point higher than that of the end of 2019. Therefore, renminbi assets are worthwhile investments.
Among foreign investors, many are foreign central bank-like institutions, whose investments are generally robust. There is one more data I'd like to share with you here. The IMF statistics show that the renminbi's share in global foreign exchange reserves had risen to 2.02% by the end of the first quarter, a new record high. This shows that foreign central banks' holdings of renminbi assets have grown steadily. Therefore, the upward trend in foreign holdings of renminbi assets in the mid and long term has not been changed.
2020-07-17 11:40:02
Wang Chunying:
Second, what impact do such massive capital flows have on us, especially the fluctuating short-term investments like stock investments? Currently such an impact is acceptable to us. China's foreign exchange market has remained generally stable, returning to normalcy shortly after short-term fluctuations. In March, in the face of highly fluctuating global financial markets, market sentiment especially risk aversion was heightened, liquidity in foreign markets was strained, and as a result, massive funds flowed out of emerging markets. China was no exception, with outflows of foreign capital from its stock market, some of which went to the Hong Kong stock market. In the second quarter, cross-border mutual investment was re-stabilized. Data shows that, in the second quarter, foreign holdings of Chinese stocks rose by US$ 23.2 billion, and outflows of funds for southbound investment in the Hong Kong stock market dropped by 68% from the first quarter, so the situation recovered after short-term fluctuations. In the same period, net inflows were maintained in mid and long-term investments including FDI and foreign investments in the bond market. Therefore, China's foreign exchange market remained highly stable in the first half, with a slight surplus recorded in foreign exchange settlement and sales.
In a word, the issues that concern you are very important. The market performance in China shows that the trends that foreign investors will hold renminbi assets over the mid and long term and China's foreign exchange market will remain stable have not been changed.
2020-07-17 11:44:01
Southern Metropolis Daily:
The renminbi exchange rate against the US dollar has been fluctuating around 7 recently, and even exceeded 7 at certain points. How should we look at the overall movements of the renminbi exchange rate in the first half? What impact will a strengthening yuan have on our lives?
2020-07-17 11:45:50
Wang Chunying:
As far as the renminbi exchange rate is concerned, I'd first like to tell you about the foreign exchange rate system adopted in China. Our foreign exchange rate regime is a managed floating regime based on market supply and demand, and with reference to a basket of currencies. Supply and demand play a decisive role in the formation of the renminbi exchange rate, which has never been changed. Short-term fluctuations in the renminbi exchange rate, as we have observed, are primarily driven by market forces. In the year to date, the renminbi exchange rate has been kept stable within the balanced and reasonable range. But two-way fluctuations have also been evident. Despite stronger elasticity, the renminbi exchange rate has remained generally stable. Relevant data shows that the renminbi exchange rate against the US dollar was nearly 7.2 at the lowest this year, but has appreciated to the level below 7 now, indicating evident ups and downs. Why do I say so?
Let's look at it by stage. In the early period of COVID-19 outbreak, low market sentiment was reflected in the renminbi exchange rate when the market reopened after the Chinese New Year holiday. Then as epidemic control measures were launched, market sentiment strengthened, driving the renminbi exchange rate to rebound. But due to fluctuations in global financial markets in March, risk aversion was heightened, providing a boost to the US dollar and pressuring most non-US dollar currencies, including the renminbi. However, the renminbi soon recovered as epidemic response yielded positive changes and resumption of work was accelerated. This was the second stage. Then after short-term depreciation in late May, the renminbi has picked up since June and returned to 7 and even below recently, fueled by lower risk aversion and a weakening US dollar. In addition, yesterday's data shows that China's economic recovery has gained steam, with major indicators in recovery. Overall, in a complex and changing external environment, it is normal to see a fluctuating renminbi exchange rate.
As for the impact of the renminbi exchange rate on our lives, I'd say that the depreciation of the renminbi exchange rate against the US dollar to 7 has little impact on people who hold limited foreign currency assets. Moreover, the opportunities for overseas trips and study have been reduced since COVID-19 outbreak, so the renminbi exchange rate against the US dollar, be it 7.2, 7, or 6.99, will have limited impact on our lives. But if there is an impact, it might be your book assets, which may change to some extent if you hold many foreign currency assets. However, the impact would be tiny if no exchanges happen. How much will the renminbi exchange rate against the US dollar be in the future? It will fluctuate with market changes. So will the impact. But the extent of the impact will depend on the size of your foreign currency assets as well as your philosophy towards asset management. Despite ups and downs, the renminbi exchange rate has stayed stable versus foreign currencies and will not have a significant impact on people's lives. This is what I want to share with you. Thank you.
2020-07-17 11:47:18
Hong Kong Economic Herald:
Could you brief us on the latest progress in the SAFE's support for the Guangdong-Hong Kong-Macao Greater Bay Area in investment and financing facilitation? Thank you.
2020-07-17 11:48:43
Wang Chunying:
This concerns our policy for special economic areas. We have given much priority to the Greater Bay Area in foreign exchange administration, especially in pilot and early implementation. For example, on May 14, several ministries and committees jointly released the Opinion on Supporting the Construction of the Guangdong-Hong Kong-Macao Greater Bay Area through Financial Measures, launching 26 initiatives on financial reform and innovation in five aspects. First, boosting cross-border trade, investment and financing facilitation in the Greater Bay Area. This is aligned with the SAFE's efforts over the past years. Second, deepening financial cooperation between the mainland and Hong Kong and Macao through expanding opening-up of the financial industry. Third, advancing connectivity in financial markets and financial infrastructure in Guangdong, Hong Kong and Macao. Fourth, further promoting financial service innovation in the Greater Bay Area, which is also related to financial administration. Fifth, effectively guarding against cross-border financial risks.
To support the construction of the Greater Bay Area through financial measures, the SAFE has implemented policies as follows: first, further promoting cross-border trade and investment facilitation. Specifically, the SAFE has eliminated restrictions on domestic equity investments by non-investing foreign-funded companies using capital funds, and delegated external debt write-off registration to banks, which can significantly save costs of enterprises for visiting different authorities. Second, the SAFE has carried out a pilot program in the Greater Bay Area for outbound transfers of domestic credit assets, expanding the scope of transferors, transfer channels and the scope of credit assets that can be transferred overseas. Third, the SAFE has carried out a pilot program for one-off external debt registration and facilitation quotas, giving free rein to eligible high-tech companies in making borrowings no more than the equivalent of US$ 5 million from overseas markets. This is the same as their counterparts in the Hainan Free Trade Port. Fourth, the SAFE has further optimized foreign exchange administration to support the development of foreign-related businesses. We have rolled out nationwide the piloted capital account receipts and payments facilitation reform, and enterprises in the Greater Bay Area are also entitled to this benefit.
What's more, the SAFE launched yesterday a program to pilot the authenticity verification application scenarios for capital account receipts and payments facilitation through the SAFE's cross-border financial blockchain service platform. Guangdong is one of the five pilot regions. On the first day of the launch, under the guidance of SAFE’s Guangdong Branch, the Bank of China Nansha Branch in China (Guangdong) Pilot Free Trade Zone conducted authenticity verification for a US$ 5.52 million transaction under foreign exchange settlement facilitation for external debt for an enterprise in the free trade zone (FTZ), through the cross-border financial blockchain service platform, which symbolizes that this pilot program has been implemented in the Greater Bay Area in the first place. This application of the platform in financial services in the Greater Bay Area shows that the authenticity verification for capital account receipts and payments facilitation can be achieved online and within the blockchain. If more institutions join the platform, the costs of visiting authorities or manual verification costs can be slashed and authenticity verification will become much easier. This is what I want to respond to your question.
2020-07-17 11:53:36
Shou Xiaoli:
We will take the last question as we are running out of time.
2020-07-17 12:07:46
China Daily:
We have recently observed that foreign-funded companies and overseas listed companies have entered the seasonal peak time for dividend payouts. Could you brief us on this? Will this put pressure on foreign exchange purchases? Thank you.
2020-07-17 12:08:10
Wang Chunying:
Thank you for your question. We have observed from our recent communication with friends from the press that they are concerned over these issues too, so we made an analysis.
First, foreign-funded enterprises have the freedom to increase or decrease their registered capital and remit out their profits so long as these actions are authentic and in compliance with laws and regulations. In recent years, outward profit remittances by foreign-funded enterprises and overseas listed companies have stayed stable. The outward profit remittances increased slightly in the first half. Due to dividend payouts by foreign-funded enterprises and overseas listed companies, a cross-border outflow of around US$ 70 billion was recorded, up by more than US$ 7 billion year on year, which was modest though. By the end of 2019, FDI stock had amounted to US$ 2.9 trillion, up by US$ 100 billion year on year. Why do I share this data with you? While FDI stock increased, outward profit remittances rose by a similar margin. Along with gradual increase in assets and relatively high returns, profits will increase, which is normal. We need to look at both the amount of profits remitted out and the amount of assets foreign investors hold in China. Overall, the profits remitted out by foreign-funded enterprises matched with the increase in assets they held in China in the first half.
At the same time, some profits have been reinvested in China and some have been remitted out to support operations of their overseas parent companies due to COVID-19 outbreak. This shows that foreign-funded enterprises are operated stably in China and enjoy relative advantages, which enable them to support their overseas parent companies through profit remittances when the parent companies are financially strained. Therefore, we can see China's sound economic fundamentals have provided solid support for the overall operations and growth of multinationals.
As for your question on foreign exchange purchases, we find that while outward profit remittances have increased slightly, relevant foreign exchange purchases represent a year-on-year decrease, mainly due to outward remittances of a much greater amount of renminbi-denominated profits, which shows the effect of cross-border use of the renminbi. As the opening-up process of our capital markets, the overseas renminbi market has been expanded further and the acceptance of the renminbi has strengthened, so some multinationals are increasing their holdings of renminbi assets. This is why outward profit remittances have risen while foreign exchange purchases have fallen.
In addition, why do outward profit remittances draw your attention at this point? Because outward profit remittances have evident seasonality and usually occur from May to July. This year is no exception. Outward profit remittances began to rise in May and will gradually drop and return to normalcy after July. Such seasonal and regular factors will not disrupt the overall stability of cross-border capital flows in China. The SAFE will ensure the continuity and consistency of policies so that authentic and compliant outward profit remittances will not suffer policy setbacks. Thank you.
2020-07-17 12:08:29
Shou Xiaoli:
Thank you, Ms. Wang. Thank you, friends from the press. This is the end of today's press conference.
2020-07-17 12:13:03
(The original text is available on www.china.com.cn)
