-
- Index number:
- 000014453-2024-0088
-
- Dispatch date:
- 2024-10-22
-
- Publish organization:
- State Administration of Foreign Exchange
-
- Exchange Reference number：
-
- Name：
- Foreign Exchange Receipts and Payments Data for First Three Quarters of 2024 — Press Conference Script
The State Council Information Office held at 10 a.m. on Tuesday, October 22, 2024 a press conference on foreign exchange receipts and payments data for the first three quarters of 2024. Li Hongyan, Deputy Administrator of the State Administration of Foreign Exchange (SAFE), and Jia Ning, Director General of the Balance of Payments Department of the SAFE, were invited to the conference to brief on the data and answer media questions. The following is the script of the conference.
Xing Huina, Deputy Director General of the Press Bureau of the State Council Information Office (SCIO) and Spokesperson of the SCIO:
Ladies and gentlemen, good morning. Welcome to this press conference of the SCIO. We are pleased to welcome Ms. Li Hongyan, Deputy Administrator of the SAFE. She will share with us the data on China’s foreign exchange receipts and payments for the first three quarters of 2024 and answer your questions. Also present at today’s press conference is Mr. Jia Ning, Director General of the Balance of Payments Department of the SAFE.
Now I will give the floor to Ms. Li.
10:00:42 10/22/2024
Li Hongyan, Deputy Administrator of the SAFE:
Good morning, everyone. Welcome to today’s press conference. First, I would like to brief you on China’s foreign exchange receipts and payments situations for the first three quarters of 2024 and then I will take your questions.
Since 2024, the global economic and financial situation has been complex and volatile, and geopolitical risks have increased. China has adhered to the general principle of pursuing progress while ensuring stability, and stepped up the intensity of macroeconomic policy regulation. The national economy has achieved generally stable growth while making further progress. Cross-border capital flows tended to be balanced, and the foreign exchange market showed a strong resilience, with generally rational and orderly market expectations and transactions. The renminbi exchange rate remained basically stable at a reasonable and balanced level.
10:02:07 10/22/2024
Li Hongyan:
According to the data on foreign-related receipts and payments by banks for customers in the first three quarters of 2024, in US dollar terms, banks registered USD 5.2594 trillion in foreign-related receipts and USD 5.2566 trillion in foreign-related payments for customers, representing a surplus of USD 2.8 billion; or in renminbi terms, banks handled foreign-related receipts of 37.39 trillion yuan and foreign-related payments of 37.37 trillion yuan for customers, recording a surplus of 18.7 billion yuan. For settlement and sales of foreign exchange by banks, I would like to explain that settlement of foreign exchange means that enterprises or individuals sell foreign exchange to banks, and sales of foreign exchange means that enterprises or individuals buy foreign exchange from banks. In US dollar terms, in the first three quarters, banks settled USD 1.6762 trillion and sold USD 1.7975 trillion of foreign exchange, representing a deficit of USD 121.3 billion. In renminbi terms, banks settled 11.91 trillion yuan and sold 12.78 trillion yuan of foreign exchange, representing a deficit of 864.6 billion yuan.
China’s foreign exchange receipts and payments for the first three quarters of 2024 present the following characteristics:
First, net inflows of cross-border capital have resumed. In the first three quarters, the settlement and sales of foreign exchange by banks for customers recorded a small surplus, with a slight surplus in the first quarter, a deficit in the second, and a surplus again in the third quarter. In terms of main composition, the net inflow of trade in goods continued, foreign investment in China gradually improved, and the outbound investment of domestic entities was generally conducted in an orderly manner.
Second, settlement and sales of foreign exchange by banks tended to be basically balanced. In the first three quarters, the settlement and sales of foreign exchange by banks represented an overall deficit. Specifically, the deficit expanded in the second quarter, and the balanced level resumed in the third quarter, with September seeing a surplus. The settlement of foreign exchange rose and the sales were basically stable.
Third, the settlement rate has recently picked up in an orderly manner, and the sales rate has been stable with a slight decline. Enterprises have maintained rational willingness for settlement and sales of foreign exchange. In the first three quarters, the foreign exchange settlement rate, a measure of customers’ willingness to settle foreign exchange, or the ratio of foreign exchange sold by customers to banks to customers' foreign exchange receipts, was 62.1 percent. The foreign exchange sales rate, a measure of customers’ willingness to buy foreign exchange, or the ratio of foreign exchange purchased by customers from banks to foreign exchange payments made by customers, was 68.9 percent. Particularly, the settlement rate for August and September was 66.4 percent, up by 5.7 percentage points from the previous 7 months, and the sales rate for August and September was 66.7 percent, down by 2.8 percentage points from the previous 7 months. The exchange rate expectations of domestic entities were basically stable, and foreign exchange transactions remained rational and orderly.
Fourth, the transactions in the foreign exchange market were relatively active. In the first three quarters, the turnover on the domestic renminbi foreign exchange market totaled USD 30.27 trillion, up by 10.1 percent year-on-year. Specifically, the turnovers on the foreign exchange spot and derivatives markets were USD 10.18 trillion and USD 20.09 trillion, respectively, with the turnover on the derivatives market accounting for 66.4 percent of the total, an increase of 3.7 percentage points over the same period of 2023.
By the way, I would like to introduce to you that this August, the SAFE released the Guidelines for Enterprise Exchange Rate Risk Management on its official website. Today, we bring these Guidelines here for you to take and read freely. In the Guidelines, we have added new market practices and corporate cases, and some accounting applications for enterprises to conduct hedging for value preservation. I hope that you can help us better publicize them.
Fifth, the scale of foreign exchange reserves remained basically stable. Since the beginning of 2024, some of the non-USD currencies have appreciated and some depreciated against the US dollar, and the global asset prices have risen in general. Due to non-trading factors such as foreign exchange rate conversion and changes in asset valuation, China’s foreign exchange reserves have steadily increased. As of the end of September, the balance of foreign exchange reserves was USD 3.3164 trillion, an increase of USD 78.4 billion from the end of 2023.
In the next step, the SAFE will thoroughly implement the guiding principles of the Third Plenary Session of the 20th CPC Central Committee and the deployment and requirements of the meeting convened by the Political Bureau of the CPC Central Committee on September 26, pay more attention to system integration, lay more emphasis on key points, and focus more on practical achievements of reforms. The SAFE will unswervingly pursue the distinctive path of financial development with Chinese characteristics, concretely and effectively promote reforms and prevent risks in the foreign exchange field, and further enhance support for the real economy. In this way, the SAFE will contribute to a sustained economic recovery.
The above are the main statistics on China’s foreign exchange receipts and payments for the first three quarters of 2024 that I want to share with you. Next, I will answer your questions on China’s foreign exchange receipts and payments.
Thank you!
10:13:28 10/22/2024
Xing Huina:
The floor is now open for questions. Please tell us your news agency before raising your questions.
10:14:13 10/22/2024
Yicai:
Since the beginning of this year, foreign holdings of Chinese bonds have constantly presented a net increase, and the recent rise in China’s stock market has also led to an increase in foreign allocation of Chinese stocks. What is the SAFE’s outlook for the future allocation of renminbi-denominated assets by foreign investors? Thank you!
10:16:37 10/22/2024
Li Hongyan:
Thanks for your question. Steady progress has been made in China’s opening-up of its financial market to the outside world, and the foreign investment in China has been receiving great attention. Let me start by giving you a brief overview of the current situation. Over the recent period, the allocation of renminbi-denominated assets by foreign investors has generally shown good momentum. Since the beginning of 2024, renminbi bonds have always presented a good overall yield and have attracted more allocation by foreign investors. To date, the foreign holdings of renminbi bonds in China have totaled over USD 640 billion, hitting an all-time high. In terms of the composition of the existing holdings, prudent investors such as foreign central banks and commercial banks are the main holding institutions, and medium- and long-term bonds such as treasury bonds and policy-oriented financial bonds account for a larger proportion, resulting in a relatively strong stability of investment. In addition, driven by the rise in the domestic stock market, since the second half of September, the net purchases of Chinese stocks by foreign investors have increased overall, and foreign investors have been even more willing to allocate renminbi-denominated assets. At present, foreign investors are generally still at an initial stage of investing in China’s capital market, and their holdings of renminbi-denominated assets do not have a large scale or share. Investments by foreign investors in China’s stock and bonds markets account for about 3 to 4 percent of the total, and still have room for increase as underpinned by multiple favorable factors.
First, China’s economic fundamentals maintain steady and upbeat momentum, offering a good macro-environment. Since the beginning of 2024, China’s high-quality economic development has been advancing in an orderly manner. As a full range of incremental policies have recently been implemented, the positive long-term trajectory of China’s economy will continue to consolidate.
Second, China has improved its high-standard opening up, offering a good policy environment. In recent years, China’s financial market has been steadily opening up to the outside world, providing a series of channels for foreign investment, including the Shanghai Stock Connect, the Shenzhen Stock Connect, the Bond Connect, and the CIBM (China’s Inter-bank Bond Market) Direct. These serial institutional arrangements provide diversified investment channels for foreign investors. The Third Plenary Session of the 20th CPC Central Committee made important arrangements for promoting the high-standard opening up of the financial sector. With more relevant policies being implemented, China’s capital markets are expected to be more attractive to foreign investors.
Third, renminbi-denominated assets, with a great effect of diverse allocation for risk diversification, offer a good investment value. China has built a relatively comprehensive and in-depth financial market system, with the second largest bond and stock markets in the world. The value of the renminbi is stable, and renminbi-denominated assets are diverse and renminbi has yield performances relatively independent from the rest of the world. This helps global investors diversify their asset allocation and risks. At the same time, renminbi accounts for a steadily greater proportion in the currencies used in cross-border transactions around the world, and its international influence has gradually increased. It is an important choice for global investors to diversify their asset allocation.
On the whole, the allocation of renminbi-denominated assets by foreign investors will help enrich market participants, increase market liquidity, and promote more dynamic and internationalized development of the capital market in China. The SAFE will continue to enhance investment facilitation, create a good environment for investment, bolster the high-standard opening up in the financial sector, and actively support foreign investors to participate in the capital market in China. Thank you!
10:16:52 10/22/2024
21st Century Business Herald:
In the first half of this year, the scale of China’s external debt increased as a whole. How does the SAFE view the changes in the scale of external debt? Thank you!
10:25:16 10/22/2024
Li Hongyan:
Thanks for your question. For this question, I give the floor to Mr. Jia Ning, Director General of the Balance of Payments Department of the SAFE.
10:26:39 10/22/2024
Jia Ning, Director General of the Balance of Payments Department of the SAFE:
Thanks for your question. The external debt of a country is a matter of considerable concern both in theory and practice. According to the ways of formation, China’s external debt can be classified into two categories. The first category is formed through overseas financing by enterprises, banks and other sectors. This part of the external debt is an objective result of making full use of the domestic and international markets and two kinds of resources, and is directly related to the development of cross-border trade and investment. The second category is the external debt formed by foreign investors purchasing domestic bonds, reflecting the global investors’ demand for the allocation of renminbi-denominated assets. In recent years, as renminbi has become more attractive to the rest of the world, the second category has become the main channel for the growth of China’s foreign debt.
In the first half of 2024, China’s external debt has steadily increased. As of the end of June, the balance of external debt was USD 2.54 trillion, an increase of USD 97.1 billion from the end of 2023. On the one hand, China’s economy has maintained steady development. This, combined with the effects of the increase in the comprehensive yield of renminbi bonds, among others, caused steady allocation of renminbi bonds by foreign investors. The net increase in foreign holdings of renminbi bonds in the first half of the year reached a historical high, driving an increase of nearly USD 90 billion in bond-related external debt, and is the main driver of the recovery of external debt. On the other hand, with rising expectations on the interest rate cut of the US Federal Reserve, enterprises, banks and other entities in China tended to slow down in the pace of servicing their external debt. As a result, financing-related external debt such as deposits, loans and trade credits have stopped falling and picked up, increasing by more than USD 8 billion in the first half of the year. According to preliminary statistics, the scale of external debt was generally stable in the third quarter.
China’s external debt is generally moderate in scale, and the risk of debt servicing is relatively low. First, the size of China’s external debt basically matches the actual economic development. In recent years, despite the abrupt changes in the Fed’s monetary policy and the shift between easing and tightening external financial conditions, China’s external debt has been generally on a stable scale, with its ratio to GDP fluctuating slightly in a range of 14-16 percent, and cross-border financing by enterprises has effectively supported the development of the real economy. Second, the risk of serving the external debt is manageable. The four indicators of China’s external debt, namely the debt-to-GDP ratio, debt service ratio, external debt to exports ratio and the ratio of short-term external debt to foreign exchange reserves, are all within the international recognized safety threshold. Third, the structure of China’s external debt has been constantly optimized. At the end of June 2024, the proportions of renminbi external debt and medium- and long-term external debt were 49 percent and 44 percent respectively, up by 13 and 3 percentage points respectively from the end of 2019. The risks of maturity mismatch and currency mismatch for Chinese external debt are manageable and significantly reduced.
Looking ahead, China’s external debt is expected to maintain steady development. As China’s economic recovery and growth have been boosted, the opening up of the financial market has been steadily advancing and the functions of renminbi-denominated asset allocation have been constantly manifested, foreign investment in renminbi bonds will continue to grow. At the same time, as China’s potential for outbound trade and investment is constantly unleashed, and the interest rate cut by advanced economies such as the United States and Europe will push the cost of external financing down, the demand for borrowing external debt by enterprises and other sectors will gradually pick up.
That’s all for my answer. Thank you!
10:27:05 10/22/2024
Market News International:
As the interest rate spreads between China and the United States are narrowing, how will China’s cross-border capital flows and exchange rates be impacted? Does the SAFE worry that fluctuations in the renminbi exchange rate against US dollar will cause exchange losses to exporting enterprises?
10:30:44 10/22/2024
Li Hongyan:
Monetary policy adjustments in major economies are of common interest, and we are more closely following this issue. In September, the Fed announced a 50-point cut in interest rates, and the austerity policy that has been in place for more than two years began to turn, and the interest rate spreads between China and the United States were adjusted. In the future, there is still uncertainty about the pace and path of the Fed’s interest rate cut, and recent market expectations are constantly adjusting to keep up with the changes in U.S. economic data. In the past, the Fed’s monetary policy adjustments had spillover effects on global financial markets. Although the operation of China’s foreign exchange market has been affected, it has remained stable on the whole, mainly thanks to the support of domestic fundamentals. In the future, China’s economy will maintain high-quality development, its high-standard opening up will continue to advance, and market resilience will be further enhanced. These will provide even more favorable foundation and conditions for stable operation of the country’s foreign exchange market.
First, the steady consolidation of China’s economic recovery will help lay a more solid internal foundation for the stable operation of the country’s foreign exchange market. Since the beginning of 2024, China’s economic operation has remained generally stable. The GDP data for the first three quarters released a few days ago showed a growth of 4.8 percent year-on-year, a growth rate at a relatively high level in the world. Recently, China has strengthened the counter-cyclical adjustments of its macro policy and launched a package of incremental policies with intensified efforts. This will continue to boost the economic recovery and growth, improve market expectations and confidence, enhance China’s economic vitality, and promote the steady development of cross-border trade and investment, thus providing a solid foundation for the stability of the foreign exchange market.
Second, the building of new systems for a higher-level open economy in China will help enhance the stability of the balance of payments and the operation of the foreign exchange market. As China’s innovation-driven development strategy and advantages over the entire industrial chain will continue to play a role, foreign trade is expected to develop steadily, the current account operation will be promoted in a reasonable and balanced range, and the internal and external balance of the economy will continue to be consolidated. At the same time, as China’s high-level institutional opening-up has been steadily advancing, the channels for cross-border investment have been continuously expanded, transactions have become more facilitated, and the foreign investment in China and the country’s outbound investment have been developing coordinately. These will enable more balanced cross-border capital flows in China. On the whole, the equilibrium and steady operation of the balance of international payments are also conducive to maintaining the basic stability of the renminbi at a reasonable and balanced level.
Third, the resilience of China’s foreign exchange market has steadily increased, which will help adapt to and ease the impact of changes in the external environment. At the macro level, in recent years, the market-based renminbi exchange rate regime has been continuously improved, and the renminbi exchange rate is playing an increasingly stronger role as an automatic stabilizer for adjusting the balance of payments. External pressure can be better released in a timely manner. At the micro level, enterprises are better at using foreign exchange derivatives to manage exchange rate risks and are more relying on cross-border renminbi settlement to reduce the risk of currency mismatch. Since the beginning of 2024, the ratio of foreign exchange hedging by enterprises has reached 27 percent, and the proportion of cross-border renminbi use under trade in goods has been 30 percent, both at a historically high level. These positive changes at both macro and micro levels have reduced the impact of fluctuations in the foreign exchange market on enterprises, and helped make market expectations and transactions more rational.
As for your concern about the impact of the renminbi exchange rate on China’s export enterprises, both theory and practice show that a country’s exports are subject to a variety of factors, including external demand, domestic manufacturing level, factor cost, and so on. The exchange rate is only one of them. When it comes to China, the foreign trade situation has continued to improve since the beginning of 2024. This is mainly attributable to the enhanced competitiveness of domestic enterprises on the supply side, and the relatively stable global trade on the demand side. From a longer-term perspective, the main driving factors of China’s export growth are also basically the same as above.
From the perspective of exchange rate fluctuations, the spot exchange rate of CNY against the US dollar has depreciated slightly by about 0.3 percent since the beginning of this year, remaining relatively stable in two-way fluctuations. Even though there was a significant rebound in the renminbi exchange rate against the US dollar in August and September, it was a common reaction of various non-USD currencies against the weakening of the US dollar. In addition, the appreciation of renminbi was also at an average level globally, with a relatively mild impact on imports and exports.
The SAFE has always paid close attention to changes in the situation. As there are still some uncertain and unstable factors in the external environment, the foreign exchange administrative authorities will continue to monitor and evaluate the international economic and financial situation and the monetary policy trends of major developed economies, constantly accumulate and summarize experience in countermeasures, and enrich policy toolkits. It will also carry out counter-cyclical macro prudential adjustments, and effectively maintain the stable operation of the foreign exchange market. Thank you!
10:30:58 10/22/2024
CCTV:
How have China’s foreign exchange market and balance of payments been operating since the beginning of this year? What characteristics do you think are presented? Thank you!
10:41:44 10/22/2024
Li Hongyan:
Thanks for your question. I would like to share with you the current foreign exchange situation. As I mentioned earlier, the external environment has been complex and volatile since 2024, with repeatedly adjusted expectations on the monetary policies of major developed economies. While the international financial market has continued to fluctuate, China’s economy has achieved overall stability while ensuring progress. The overall foreign exchange market in China has withstood the test of changes in external environment and shown strong resilience, with the recent situation stabilizing and improving. As a whole, this can be observed from the following three aspects:
First, the renminbi exchange rate remained basically stable in two-way fluctuations. The RMB exchange rate is mainly determined by the market. Under the market-based exchange regime, the two-way fluctuations of renminbi with both appreciation and depreciation are the norm. As I just mentioned, the spot CNY-USD exchange rate has depreciated slightly overall by 0.3 percent since the beginning of this year, with certain declines and rises in some periods, but all in line with the changes in the internal and external environment. At the same time, the performance of renminbi in the global foreign exchange market is relatively robust compared to other currencies. Since the beginning of this year, the US dollar index has risen by 2.3 percent, the euro and the yen have depreciated by 1.7 percent and 5.9 percent against the US dollar respectively, and the emerging market currency index has fallen by 6.3 percent. These show that the renminbi fluctuations are normal and mild.
Second, foreign exchange market expectations and transactions remained rational and orderly. According to relevant indicators in the foreign exchange forward and options markets, there has been no significant expectation of appreciation or depreciation of the renminbi exchange rate since the beginning of this year, and overall market transactions have remained rational and orderly. As we all see, the renminbi exchange rate has recently risen and declined, and its flexibility has been enhanced. Enterprises and other entities have chosen the right time for settlement and sales of foreign exchange on the basis of the demands for cross-border trade, investment and financing. The total scale of settlement and sales of foreign exchange in September increased by 14 percent over August. Meanwhile, in recent years, enterprises have been increasingly more aware of exchange rate risk neutrality, and the scale of forward exchange settlement contracts increased month on month in both August and September, indicating that enterprises have been actively adapting to market fluctuations through exchange rate risk management.
Third, China’s balance of payments maintained a basic equilibrium overall. The current account continued to show a reasonable scale of surplus. In the first half of this year, China’s current account surplus was USD 93.7 billion, accounting for 1.1 percent of the Gross Domestic Product (GDP) for the same period, and still in a reasonable and balanced range. Specifically, trade in goods has maintained a surplus of a certain scale and continued to play the basic role of stabilizing cross-border capital flows; and the deficit in trade in services has basically returned to the pre-epidemic level. According to preliminary statistics, the current account surplus for the third quarter remained at a reasonable level. In terms of the capital account, cross-border capital flows have recently become more balanced. Foreign investments in China have increased. Foreign investments in China’s bonds have continued the trend of steady inflow, with a cumulative net increase of over USD 80 billion in holdings in the previous three quarters. Recently, foreign investments in China’s stocks have also improved markedly, and the changes in external debt have remained stable. Outbound investments by entities within China have been conducted in an orderly manner, with both direct investments and securities investments showing a steady and sustained growth trend.
On the whole, China’s foreign exchange market has become increasingly more mature and resilient, and has been obviously more capable of coping with changes in the external environment, providing strong support for the overall stability of foreign exchange receipts and payments.
That’s all for my answer. Thank you!
10:42:36 10/22/2024
Bloomberg:
I have two questions today. First, the U.S. Department of the Treasury has raised some questions about the balance of payments statement compiled by the SAFE. In particular, with regard to the calculation of trade, the U.S. Department of Treasury would like to see more information from the SAFE on how it calculates the trade surplus. Will the SAFE plan to provide more details on its calculation method? Second, the Chinese stock market has rebounded recently due to the expectation of stimulus measures. Can the SAFE disclose the details of the recent capital inflows of foreign investors under the capital account? What is the outlook for cross-border capital flows by the end of this year?
10:51:45 10/22/2024
Jia Ning:
Thanks for your interest in the balance of payments statistics. The difference between the trade in goods in the balance of payments statement and the customs import and export is not unique to China. It is also a common phenomenon in other economies. This is mainly because the balance of payments and customs statistics follow different international standards. This also suggests that we should first focus on the statistical calibers of the two categories of data.
The trade in goods in the balance of payments reflects the transfer of ownership of goods between residents and non-residents. Generally speaking, it is the situation of goods purchase and sales between domestic and foreign enterprises. The customs statistics, however, are on the situation of goods entering and exiting China’s customs border, and do not take into account changes in the ownership of goods. Take the common processing trade as an example, if a foreign enterprise provides all raw materials and commissions a domestic enterprise to process and assemble, and the finished product is owned by the foreign party, the trade will not be included in the balance of payments because the ownership of goods does not change. However, because the goods are in and out of the customs border, the customs include the trade in the statistics of import and export according to the full value of the goods.
In particular, as a major global trade and consumer country, China has diverse forms and complex patterns of trade. The purchase and sales of goods are more commonly separated from the cross-border movement of goods in international trade, and the differences between the two types of data are naturally even more obvious. For example, in the context of globalization, an overseas transnational corporation entrusts a domestic enterprise with production and manufacture, and the finished products are sold directly within the country. Since goods always circulate within the country, they are not included in customs statistics, but when goods are sold directly within the country, the ownership of goods has been transferred from the overseas transnational corporation to domestic entities, and therefore the goods should be covered by the import statistics of the trade in goods in the balance of payments.
In addition, the pricing principles of the two types of statistics are different. The balance of payments is on the value of goods themselves, excluding the fees for services such as transportation and insurance, while for customs statistics, exports are based on FOB and imports are based on CIF, that is, imports include the fees for transportation and insurance.
The above details are elaborated in the newly released China’s Balance of Payments Report for the First Half of 2024 and in previous reports. In order to provide more comprehensive and accurate statistics on trade in goods in the balance of payments, since 2022, the SAFE has used the data directly reported by enterprises, which are more in line with the principles of goods purchase and sales, when compiling the balance of payments statement. All countries compile their balance of payments statements in accordance with the uniform standards of the International Monetary Fund (IMF). In the first half of this year, during the IMF Article IV consultations, the IMF believed that the new compilation method for China’s trade in goods solved the practical problems facing China and was more in line with the principle of balance of payments statistics, and fully recognized the method. Recently, at a special session of the China-US Financial Working Group, SAFE and the U.S. Department of the Treasury also had full and effective communication on statistical issues.
In the future, the SAFE will continue to track the development and changes of China’s foreign trade, constantly improve the statistical methods, and provide higher quality balance of payments statistics to society.
On your second question, Ms. Li also made an answer earlier. On the whole, China’s balance of payments has a solid internal economic foundation and good market conditions. The current account has been developing steadily since the beginning of this year, with the size of two-way transactions increasing and the surplus remaining at a reasonable and balanced level. In terms of the capital account, foreign direct investment has improved recently, and the purchase of bonds and stocks in China by foreign capital under securities investment has been enhanced overall. Therefore, we have the conditions and confidence to believe that China’s cross-border capital flows will remain stable and positive in the coming months of this year and beyond. Thanks for your interest.
10:52:15 10/22/2024
The Cover:
What is your comment on the performance of the current account of the balance of payments since this year? What is your judgment on future trends of the current account? Thank you!
10:59:46 10/22/2024
Jia Ning:
Thanks for your interest in China’s current account performance. The current account is an important indicator of the balance of the internal and external economy of a country. Since 2024, China has maintained a reasonable scale of current account surplus, indicating that the internal and external balance of the economy has been further consolidated. Just now Ms. Li Hongyan has introduced the proportion of China’s current account surplus to GDP and the main composition of the current account in the first half of this year. In recent years, China has given full play to its comparative advantages in the industrial chain and supply chain, enhanced its foreign trade competitiveness, and promoted the export of productive services. At the same time, relying on the consumption potential of its large markets, China allowed global trading partners to fully share its development opportunities, and this boosted the balanced development of China’s import and export trade. Looking ahead, China’s current account will continue the development trend of expanding scale and basic equilibrium, which will help maintain the stable operation of the balance of payments and the foreign exchange market.
First, China’s exports and imports for trade in goods are expected to grow steadily, and its trade surplus will remain relatively stable. From the perspective of exports: On the one hand, the global economy has recovered moderately, and the role of external demand in export promotion has persisted. According to the forecast of the World Trade Organization, global trade growth will be 3 percent next year, up by 0.3 percentage points from this year. At the same time, the stock replenishment cycle of developed economies is not yet over, and the consumer electronics market is expected to remain moderate. All these will support China’s exports. On the other hand, the internal driving force of export development remains strong. China has a relatively complete industrial system, and over the years has been deeply integrated into the global supply chain and value chain. It has richer commodities for trade, a more optimized trade structure, and more diverse trade partners. From the perspective of imports: As the domestic economic operation continues to improve, consumption vitality will be further released, and demand for international commodities will increase simultaneously. At the same time, in recent years, China has adopted a series of policy measures to take the initiative to expand imports. This has opened the door for the world to the Chinese market, and will further increase the scale of imports. On the whole, under the joint effects of both internal and external favorable factors, China’s total import and export of trade in goods will continue to lead the world, and the trade balance will develop in a more balanced direction.
Second, the balance of trade in services has a gradually optimized structure and is expected to have a mild trend. In recent years, China has continued to advance the industrial transformation and upgrading and bolster the deep integration of the service and manufacturing industries. The country has seen accelerated development of high-end services such as those for the digital economy and intellectual property rights, and a steady growth of exports in the trade in services. In the first three quarters of 2024, China’s cross-border revenue from the trade in telecommunications, computer and information services and business services totaled USD 123.6 billion, up by 6.8 percent year-on-year. Its revenue from the fees for the use of intellectual property was USD 9.1 billion, up by 5.5 percent year-on-year. Another major component of trade in services is travel. At present, residents’ cross-border travel and overseas study have steadily recovered and basically returned to the pre-epidemic level, and the growth rate will be more moderate in the future. At the same time, since the beginning of this year, China has continuously optimized the services for foreign nationals arriving in China and expanded visa facilitation, bringing about a relatively rapid increase in the revenue from cross-border travel. This revenue is expected to continue to grow and help narrow the travel deficit in the future.
Thank you!
11:00:37 10/22/2024
Xing Huina:
Please continue to ask questions. I see a reporter raising her hand.
11:03:13 10/22/2024
National Business Daily:
In recent years, the flexibility of the two-way fluctuations of renminbi has been enhanced. The SAFE has been pushing enterprises to establish the idea of exchange rate risk neutrality. What suggestions do you have for enterprises on exchange rate risk management? Thank you!
11:09:01 10/22/2024
Li Hongyan:
Thanks for your question. In recent years, media friends have helped the foreign exchange administrative authorities make a lot of effective publicity and reports on enterprises’ exchange rate risk management. First of all, I would like to thank you all for your support in foreign exchange administration.
The SAFE has always attached importance to, supported and served enterprises’ exchange rate risk management, and has made efforts in many aspects. On the one hand, the foreign exchange market has constantly been improving conditions for serving enterprises’ exchange rate risk management. At present, there is a mature international foreign exchange derivatives system including forward, swap and options. Over 120 small, medium-sized and large banks of various kinds, whether Chinese or foreign funded, can now open foreign exchange derivatives business. They provide market services covering all parts of China and trading available to the main currencies for cross-border settlement by enterprises, with a complete infrastructure for trading, clearing, and so on. On the other hand, we continue to guide enterprises to establish the concept of exchange rate risk neutrality and promote banks to improve their foreign exchange services for enterprises, especially the micro, small and medium-sized ones. Through various efforts, enterprises have gradually improved their exchange rate risk management. In the first three quarters of 2024, the foreign exchange derivatives used by enterprises to manage exchange rate risks totaled over USD 1.1 trillion, and over 32,000 enterprises tried exchange rate hedging for the first time. These data are at a historically high level.
In an environment of open economy and market-based exchange rate, enterprises need to pay attention to exchange rate risk management. The use of foreign exchange derivatives is an important means of exchange rate hedging. We also understand in daily research that some enterprises have some concerns on issues such as the price cost of derivatives and the effectiveness of value preservation. Here I want to share some ideas with you and enterprises. Foreign exchange derivatives have market pricing mechanisms that are common at home and abroad. For example, the prices for forward settlement and sales of foreign exchange are based on the spot prices of foreign exchange, with a certain amount of appreciation or depreciation according to the spread of local and foreign currencies. For another example, buying a foreign exchange option is similar to buying an insurance policy, which requires a premium to be paid accordingly. It is necessary and cost-effective for enterprises to hedge at a certain cost. The essence of hedging is to translate uncertainty about future exchange rate fluctuations into certainty, and thus reduce the impact of such fluctuations on the operations of enterprises. Market practice also shows that enterprises should make reasonable use of various instruments such as foreign exchange derivatives for hedging according to their own foreign exchange exposures, and should correctly evaluate the effectiveness of hedging. In particular, it is undesirable to assess the loss or gain of hedging simply by comparing the locked forward rate with the spot rate at maturity.
It is a key task for the SAFE to service enterprises’ foreign exchange risk management. We will continue to strengthen publicity and training in the market, promote financial institutions to optimize their services, and cooperate with multiple parties to reduce the cost of foreign exchange hedging. We will also deepen the development of the foreign exchange market, build better foreign exchange financial infrastructure and services, and support enterprises in better managing foreign exchange risks.
This August, we released on the official website of the SAFE the updated book Guidelines for Enterprise Exchange Rate Risk Management, adding new information on market practice and several business cases. The book introduces the accounting applications of hedging, which is interesting to many enterprises. We hope that the Guidelines can better provide targeted help to enterprises, and also hope that media friends can help us make more publicity. Thank you.
