In January 2012, foreign-related receipts and payments by domestic banks on behalf of clients amounted to USD183.2 billion and USD156.7 billion respectively, and the surplus of foreign-related receipts and payments reached USD26.5 billion.

Annex: Glossary and relevant definitions

The Balance of Payments refers to all economic transactions occurring between residents and non-residents in China , including all financial transactions and barter transactions resulting in changes in the assets and liabilities of residents and non-residents.

Foreign exchange settlement and sales by banks refer to settlement and sales conducted by designated foreign exchange banks for their clients or for themselves, excluding data on transactions on the inter-bank foreign exchange market. Foreign exchange settlement and sales by banks on behalf of clients (including foreign exchange settlement and sales by banks) refer to settlement and sales by designated foreign exchange banks for their clients. The time of conversion between RMB and the foreign currency is regarded as the time-point for the statistics on the foreign exchange settlement and sales by banks, Specifically, foreign exchange settlement refers to the sale of foreign exchange to designated foreign exchange banks by owners of foreign exchange; foreign exchange sales refer to the sale of foreign exchange by designated foreign exchange banks to users of foreign exchange. The differences between foreign exchange settlement and sales are regarded as an offset balance. Such differences, which will be offset by the banks through transactions on the inter-bank foreign exchange market, function as a major factor resulting in changes in the country’s foreign exchange reserves. But they are not equivalent to the net change in foreign exchange reserves during the same period.

The principle for transactions between residents and non-residents does not apply to the preparation of statistics on foreign exchange settlement and sales by banks on behalf of clients, and such statistics only cover transactions of RMB and the foreign currency between the banks and their clients, namely, exchange transactions between RMB and the foreign currency that fall outside the category of the balance-of-payments statistics.

Contracts for forward settlement and sales of foreign exchange refer to the contracts for forward settlement (sales) of foreign exchange executed between the banks and their clients through consultation, in which the foreign currency, amount, exchange rate, and term for the forward settlement (sales) of foreign exchange are agreed upon; where the foreign exchange is to be received (paid), the foreign exchange settlement (sale) is to be handled on the basis of the amount of foreign currency and the exchange rate specified in such contracts. The forward foreign exchange settlement and sales business enables enterprises to lock into the exchange rate in advance for future foreign exchange settlement or sales and effectively avoid the risk of RMB exchange rate changes. Generally, banks will hedge the risk exposure arising from the forward foreign exchange settlement and sales business through the inter-bank foreign exchange market. For example, where the total amount involved in the contracts for forward settlement of foreign exchange executed by banks is more than that in the contracts for forward sales of foreign exchange, the banks will generally sell an equivalent amount of foreign exchange in advance on the inter-bank foreign exchange market, and vice versa. Therefore, the forward settlement and sales of foreign exchange business is also a factor that affects changes in the foreign exchange reserves in China .

Foreign-related receipts and payments by banks on behalf of their clients refers to receipts and payments occurring between domestic non-bank resident institutions/individuals (collectively called the “non-bank sector”) and non-resident institutions/individuals through domestic banks, exclusive of the receipts and payments in cash and foreign-related receipts and payments by the banks themselves; in particular, cross-border receipts and payments between non-bank sectors and non-residents through domestic banks (including RMB and foreign exchange), and domestic receipts and payments between non-bank sectors and non-residents through domestic banks (temporarily excluding receipts and payments in RMB between domestic individual residents and domestic non-resident individuals). Statistics are collected at the time when the clients conduct the foreign-related receipts and payments at the domestic banks. Specifically, foreign-related receipts of banks on behalf of clients refer to funds collected by non-bank sectors from non-residents via domestic banks; external payments by banks on behalf of clients refer to funds paid by non-bank sectors to non-residents through domestic banks.

Although the foreign-related receipts and payments of banks on behalf of clients are an integral part of the balance-of-payments statistics, the accounting method for the statistics, different from the accrual basis of accounting required by the balance-of- payments statistics, is based on a cash basis. In addition, it merely reflects fund flows between the non-bank sectors and non-residents and does not include barter transactions or foreign transactions conducted by the banks themselves. Furthermore, the scope of the statistics on foreign-related receipts and payments of banks on behalf of clients is smaller than the scope of the balance-of-payments statistics.