According to statistical data released by the State Administration of Foreign Exchange (SAFE), in July 2012 the amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD127.5 billion and USD127 billion respectively. The surplus of foreign exchange settlement and sales amounted to USD500 million. During the same period, the total amount involved in contracts for forward settlement of foreign exchange with banks on behalf of clients was USD11.8 billion; the total amount involved in contracts for forward sale of foreign exchange was USD15.2 billion; and net forward exchange sales totaled USD3.4 billion. During the first seven months of 2012, the cumulative amount of foreign exchange settlement and sales by banks on behalf of clients amounted to USD872.5 billion and USD842.6 billion respectively. The surplus of foreign exchange settlement and sales was USD30 billion. During the same period, the cumulative amount in contracts for forward settlement of foreign exchange with banks on behalf of clients was USD95.7 billion, the cumulative amount in contracts for forward sale of foreign exchange was USD104.5 billion, and the cumulative net forward sale of foreign exchange with banks on behalf of clients totaled USD8.8 billion.

In July 2012 foreign-related receipts and payments of domestic banks on behalf of clients amounted to USD218.4 billion and USD209.6 billion respectively; and the surplus of foreign-related receipts and payments totaled USD8.8 billion. In the first seven months of 2012, the cumulative foreign-related receipts and payments of banks on behalf of clients amounted to USD1443.7 billion and USD1355.8 billion respectively; and the cumulative surplus of foreign-related receipts and payments reached USD88 billion.

Addendum: 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 arrangements 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 carried out by designated foreign exchange banks either 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 the banks themselves) refer to settlement and sales by designated foreign exchange banks for 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 the 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 the users of foreign exchange. The difference between the foreign exchange settlement and sales is regarded as an offset balance. This difference, which is offset by the banks through transactions on the inter-bank foreign exchange market, is a major factor resulting in changes in the country’s foreign exchange reserves. But it is 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; such statistics only cover RMB and foreign currency transactions between banks and clients, namely, RMB and foreign currency exchange transactions that fall outside the category of the balance-of-payments statistics.

Contracts for forward settlement and sales of foreign exchange refer to contracts for forward settlement (sale) of foreign exchange executed between banks and their clients through consultation, during which the foreign currency, amount, exchange rate, and term for the forward settlement (sale) of foreign exchange are agreed upon; where the foreign exchange is to be received (paid), and 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 an exchange rate in advance for future foreign exchange settlement or sales and effectively to avoid the risks of changes in the RMB exchange rate. In general, 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 generally will 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 China ’s foreign exchange reserves.

Foreign-related receipts and payments by banks on behalf of clients refer 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, they include 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 individual domestic residents and individual domestic non-residents). The statistics are collected at the time when the clients carry out the foreign-related receipts and payments at the domestic banks. Specifically, the 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 via domestic banks.

Although the foreign-related receipts and payments by 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 accounting basis required for the balance-of- payments statistics, is based on a cash basis. In addition, it merely reflects capital 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 the foreign-related receipts and payments of banks on behalf of clients is smaller than the scope of the balance-of-payments statistics.