Premier Li Keqiang recently signed Decree No. 642 of the State Council on promulgation of the Resolution of the State Council on the Amendments to the Measures for the Declaration of Balance-of-Payments Statistics (hereafter, the Resolution), which will come into  effect on January 1, 2014. Experts at some relevant research institutes and government departments were interviewed in order to grasp a deeper understanding of the amendments.

In 1995, the People’s Bank of China (PBOC) promulgated the Measures for the Declaration of Balance-of-Payments Statistics (hereafter, the Measures) upon approval of the State Council. The Measures were formulated to obtain a comprehensive understanding of China’s foreign economic situation, which could provide an important basis for macro-economic decision-making. The Measures have played an active role in China’s Balance of Payments (BOP) statistics during the past 20 years. What was the reason for this important amendment at this time?

Ding Zhijie (dean of the School of Finance of the University of International Business and Economics): The past 20 years witnessed the burgeoning development of China’s foreign economy. The amendments were implemented to adapt to the new circumstances, tackle new challenges, and meet the new requirements. With respect to the  new circumstances, in recent years there has been a constant expansion of China’s BOP transactions, a growing diversity of transactions in terms of content, type, and mode, development of new products, such as cross-border portfolio investments and financial derivatives, and the emergence of new businesses, such as e-banking and international bank cards, thus calling for new methods to monitor, analyze, and provide early warnings for the BOP statistics. As for the new challenges, in recent years there have been increasing uncertainties regarding BOP operations, a growing severity of abnormal inflows of cross-border capital, and greater difficulties in supervising them. This has made it necessary that monitoring and analysis of cross-border capital flows be strengthened and that early-warning capability be enhanced by improving the current BOP statistical and declaration systems. As for the new requirements, in 2009 the IMF published the Balance of Payments and International Investment Position Manual (hereafter, the Manual, sixth edition), specifying the universal international standards for the compilation of BOP statistical statements. The revised Manual refined the existing system in terms of its principles, scope, and classification and framework of the statistics and enhanced the statistics on the stock of the BOP positions. These changes subjected China’s BOP statistical data and methods to higher standards and created good opportunities for China to improve its BOP statistical system so that it is consistent with the latest international standards.

The amendments reflect the most recent requirements as a result of the rapid changes in the BOP situation and macro-economic monitoring and analysis. What are the highlights of the amended measures as compared with the previous measures?

Zhao Qingming (expert on international finance): Five areas are highlighted in the amendments. First, the current statistical declaration system (scope, object, and so forth) has been comprehensively revised based on the latest international standards for BOP statistics. Second, some key areas were revised, such as BOP stock statistics and the declaration obligations of non-Chinese residents. Third, the Measures have been supplemented by some content that was missing from the previous version and by those vulnerable aspects of the BOP statistics, including stock statistics and the obligations of the declaration entities, such as Chinese and non-Chinese residents. Fourth, the amendments optimize the channels and specify the obligations of registration, settlement, and trusteeship agencies in terms of submitting portfolio investment data in a more convenient and accurate manner, thus easing the burdens on the declaration entities and increasing the efficiency and accuracy of the submitted data. Fifth, the statistical obligations of declaration entities and the statisticians, as well as the penalties for violation of the regulations, are specified.

Guan Tao (director of the BOP Department of the SAFE): The amended Measures cover six areas. First, external financial assets and liabilities of Chinese residents are incorporated into the statistics. Second, non-Chinese entities are treated as declaration entities so as to acquire more comprehensive and accurate data on BOP transactions, especially transactions with non-Chinese residents that take place within China. Third, a series of new declaration requirements for agencies that provide services, such as registration, settlement, and trusteeship, have been added due to the development and administration of e-banking, international bank cards, and the securities market. Fourth, the declaration obligations of Chinese residents who have external financial assets and liabilities have been added. Fifth, the confidentiality obligations of the above entities have been added based on the revision of the declaration entities. Sixth, it is explicitly specified that penalties shall be imposed on the relevant entities in accordance with the Regulations on Foreign Exchange Administration of the People’s Republic of China, and the penalties set forth in the previous Measures are hereby abolished. All in all, for the present and for the foreseeable future, the revised version will meet the requirements for BOP statistics and monitoring.

The amendments also introduce some new requirements for China’s current BOP statistical system. Suggestions and opinions from experts were solicited regarding implementation of the new version. The BOP Department of the SAFE, as the entity responsible for implementing the Measures, has also been making preparations for their implementation.

Zhang Bin, director of the Global Macro-economy Research Office of the Research Institute on the World Economy and Politics at the Chinese Academy of Social Sciences, has suggested that the relevant systems be improved and that the statistics on China’s external financial assets, liabilities, and transactions be strengthened so as to provide an important basis for macro-economic control. Current statistical methods should be further improved to meet the new requirements in the Measures and to fulfill the obligations in the amendments.  Efforts should be intensified to disseminate information about the relevant policies in order to enhance awareness among the declaration entities as well as the general public regarding their declaration obligations.

Guan Tao described three new initiatives for implementing the Measures. The first is to revise and publish national standards for the Statistical System for External Financial Assets and Liabilities and Transactions and the Classification and Coding of BOP Transactions as required by the Balance of Payments and International Investment Position Manual (sixth edition). The second is to improve the direct declaration and statistical systems for external financial assets, liabilities, and so forth, to refine the statistical content of the BOP sampling survey, and to explore the estimation and statistical methods so as to reduce the social costs and to streamline the procedures for the declaration entities while maintaining the quality of the statistical data. The third is to intensify training efforts on the BOP statistics by increasing the frequency of training classes, enhancing face-to-face communications with the data submission agencies such as the banks, carrying out training and dissemination campaigns at various levels, and compiling brochures that interpret the BOP statistics so as to impart the relevant knowledge to both the general public and the declaration entities.