Q: How do you view the changes in the data on foreign exchange settlement and sales by banks in August?

A: Despite fragile recovery of the world economy, China's economy has been growing slowly but stably and confidently since the beginning of this year, with positive factors on the rise. Due to the impact of multiple domestic and overseas factors, the short-term cross-border capital flows have been fluctuating more sharply as the supply of and demand for foreign exchange in China have been basically balanced.

In August, banks recorded a deficit of RMB 274.5 billion (equivalent to USD 43.5 billion) between foreign exchange settled and sold. The factors that impacted this deficit include: first, market players were more willing to hold foreign exchange, with the USD deposits held by domestic residents and enterprises with domestic banks on the rise. Second, market players optimized the arrangements for assets and liabilities in domestic and foreign currencies. Companies adjusted the structure of foreign currency liabilities and RMB assets that was popular in the past few years, making the US dollars and the renminbi more matched in the assets and liabilities, thereby reducing the foreign exchange rate risk. Third, trading and investment activities resulted in the increase in external payment, including foreign trading companies accelerating foreign exchange payments and actively repaying debt incurred by trade finance as well as seasonal factors like purchase of foreign exchange for travel and for return on investment. August is the peak season for overseas travel and studying abroad by Chinese residents as well as for distributing dividends and purchasing foreign exchange by enterprises.

Generally speaking, the recent changes in foreign exchange receipts and payments have been driven primarily by economic and market factors and show the bidirectional volatility of cross-border capital flows, which is normal and affordable. While continuing to vigorously facilitate trading and investment activities by market players that do business in compliance with laws and regulations, the SAFE will further enhance monitoring and warning of cross-border capital flows, accelerate building and improving the external debt and capital flow management system under the macro-prudential management framework, and increase counter-cyclical policy tools, so as to stick to its bottom line of guarding against systematic and regional financial risks.