The State Administration of Foreign Exchange (SAFE) has recently released the Balance of Payments (BOP) for the first quarter of 2020 and the International Investment Position (IIP) at the end of March 2020. Wang Chunying, press spokesperson and chief economist of the SAFE, answered media questions on relevant issues.
Q: Could you brief us on China's balance of payments for the first quarter of 2020?
A: In the first quarter of 2020, due to the economic, trade and investment impact of the COVID-19 pandemic, global financial markets were very volatile. In this context, China recorded a slight deficit under the current account in the first quarter, with its ratio to GDP reaching -1.1%, which was relatively balanced and reasonable though. The cross-border capital flows stayed generally stable and the balance of payments maintained general equilibrium, showing strong stability.
First, a surplus was registered under trade in goods and a narrower deficit was recorded under trade in services. In the first quarter, China posted a surplus of US$ 23.1 billion under trade in goods. Due to the impact of the COVID-19 outbreak and the Chinese New Year Holiday, a slight deficit was recorded under trade in goods in January and February. But in March, with the steady progress of the resumption of work and production and the policy to stabilize foreign trade took effect, a surplus was registered under trade in goods again. China posted a deficit of US$ 47 billion under trade in services, down by 26% year on year. In particular, a deficit of US$ 41.5 billion was recorded under tourism, down by 28% year on year, and a deficit of US$ 11.7 billion was posted under transport, down by 6% year on year, which were chiefly because of reduced travel expenses caused by less overseas trips and decreased transport expenses resulting from declining imports under trade in goods during the COVID-19 epidemic.
Second, surpluses were registered in direct investment and other investments, and portfolio investment became stabilized after short-term fluctuations. In the first quarter, a net inflow of US$ 16.3 billion was registered in direct investment, a net outflow of US$ 53.2 billion was recorded in portfolio investment and a net inflow of US$ 27.7 billion was recorded in other investments including deposits and loans. Firstly, China posted a net inflow of US$ 34.3 billion in FDI, showing foreign capital had a strong desire to invest in China despite sluggish absorption of direct investments in global markets. Secondly, a net outflow was recorded in portfolio investment, suggesting that global financial markets were more volatile in March due to the global spread of COVID-19 and domestic investors were attracted to invest overseas since the prices of some overseas assets plummeted. Moreover, a net inflow of US$ 8.9 billion was registered in bond investment under foreign portfolio investment that was aimed to allocate mid and long-term RMB assets. Since late March, a net inflow has been recorded in foreign investment in China's capital market again and investments of domestic investors in overseas capital markets have been evidently stabilized.
Overall, China's epidemic control has yielded positive results, resumption of work and production has been promoted in an orderly manner, our economic fundamentals are stable and sound and will remain so over the long term, and our confidence and determination in opening up have not changed, all of which have laid a solid foundation for China's balance of payments to maintain general equilibrium.
Q: What would you say about China's international investment position as at the end of March 2020?
A: Since the beginning of 2020, China has witnessed robust international investment position, with inbound and outbound investments carried out in a good order. As at the end of March, China was ranked the world's No. 1 by reserve assets.
First, China's external financial assets and liabilities fell slightly against the end of 2019. Due to a combination of factors like asset prices and exchange rate conversion, China recorded US$ 7.6354 trillion in external financial assets by the end of March, down by a slight 1% quarter on quarter, and registered US$ 5.4981 trillion in external liabilities, down by a slight 1.7%.
Second, China's net external assets rose slightly. By the end of March, China posted US$ 2.1373 trillion in net external assets (assets minus liabilities), up by a slight 1% quarter on quarter. Overall, China's net external assets have remained stable, and our reserve assets have been around US$ 3.1 trillion.