The State Administration of Foreign Exchange (SAFE) has recently released the data on banks' foreign exchange settlements and sales and banks' foreign-related receipts and payments for customers for August 2020. The SAFE deputy administrator and press spokesperson Wang Chunying answered media questions on foreign exchange receipts and payments for August 2020.
Q: Could you brief us on the changes in China's foreign exchange receipts and payments for August 2020?
A: The supply and demand of foreign exchange reached a basic equilibrium in August. Firstly, banks’ foreign exchange settlements and sales posted a deficit of US$ 3.8 billion, down by 29% year on year. Given foreign exchange trading of foreign institutions in the inter-bank foreign exchange market and changes in banks’ foreign exchange positions, the supply and demand of the foreign exchange market was generally balanced. Secondly, the cross-border capital of non-banking sectors registered a net inflow of US$ 12.7 billion, marking a recent high. Thirdly, foreign exchange reserves increased steadily, reaching US$ 3.1646 trillion by the end of August, up by US$ 10.2 billion month on month.
Cross-border capital flows through major channels continued to present positive changes. First, cross-border receipts and payments under trade in goods registered a rising surplus. In August, the surplus in cross-border receipts and payments under trade in goods grew 1.1 times year on year. Specifically, receipts from trade in goods rose by 2.6%, and payments decreased by 3.1%. Second, the seasonal peak of corporate dividend payout came to an end. In August, the deficit in foreign exchange settlements and sales of income and current transfer decreased by 34% month on month, mainly due to the 39% reduction in foreign exchange purchase with investment income. Third, foreign investments in the domestic bonds market remained high. In August, foreign investors increased their net holdings of domestic bonds by US$ 21 billion, higher than the average historical level.
Currently, there are still many destabilizing and uncertain factors in the external environment. However, China’s significant institutional advantages, sound long-term economic prospects, broad market space and strong resilience in development are expected to provide a fundamental support for the stability of China’s foreign exchange market. China will gradually form a new development pattern, featured as domination by domestic cycle and mutual promotion between domestic and international cycle, which will help China’s current account to broadly remain within a reasonable range. Steady progress has been made in the two-way opening-up of financial markets, which is conducive to balance cross-border capital flows. China’s maturing foreign exchange market, the rational and orderly transaction behaviors and the increasing elasticity of renminbi exchange rate will continue to play the role of “automatic stabilizer” in regulating the macro economy and the balance of payments.