The State Administration of Foreign Exchange (SAFE) recently released data on foreign exchange settlement and sales by banks and international receipts and payments via banks for May 2021. Wang Chunying, SAFE Deputy Administrator and Press Spokesperson, answered media questions on relevant issues.

Q: Could you brief us on the situation of China’s foreign exchange receipts and payments in May 2021?

A: China’s foreign exchange market remained stable in May. First, the surplus in foreign exchange settlement and sales by banks amounted to US$22.8 billion, the same as the average level from January to April. Second, the surplus in international receipts and payments by non-banking sectors reached US$19.7 billion, which was narrowed compared to the monthly average of the previous four months. Presently, China’s foreign trade displays an increasing trend. Its import and export recorded surplus, which is the main reason behind the surplus pattern of foreign exchange settlement and sales by banks and international receipts and payments by non-banking sectors in China. Third, foreign exchange reserves are generally stable. By the end of May, foreign exchange reserves stood at US$3.2218 trillion, up by 0.74% month on month, mainly affected by factors including the appreciation of non-US dollar currencies against the US dollar and rising asset prices.

Market expectations were generally stable. In May, both the settlement and sales ratios were almost equal to the average of the first four months. The settlement ratio that measures customers’ willingness to settle their foreign exchange recorded 67%, which is the ratio of foreign exchange customers sold to banks to their foreign exchange receipts from foreign-related transactions. The sales ratio that measures customers’ willingness to sell foreign exchange was 66%, which is the ratio of foreign exchange bought by customers from banks to their foreign exchange payments for foreign-related transactions.

Two-way cross-border capital investment was in a rational and orderly manner. In May, direct investment maintained a small net inflow. Two-way investment in securities was generally stable, posting a net increase in foreign holdings of domestic stocks and bonds of US$23.7 billion, equivalent to the average level from January to April. Domestic market entities purchased a net 36.6 billion yuan of Hong Kong stocks under the Hong Kong Stock Connect program.

At present, there are still many unstable and uncertain factors in the external environment. The COVID-19 pandemic continues to spread, the world economic recovery remains uneven, pressure on major developed economies to adjust monetary policies is mounting, and asset prices in the international financial market remain high. However, China’s economy is stable and improving, the balance of payments is stable, and the foreign exchange market is more mature and rational. In general, China’s foreign exchange market is expected to remain stable, and two-way fluctuations of the renminbi exchange rate will become normal.