The State Administration of Foreign Exchange (SAFE) recently released the data of China’s balance of payments (BOP) for the first half of 2022, and issued the Report on China’s balance of payments for the First Half of 2022. Wang Chunying, SAFE Deputy Administrator and Press Spokesperson, answered media questions on the situation of China’s balance of payments since 2022.

I. What are the characteristics of China’s BOP in the first half of 2022? How about its recent performance?

A: China maintained a basic equilibrium in its BOP, and both the current account and direct investment showed relatively high surpluses. In the first half of 2022, the current account registered a surplus of USD 166.4 billion, a year-on-year increase of 43%. And its ratio to Gross Domestic Product (GDP) reached 1.9%, which maintained within a reasonable and balanced range. To be specific, the surplus in trade in goods increased by 36%, while the deficit in trade in services narrowed by 30%. In the first half of the year, the surplus in direct investment was USD 74 billion. The basic balance of payments surplus formed by direct investment and the current account totaled USD 240.4 billion, a year-on-year increase of 3%, which stayed at a relatively high level in the same period in history. It effectively played a fundamental role in balancing cross-border capital flows and stabilizing the foreign exchange market.

In the third quarter, China’s balance of payments was generally stable, and the basic balance of payments surplus continued to play a leading role. At present, the balance of payments data for the third quarter is still in collection. According to the relevant data, the basic balance of payments still shows a certain scale of surplus. In terms of the current account, according to customs statistics, the surplus in import and export from July to August increased by 57% year on year, reflecting that China’s complete industrial chain and supply chain system as well as policies to stabilize foreign trade and protect market entities have played a supporting role. The SAFE data shows that the deficit in service trade narrowed by 3% year-on-year from July to August, mainly due to a 14% increase in revenue from transportation, computer information services, and business services. In terms of direct investment, according to the statistics of the Ministry of Commerce, China’s actual utilization of foreign capital increased by 14% year-on-year from July to August, indicating a steady performance of medium and long-term investment channels under the capital account. In addition, since September, China’s cross-border capital flow has remained stable, as the foreign exchange settlement and sales by banks as well as cross-border receipts and payments by non-banking sectors have maintained basic balance. Various data show that China’s balance of payments operated generally stable.

II. What would you say about the trend of China’s BOP in the future?

A: The surplus of China’s current account will maintain a reasonable scale. In the recent period, under the complex international economic situation, China’s current account surplus keeps growing, which is outstanding among the major surplus countries in the world. It fully reflects the stability, resilience, and strong sustainability of China’s current account balance, such as trade in goods. Firstly, in recent years, the structure of China’s trade in goods has been constantly optimized, and the new growth drivers for exports have gradually emerged. In the first eight months of this year, the export of traditional advantage items mechanical and electrical products increased by 9% year on year, the export growth rate of textiles and clothing was higher than 10%, and the export of automobiles and other kinds of trade increased by 56%. New forms of trade like cross-border e-commerce have become an important engine to promote the development of foreign trade. At the same time, the diversification and expansion of trading partners have achieved positive results. Europe and the United States were still important traditional markets of China, and the growth of foreign trade was also seen with ASEAN and Latin America. Secondly, the development of trade in services will continue to upgrade. With the deep integration of manufacturing and service industries as well as the digital transformation and upgrading of service industries, emerging producer services such as computer information services are injecting new growth momentum into service trade.

Cross-border two-way investment will develop in a more balanced manner. Firstly, direct investment maintained a surplus pattern. China’s business environment continues to improve and its consumer market has huge potential, which will continue to attract foreign investment and business. At the meantime, China’s outward foreign investment will still maintain a reasonable and orderly development trend. Secondly, RMB assets have stable investment returns and diversified investment value globally. In the long run, international investors are still willing to allocate RMB assets.

In general, China’s economy will continue to recover in the future. China is firmly determined to continue with a higher level of opening-up, it has more obvious advantages in price stability, and the transformation and upgrading of its manufacturing sector is gradually showing results. Moreover, the internal foundation of China’s balance of payments remains solid, which is also the fundamental support for the stability of China’s foreign exchange market and RMB exchange rate.