The State Administration of Foreign Exchange (SAFE) has recently released data on foreign exchange settlement and sales by banks as well as cross-border receipts and payments by non-banking sectors for November 2023. The SAFE Deputy Administrator and Press Spokesperson Wang Chunying answered media questions on the relevant issues.

Q: Could you brief us on the changes in China’s foreign exchange receipts and payments for November 2023?

A: In November, China’s foreign exchange market remained stable and continued to show signs of improvement, with generally balanced cross-border capital flows. The foreign-related receipts and payments by non-banking sectors, including enterprises and individuals, are in equilibrium, fostering an overall trend of balanced cross-border capital flows. Amid the RMB appreciation, some enterprises exhibited a rational trading pattern by purchasing foreign exchange at lower exchange rates. In the overall, foreign exchange market expectations and transactions remained in a stable and orderly manner.

Major channels of cross-border capital flows witnessed heightened stability, with a noteworthy rise in foreign investments directed to the Chinese bond market. Under the current account, the net inflow of cross-border capital in China’s trade in goods remained roughly flat. Expenditures related to cross-border travel and other service trade and profit repatriation by foreign-invested enterprises gradually declined from the seasonal peaks observed in July and August, indicating a shift towards increased stability. Under the capital account, specifically under securities investments, there was an overall recovery in the net inflow of foreign capital. Notably, foreign investors are increasingly and consistently showing a preference for allocating funds to RMB-denominated bonds. Over the past few months, foreign investors have steadily increased their holdings of China’s bonds, reaching a significant milestone in November with a net increase of USD 33 billion - the second-highest value recorded in history.

With improvements in both the internal and external environments, China’s foreign exchange market is poised to have a stronger foundation and conditions to sustain stable operations in the future. Internally, China’s economic rebound and its fundamentals for long-term sound growth remain unchanged. This will bolster support for stable cross-border capital flows. Externally, the market anticipates that the Federal Reserve is approaching the conclusion of its interest rate hike cycle. Going forward, there might be a gradual transition to interest rate cuts, potentially resulting in an overall decline in both US dollar interest rates and exchange rates. In general, the favorable conditions supporting China’s economic development outweigh the unfavorable factors, laying a more solid foundation for the stability of the Chinese foreign exchange market.