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 February 2024. SAFE Deputy Administrator and Press Spokesperson Wang Chunying answered media questions on this issue.

Q: What are the specifics and changes of China’s foreign exchange receipts and payments for February 2024?

A: China’s foreign exchange market is on a pathway of steady improvement, with cross-border capital flows becoming increasingly stable. In February, data on foreign-related receipts and payments by non-banking sectors, including enterprises and individuals, showed a surplus of USD 12.1 billion, representing an increase of USD 6.6 billion compared to January. At the same time, foreign exchange settlement and sales by banks resulted in a small surplus of USD 1.7 billion. Market expectations remained stable, and transactions in China’s foreign exchange market proceeded in a reasonable and orderly manner.

Cross-border capital flows through major channels were stable, and substantial net inflows of funds were observed in both trade in goods and securities investments. After taking into account factors such as the Chinese Spring Festival holiday, the average daily net inflow of cross-border funds in terms of trade in goods saw a year-on-year increase of 3% in February, highlighting the trade’s continued fundamental role in stabilizing cross-border capital flows. Meanwhile, the net increase in foreign holdings of China’s domestic bonds totaled USD 11.1 billion in February, thus remaining at a relatively high level. Foreign investment in the domestic securities market has shifted towards positive overall, reflecting foreign investors’ preference for stable and increasing RMB-denominated asset investments and holdings.

Based on the solid fundamentals of China’s economy, supportive policies, and favorable market conditions, China’s foreign exchange market is set to remain stable for the foreseeable future. First, China will strengthen its macroeconomic control measures to achieve an expected target of approximately 5% GDP growth in 2024, further solidifying and enhancing the positive trend of economic recovery. Second, China will steadily expand its institutional opening-up and continuously improve its business environment to further facilitate cross-border trade, investment and financing. Third, China’s foreign exchange market will undergo further development, and enterprises will gradually enhance their capability to manage exchange rate risks. The use of RMB for cross-border transactions will continue to expand, and foreign exchange market players will increasingly make more rational transaction decisions as they gain further market experience. Lastly, there may be a potential shift in the monetary policies of major developed economies in 2024, which is expected to alleviate the difficult external liquidity situation and further contribute to the stability of China’s foreign exchange market.