Chinese

Annual Report

China’s Cross-border Capital Flow Tends to Stabilize

2018-11-19 16:34:00

On Nov. 15th, the State Administration of Foreign Exchange (SAFE) released the data of October on banking exchange and foreign-related receipts and payments for clients. The data shows that the deficit in banking exchange narrowed 83% to USD 2.9 billion from September, and the deficit in foreign-related receipts and payments of domestic enterprises and other non-banking institutions shrank 73% MoM to USD 7.4 billion, with exchange receipts and payments turning from deficit to surplus (USD 4.6 billion).

“In October, China’s foreign-related receipts and payments registered a plummeting deficit, cross-border capital flow tended to stabilize, and foreign exchange market struck a balance between supply and demand.” According to Wang Chunying, Spokeswoman of SAFE, the drastic decline in both deficits indicates stable cross-border capital flow and bidirectional volatility. In the first ten months of 2018, the deficit in banking exchange dropped 72% YoY, and the deficit in foreign-related receipts and payments fell 43% YoY.

Individual and corporate foreign exchange transactions did not witness any major fluctuation. To be specific, individual transactions remained rational and stable, with net purchase of foreign exchange sagging 6% from September; so did direct purchase of foreign exchange by enterprises, which stayed at the same level last year.

Generally speaking, the foreign exchange market is in good shape. In October, FDI-related exchange settlement rose 11% YoY; exchange purchase with ROI saw a seasonal decline (down 55% MoM and 16% YoY in the year to October); forward exchange recorded a slight surplus of USD 2.8 billion, much higher than the USD 300 million surplus of September.

“China has risen above the uncertainties in global economy and finance,” said Wang Chunying. In the complex and changeable international situation, the country has proceeded with supply-side structural reform and maintained stable employment, stable finance, stable trade, stable foreign investment, stable investment, and stable expectations. It is well placed to address external changes and stabilize the foreign exchange market.

Wang Chunying also noted that Renminbi has displayed greater bidirectional volatility in recent years, and that market players have taken a more rational attitude towards changes in the foreign exchange market. With plenty of practical experience and policy tools to address such changes, China can be more flexible and prudent in macro regulation of the market.

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