SCIO briefing on China's foreign exchange receipts and payments in Q1
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E-mail China.org.cn, April 21, 2020
Xi Yanchun:
Ladies and gentlemen, friends from the media, welcome to this press conference held by the State Council Information Office (SCIO). Today, we are delighted to invite Ms. Wang Chunying, spokesperson and chief economist of the State Administration of Foreign Exchange (SAFE), as well as director general of the administration's Balance of Payments Department. She will introduce China's foreign exchange receipts and payments in the first quarter of 2020 and also answer some of your questions.
Now, I'll give the floor to Ms. Wang.
Wang Chunying:
Good afternoon. Welcome to this press conference. I'll first introduce China's foreign exchange receipts and payments in the first quarter of 2020, and then I will answer some of your questions.
In the first quarter of 2020, the outbreak and spread of COVID-19 presented a major uncertainty for economic and financial performance at home and abroad. As the pandemic continues to rage around the world, downward pressure on the global economy is rising, and international financial markets have shown dramatic turbulence.
Currently, the situation in China is continuously improving, with resumption of work and production on the fast track and economic and social activities in steady progress. Since the beginning of this year, the RMB exchange rate remained basically stable amid two-way fluctuations, and market expectations were relatively stable. China's cross-border financial flows remained generally stable, and overall balance was achieved between demand and supply in the foreign exchange market.
In the first quarter of 2020, foreign currency bought and sold by Chinese banks totaled 3.43 trillion yuan ($491.5 billion) and 3.16 trillion yuan, respectively, creating a surplus of 273 billion yuan.
Foreign-related receipts and payments by banks on behalf of clients were worth 6.39 trillion yuan and 6.61 trillion yuan, respectively, with a deficit of 216.5 billion yuan.
China's foreign exchange receipts and payments showed the following characteristics in the first quarter of 2020:
First, overall balance was achieved between demand and supply in the foreign exchange market. In the first quarter, the surplus of foreign exchange settlement and sales by banks was $39.1 billion. If comprehensive consideration is given to factors that include forward transactions and options, the supply and demand of foreign exchange in China have reached a state of basic balance. Over the same period, foreign-related receipts and payments of foreign exchange by banks on behalf of clients produced a surplus of $1.7 billion.
Second, although foreign-related receipts and payments by banks on behalf of clients showed a deficit in March, foreign exchange settlement and sales by banks remained in surplus. Since April, overall balance has been achieved in foreign-related receipts and payments by banks on behalf of clients, as well as in foreign exchange settlement and sales. In March, the virus spread around the world, sparking more violent fluctuations in the international financial market and a plunge in major stock indexes. As a result, risk aversion was on the rise and external liquidity tightened. In this context, foreign-related receipts and payments by banks on behalf of clients showed a deficit, mainly because RMB cross-border net outflow under security investment increased. Meanwhile, the domestic foreign exchange market remained basically stable; foreign exchange settlement and sales by banks stayed in surplus; and overall balance was achieved between demand and supply in the foreign exchange market. In terms of daily data, since the beginning of April, foreign-related receipts and payments by banks on behalf of clients struck a basic balance, and foreign exchange settlement and sales by banks continued to be in minor surplus.
Third, the rate of foreign exchange buying dropped, and the forex financing of enterprises stayed generally stable. In the first quarter, the rate of foreign exchange buying, which means the ratio of clients buying foreign exchange from banks to the overseas expenditure of foreign exchange, stood at 63%, down two percentage points compared to the same period of last year. Meanwhile, the forex financing of enterprises remained stable. At the end of March, Chinese banks' forex loans at home rose by $27.7 billion. Import foreign currency and cross-border financing, such as refinancing and forward letters of credit, fell by $8 billion compared to the end of 2019, corresponding with fluctuations in the import volume of the same period.
Fourth, the rate of foreign exchange selling grew steadily, and market players showed a steady willingness to hold foreign currency. In the first quarter, the rate of foreign exchange selling, which means the ratio of clients selling foreign exchange to banks to clients receiving foreign exchange from overseas, stood at 66%, up five percentage points compared to the same period of last year. At the end of March, forex deposits of enterprises and individuals at home dropped by $6.7 billion compared to the end of 2019, remaining basically stable.
Fifth, Chinese banks maintained a forward forex settlement surplus. In the first quarter, Chinese banks reported a forward forex settlement surplus of $41.4 billion, including a surplus of $16.6 billion in March.
Sixth, China's foreign exchange reserves remained generally stable. By the end of the first quarter in 2020, the foreign exchange reserves stood at $3.06 trillion, down 1.5% compared to the beginning of this year, affected mainly by factors that include exchange rate conversion and assets price fluctuations.
These are the main Q1 forex data that I want to share with you. Now, I would like to answer questions about China's foreign exchange reserves.
Xi Yanchun:
Thanks for Mrs. Wang's introduction. Now it's time for questions. Please indicate the news organization you work for before raising your questions.
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