Q&A on Foreign Exchange Receipts and Payments Data for 2021

The State Council Information Office (SCIO) held a press conference on July 23，2021. Wang Chunying，Deputy Administrator and Press Spokesperson of the State Administration of Foreign Exchange (SAFE)，was invited to share the data on foreign exchange receipts and payments for the first half of 2021 and answer questions from the press.

The State Council Information Office (SCIO) held a press conference on Friday，January 21，2022 at 10 a.m. Ms. Wang Chunying，deputy administrator and press spokesperson of the State Administration of Foreign Exchange (SAFE)，was invited to unveil the data on foreign exchange receipts and payments for 2021 and answer media questions. The transcript is as follows.

Wang Chunying，deputy administrator and press spokesperson of the SAFE: Welcome to today’s press conference. First，I would like to disseminate China’s foreign exchange receipts and payments data for 2021 and then I will take your questions.

Since the 18th National Congress of the Communist Party of China (CPC)，China has been confronted with the complex and severe international economic and financial situation. However，under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at the core，China has adhered to the general principle of seeking progress while maintaining stability，coordinated development and security，and created a new situation in reform and opening-up. Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era，the SAFE resolutely implemented the decisions and arrangements of the CPC Central Committee and the State Council. We deepened the reform and opening-up in the field of foreign exchange，promoted facilitation of cross-border trade and investment，and calmly responded to external shocks. By doing so，we maintained the stability of the foreign exchange market. Besides，we also promoted the basic balance of international payments，maintained the overall stability of foreign exchange reserves，in order to actively help China secure a decisive victory in building a moderately prosperous society in all respects.

In 2021，under coordinated epidemic prevention and control as well as economic and social development，China’s national economy was generally stable，with major macro indicators within a reasonable range. Against this background，China’s foreign exchange market was generally stable. The renminbi exchange rate remained basically stable at a reasonable and balanced level，the cross-border capital flow ran at a reasonable and orderly manner，and the foreign exchange reserves maintained an overall stable scale.

According to the data on foreign exchange settlement and sales by banks in 2021，in dollar terms，banks settled US$2.5616 trillion and sold US$2.2940 trillion of foreign exchange，representing a surplus of US$267.6 billion. In renminbi terms，banks settled 16.5 trillion yuan and sold 14.8 trillion yuan of foreign exchange，representing a surplus of 1.7236 trillion yuan. For cross-border receipts and payments by non-banking sectors，in dollar terms，banks registered US$6.0399 trillion in foreign-related receipts and US$5.6835 trillion in foreign-related payments for customers，representing a surplus of US$356.4 billion; or in renminbi terms，banks handled foreign-related receipts of 39.0 trillion yuan and payments of 36.7 trillion yuan for customers，recording a surplus of 2.2965 trillion yuan.

China’s foreign exchange receipts and payments for the year of 2021 present the following characteristics:

First，foreign-related transactions remained active and cross-border capital flows were in an orderly manner. In 2021，foreign exchange settlement and sales by banks totaled US$4.9 trillion，and the scale of cross-border receipts and payments by non-banking sectors reached US$11.7 trillion，with an increase of 24% and 35% respectively over 2020. It was mainly because China led the world in epidemic prevention and control and economic recovery，and trade in goods and all sorts of investment and financing activities remained relatively active.

Second，the sales ratio remained basically stable，and the willingness of cross-border financing became stabilized. In 2021，the foreign exchange sales rate，a measure of customers’ willingness to buy foreign exchange，the formula we use is the ratio of foreign exchange purchased by customers from banks to foreign-related foreign exchange payments made by customers，stood at 63.6%，basically the same as that in 2020. From the perspective of customers’ willingness for foreign exchange financing，the overall trend has become stabilized. As of the end of 2021，outstanding foreign exchange loans in China registered US$355.4 billion，an increase of 8.4% from the end of 2020. It remained generally stable since the second half of the year. The balance of foreign currency financing under international trade such as import refinancing and forward letter of credit increased by US$11.6 billion from the end of 2020 to US$132.2 billion，roughly equivalent to 2019 before the pandemic. From the perspective of customers，foreign exchange sales were basically stable，and the willingness of cross-border financing tended to stabilize.

Third，the foreign exchange settlement rate rose steadily，and the balance of domestic foreign exchange deposits grew rapidly. In 2021，the foreign exchange settlement rate，a measure of customers’ willingness to settle foreign exchange，or the ratio of foreign exchange sold by customers to banks to customers’ foreign-related foreign exchange receipts，reached 66.4%，up by 1.4% year on year. As of the end of 2021，the balance of domestic foreign exchange deposits of market participants including enterprises went up US$95.4 billion from the end of 2020 to US$695.9 billion. It reflected the enterprises’ reasonable arrangement of foreign exchange funds，part of which was settled and part of which was held in the form of deposits.

Fourth，the foreign exchange hedging ratio has grown steadily，and risk neutrality among enterprises has enhanced. In 2021，the scale of enterprises using foreign exchange derivatives such as forwards and options to manage exchange rate risks increased by 59% year on year，36% higher than the growth rate of foreign exchange settlement and sales by banks in the same period. It drove the corporate hedging ratio to increase by 4.6% year on year to 21.7%，indicating that the awareness of risk aversion and operation philosophy of risk neutrality among enterprises have improved.

Fifth，foreign exchange reserves remained basically stable. As of the end of 2021，China’s foreign exchange reserve balance stood at US$3.2502 trillion，a slight increase of 1.0% from the end of 2020. In 2021，changes in the volume of foreign exchange reserves were mainly attributed to valuation factors including foreign exchange rate conversion，asset price changes，and reserve investment returns.

In 2022，the external environment will remain complex and volatile，with unstable and uncertain factors in the global epidemic and the world economic situation. Holding on to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era，the SAFE will fully implement the spirit of the 19th CPC National Congress，each plenary session of the 19th CPC Central Committee，and the Central Economic Work Conference. The SAFE will earnestly carry out the decisions and arrangements of the Party Central Committee and the State Council，by prioritizing stability，seeking progress while keeping performance stable. The SAFE will fully apply the new development philosophy，integrate it into the new development paradigm，and deepen reform and opening-up in the foreign exchange sector for the stability of the macro-economy. The SAFE will also strive to maintain a healthy order in the foreign exchange market by further ensuring “stability on the six fronts” and “security in the six areas”，so as to promote the high-quality economic development，and welcome the successful convening of the 20th National Congress of the CPC with outstanding achievements.

Now，I would like to take your questions on China's foreign exchange receipts and payments.

China Media Group CCTV:

What would you say about the performance of China’s foreign exchange market in 2021? What were the characteristics? What are your perspectives on China’s foreign exchange receipts and payments in 2022? Thank you.

Wang Chunying: Thank you for your question. In 2021，the COVID-19 pandemic continued to disrupt the global economic recovery. The monetary policies of major developed economies began to shift，resulting in many uncertainties and instability. Under the complex and volatile environment，China’s foreign exchange market was generally stable. The renminbi exchange rate remained stable，cross-border capital flows were in a reasonably and orderly manner，and the balance of payments was basically balanced. China’s foreign exchange market mainly presented the following characteristics:

First，the exchange rate of renminbi against the U.S. dollar showed two-way fluctuations and is expected to be relatively stable. The spot exchange rate of the renminbi against the U.S. dollar rose slightly by 2.6% in the whole of last year，making it more robust than the currencies of major developed and emerging economies. The renminbi exchange rate rose and fell and maintained two-way fluctuations in different stages. In the first five months，the renminbi exchange rate generally appreciated by 2.8%，depreciated by 1.6% in June. It fluctuated within a narrow range from July to September，and appreciated by 1.4% since October. The renminbi exchange rate eventually closed at 6.37 at the end of 2021. Throughout the year，the renminbi against the U.S. dollar rose to 6.35 at the highest point，while fell to 6.57 at the lowest point. The range of fluctuation was 22 basis points. The two-way fluctuations of exchange rate were affected by various factors，including mainly the international financial environment as well as the supply and demand of the domestic foreign exchange market. We also noticed that professional indicators，such as foreign exchange forwards and options，have showed signs of reasonable divergence and relative stability in the market expectations for exchange rates.

Second，real economic activities such as trade and investment promoted cross-border capital inflows. China’s import and export of goods continued to maintain a relatively high surplus，up by 30% year on year in U.S. dollar terms. It demonstrated the advantages of China’s industrial and supply chains in the face of the pandemic. As a result，in 2021，the surplus of foreign-related receipts and payments of trade in goods by enterprises and other sectors reached US$339.5 billion，equivalent to 95% of the surplus of the entire cross-border foreign exchange receipts and payments. Meanwhile，according to the data from the Ministry of Commerce，the actual use of foreign investment in China in 2021 stood at US$173.5 billion，a year-on-year increase of 20%，which reached a historical high. It reflected China’s good economic development prospects have strong attraction for overseas long-term capital. In addition，in 2021，foreign investors increased their holdings of domestic bonds by US$166.6 billion，and renminbi assets have become an important choice for foreign capital allocation. Real economic activities such as trade and investment have become the main driving force for cross-border capital inflows.

Third，the external assets of China’s private sector increased significantly. According to the balance of international payments (BOP)，China’s outbound investment，especially that of the private sector，increased correspondingly under the background of current account surplus and overall inflow of overseas capital. In the first three quarters of 2021，the net increase of outward investment by the private sector increased by US$489 billion，including US$85.4 billion of foreign direct investment. Overseas securities investment by domestic residents through the Hong Kong Stock Connect and QDII channels reached nearly US$100 billion. Investments other than direct and portfolio investments e