A Look at First-Half 2020 Foreign Exchange Data
At a press conference held by the State Council Information Office (SCIO) on July 17，2020，Wang Chunying，deputy administrator and press spokesperson of the State Administration of Foreign Exchange (SAFE)，brief on the foreign exchange receipts and payments situations for the first half of this year and answer questions from the press. The following is an edited transcript.
Wang Chunying: Welcome to today's press conference. First，I'd like to brief you on the foreign exchange receipts and payments situation for the first half of this year. Then I will take your questions.
In the first half of 2020，the COVID-19 pandemic dealt a great blow to the world economy，with sharp swings seen in global financial markets. Currently the pandemic and the world economic conditions are still challenging，complicated and full of uncertainties. On the domestic front，as the Covid-19 situation came under control and the resumption of work yielded significant results，the economy has gradually recovered since the second quarter. Economic indicators have shown marginal improvements and the renminbi exchange rate has become increasingly elastic while maintaining overall stability. Cross-border capital flows have remained stable. The foreign exchange market witnessed balanced supply and demand,and demonstrated stronger resilience against external shocks.
According to the data on foreign exchange settlement and sales by banks in the first half of 2020,banks settled US$ 953.5 billion and sold US$ 874.9 billion in foreign exchange,representing a surplus of US$ 78.6 billion,or in renminbi terms,banks settled 6.7 trillion yuan and sold 6.1 trillion in foreign exchange,recording a surplus of 553.1 billion yuan. At the same time,banks handled foreign-related receipts of US$ 1.9066 trillion and payments of US$ 1.9045 trillion for customers,representing a surplus of US$ 2 billion,or in renminbi terms,banks handled foreign-related receipts of 13.4 trillion yuan and payments of 13.4 trillion yuan for customers,recording a surplus 15.6 billion yuan.
China's foreign exchange receipts and payments showed the following features in the first half of 2020:
First,the supply and demand of the foreign exchange market remained basically in balance,with a surplus registered in foreign exchange settlement and sales by banks. In the first half of 2020,foreign exchange settlement and sales by banks reached a surplus of US$ 78.6 billion,including US$ 39.1 billion and US$ 39.5 billion in the first and second quarters respectively. In monthly terms,the monthly average surplus was US$ 15.5 billion from January to May,then contracted to US$ 900 million in June due to the climax of seasonal dividend payouts. Taking other supply and demand factors into consideration,such as net purchase of foreign exchange by foreign institutions in the interbank foreign exchange market and increase in foreign exchange position of banks,the supply and demand on China's foreign exchange market remained generally stable in the first half.
Second,cross-border capital flows stayed steady,with a higher net inflow registered in the second quarter. In the first half,foreign exchange receipts and payments by banks for customers registered a slight surplus of US$ 2 billion. A deficit of US$30.1 billion was recorded in the first quarter,primarily due to higher outflow of the renminbi under stock investment,fueled by fluctuations in global financial markets in March. As two-way cross-border stock investments have returned to normalcy since April,a surplus of US$ 32.2 billion was posted in foreign exchange receipts and payments by banks for customers in the second quarter. Therefore China's cross-border capital flows remained stable in the first half,with a higher net inflow recorded in the second quarter than in the first quarter.
Third,a lower foreign exchange sales rate was recorded,and enterprises' desire for foreign exchange financing in and outside China rose steadily. In the first half,the foreign exchange sales rate,the measurement of customers' desire to buy foreign exchange,or the ratio of foreign exchange purchased by customers from banks to foreign-related foreign exchange payments made by customers,stood at 63%,down by 3.5 percentage points year on year. By the end of June,the outstanding domestic foreign exchange loans rose by US$ 52.4 billion from the level at the end of 2019,indicating a stronger demand for foreign exchange financing among enterprises. Also by the end of June,the balance of foreign currency financing for cross-border trade such as import refinancing and forward L/C for imports fell by 3% from that of the end of 2019,but imports in the same period dropped by 7%,indicating stable desire for cross-border foreign exchange financing among enterprises. Therefore,we can see that despite a decreased foreign exchange sales rate,enterprises' desire for foreign exchange financing in and outside China strengthened steadily in the first half.
Fourth,the foreign exchange settlement rate climbed steadily and market participants' desire to hold foreign exchange weakened. In the first half,the foreign exchange settlement rate,the measurement of customers' desire to settle foreign exchange,or the ratio of foreign exchange customers sold to banks to foreign-related foreign exchange receipts received by customers reached 66%,up by 2.0 percentage points year on year. By the end of June,the balance of foreign exchange deposits held by domestic market participants including individuals and enterprises dropped by US$ 5 billion from that of the end of 2019. Therefore,it is clear that market participants' desire to hold foreign exchange weakened along with steady growth in the foreign exchange settlement rate.
Fifth,foreign exchange reserves rose steadily. By the end of June,the balance of foreign exchange reserves amounted to US$ 3.1123 trillion,up by US$4.4 billion from that of the end of 2019. In particular,the balance of foreign exchange reserves for June increased by US$ 10.6 billion,representing the third consecutive month of growth in the second quarter. Overall,the supply and demand on China's foreign exchange market remained basically balanced in the first half,while the changes in the balance of foreign exchange reserves were primarily driven by foreign exchange conversion and assert price changes.
The above are the major statistics I'd like to share with you about China's foreign exchange receipts and payments for the first half. Now,I will take your questions.
Q(from CCTV): You've just said that the global spread of Covid-19 significantly impacted the world economic and financial performance in the first half. Could you elaborate on China's foreign exchange receipts and payments situation under these circumstances? In your opinion,what changes would you expect in China's foreign exchange receipts and payments in the second half?
Wang Chunying: Thank you for your questions. As we all know,due to COVID-19 outbreak,the world economy has been sluggish in the year to date,with violent fluctuations seen in global financial markets. Under such a circumstance,China's foreign exchange receipts and payments have remained generally stable,and its foreign exchange market has shown strong resilience and risk-resistance capabilities,as indicated by the data I have just shared with you. This can also be seen from major figures,quantity and price indicators alike.
On the one hand,as shown by the quantity indicators,the supply and demand on the foreign exchange market were in basic equilibrium. In the first half,bank customers' cross-border receipts and payments remained in surplus,and so did foreign exchange settlement and sales,denoting foreign exchange receipts and payments of domestic market participants including enterprises and individuals were in surplus. This was reflected by strong supply on the foreign exchange market. Then where did the surplus go? We can get a clue from net purchases of foreign exchange by foreign institutions and increased holdings of foreign exchange positions by banks in the first half. This shows that the supply and demand found an equilibrium among different market participants. This is the whole picture. The supply and demand of foreign exchange between domestic and foreign market participants were on the opposite ends