The State Administration of Foreign Exchange answers questions on the foreign exchange revenue and expenditure situation in 2022

Deputy Director of the State Administration of Foreign Exchange and Spokesperson Wang Chunying's Remarks on the Foreign Exchange Receipt and Expenditure Situation in 2022

Recently, the State Administration of Foreign Exchange announced the data of bank foreign exchange settlement and sales and bank valet foreign-related receipts and payments in December 2022 and the whole year. Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, answered questions from reporters on the status of foreign exchange receipts and payments in our country.

1. What is the current situation of foreign exchange revenue and expenditure in our country? What are the outstanding characteristics and new changes?

In 2022, in the face of the complex and severe international situation, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping as the core, our country will coordinate epidemic prevention and control and economic and social development, increase macro-control efforts, cope with the impact of unexpected factors, and achieve new results in high-quality development. The "14th Five-Year Plan" has achieved a good start. The RMB exchange rate fluctuates in both directions, enhances flexibility, and remains basically stable at a reasonable and balanced level. The overall balance of cross-border capital flows in our country throughout the year is as follows:

First, the bank's foreign exchange settlement and sales and foreign-related income and expenditure were both in surplus throughout the year.foreign exchange marketSupply and demand remain basically balanced. In 2022, the scale of the surplus of foreign exchange settlement and sales by banks and foreign-related income and expenditure by bank valets was 107.30 billion and 76.30 billion US dollars respectively. Recently, driven by internal and external factors, the operation of our country's foreign exchange market has become more stable. In December, the balance of foreign exchange settlement and sales by banks and foreign-related income and expenditure were 7 billion and 23.10 billion US dollars respectively. Taking into account other supply and demand factors, the supply and demand of our country's foreign exchange market will generally remain basically balanced in 2022.

Second, the expectations of the foreign exchange market are generally stable, and market transactions are rational and orderly. Under the complex and changeable internal and external environment, the changes in the relevant indicators reflecting the expectations of the RMB exchange rate in the forward and options markets are controllable, and there is no sustained strong unilateral trend, indicating that the exchange rate expectations of market entities remain generally stable, and the foreign exchange settlement and sales and foreign-related income and expenditure behavior of market entities is rational and orderly. The willingness of market entities to settle foreign exchange is basically stable, and the rational transaction mode of "picking up foreign exchange" is generally maintained. In 2022, the settlement exchange rate (that is, the ratio of foreign exchange sold by customers to banks to customers' foreign exchange income) was 67%, an increase of 1 percentage point compared with 2021. Enterprises actively use their own foreign exchange to make external payments, and their willingness At the end of November 2022, the balance of domestic foreign exchange deposits of enterprises, individuals and other market entities 639.60 billion US dollars, down 56.20 billion US dollars from the end of 2021.

Third, capital inflows such as trade in goods and foreign direct investment have played a leading role in stabilizing cross-border capital flows. In 2022, the net inflow of cross-border funds for trade in goods in our country reached a record high, an increase of 45% over 2021, reflecting the resilience of our country's foreign trade development. The net inflow of funds under the foreign direct investment capital base maintained a relatively high scale, significantly higher than the level in 2019 before the epidemic; according to the statistics of the Ministry of Commerce, the actual use of foreign capital in our country from January to November was 178.10 billion US dollars, an increase of 12% year-on-year, indicating that our country's economic development prospects and huge consumer market are still attractive to foreign investment.

Fourth, foreign investors have continued to resume investment in our country's securities market recently. According to statistics from the State Administration of Foreign Exchange, in December 2022, foreign investors increased their net holdings of domestic bonds and stocks to 7.30 billion and 8.40 billion US dollars respectively. Judging from the latest market data, foreign participation in the domestic securities market has remained active recently. In the first half of January 2023, net purchases of domestic stocks and bonds totaled about 12.60 billion US dollars.

In 2022, our country's foreign exchange revenue and expenditure situation will remain generally stable under the complex and severe external environment. What do you think are the main reasons?

In 2022, affected by multiple factors such as "high inflation" and "tight currencies" in major economies, the international financial marekt fluctuated violently, global stock and bond indices fell sharply, the US dollar index hit a new high in 20 years, and major international currencies such as the euro, yen, and British pound hit new lows in the past 20 or 30 years. The operation of our country's foreign exchange market has generally withstood the test. The RMB exchange rate has performed relatively steadily among major global currencies, and our country's cross-border capital flows have become more balanced. This is mainly due to two supporting factors, which are manifested as two "resilience enhancements".

On the one hand, the resilience of the domestic economy, especially the foreign-related economy, has been strengthened, and the stable operation of the balance of payments has been effectively guaranteed. First, the basic balance of payments surplus such as the current account and direct investment has played a leading role in stabilizing cross-border capital flows. In the first three quarters of 2022, our country's current account surplus was US $310.70 billion, the highest value in the same period of the previous year, and the ratio to the gross domestic product (GDP) in the same period was 2.4%, which was in a reasonable and balanced range. At the same time, foreign direct investment maintained a net inflow, reflecting our country's advantages in the supply chain of the industrial chain and the unified national market, and also showing the effect of policies and measures such as stabilizing foreign trade and stabilizing foreign investment. Secondly, the overall structure of foreign In recent years, the structure of external debt types, currency structures and maturity structures have been optimized, and the adjustment of traditional financing foreign debt such as deposits and loans has been relatively stable.

On the other hand, the resilience of the foreign exchange market has been enhanced, and the ability to adapt to changes in the external environment has been greatly improved. First, the formation mechanism of the RMB exchange rate has been continuously improved, and the elasticity of the exchange rate has been gradually enhanced, which helps to release external pressure in a timely manner, and the role of automatic stabilizers in adjusting the balance of payments is more obvious. Second, the proportion of RMB in cross-border use has been continuously increasing, which helps to reduce the risk of currency mismatch in cross-border transactions. In 2022, the proportion of RMB revenue and expenditure in our country's cross-border revenue and expenditure will be close to 50%, an increase of more than 20 percentage points over 2016. Third, market players actively manage exchange rate risks, carry out more hedging operations, and significantly enhance their adaptability to exchange rate fluctuations. In 2022, the proportion In addition, the two-in-one management framework of "macro-prudential + micro-supervision" in the foreign exchange market has been continuously improved, providing a benign and healthy market environment for the smooth flow of cross-border funds and rational transactions in the foreign exchange market.

How do you see our country's foreign exchange revenue and expenditure situation in 2023?

Looking forward to 2023, there are still uncertainties in the external environment, but the domestic economy is expected to rebound overall, our country's foreign exchange market has the foundation and conditions to maintain stable operation, and cross-border capital flows will be more stable.

Domestic economic fundamentals are the decisive factor for stabilizing our country's cross-border capital flows. Our country's economy is resilient, has great potential, and is full of vitality. The fundamentals for long-term improvement have not changed. With the continuous emergence of various policies such as optimizing epidemic prevention and control and stabilizing economic growth, our country's economic operation is expected to rebound in 2023. The latest forecasts from major international organizations and other institutions show that in the context of slowing global economic growth, our country may become the only major economy to show a pick-up in economic growth. At the same time, our country insists on promoting high-level opening up, continuously improving the facilitation level of cross-border trade and investment and financing, and increasing efforts to attract foreign investment, which will continue to create a good policy environment for cross-border capital flows. In addition, the recent decline in inflation data in major developed economies, the increasing downward pressure on the economy, the pace of monetary policy tightening may slow down, and the related spillover impact will be marginal.

In 2023, our country's cross-border capital flow is expected to be more stable. On the one hand, the current account will maintain a reasonable scale surplus and continue to be in a balanced range. Under the item of trade in goods, with our country's overall epidemic prevention and control and economic and social development results, the foundation for the stability of the supply chain will be more solid. At the same time, the transformation and upgrading of the manufacturing industry and the continuous promotion of regional trade cooperation will also help to enhance the competitiveness of goods trade products, promote the diversification of export markets and develop new forms of cross-border trade. Our country's trade in goods is expected to maintain a high scale surplus. Under the service trade item, in recent years, our country's manufacturing and service industries have developed together, and productive service trade, especially computer information services, business services and other emerging service industries, has developed rapidly, which will drive the growth of related service trade exports. On the other hand, cross-border capital flows under the capital item are expected to be more stable. Foreign direct investment in China has maintained steady development, our country's foreign direct investment has continued to be reasonable and orderly, and direct investment will generally continue to be a surplus pattern. In recent years, our country's foreign debt structure has been optimized, and the volatility of cross-border financing of enterprises has decreased. The trend will continue to be stable in the future. Under the support of factors such as the stabilization and recovery of our country's economic growth rate, the enhanced attractiveness of RMB assets, and the prominent hedging attributes of RMB assets, foreign capital will continue to invest steadily in our country's securities market.