SAFE: Cross-border capital flows are off to a good start

On March 15, the State Administration of Foreign Exchange (hereinafter referred to as "SAFE") announced the data on foreign exchange settlement and sales by banks and foreign-related receipts and payments by banks on behalf of customers in February 2023. Wang Chunying, deputy director and spokesperson of the SAFE, pointed out that the scale of foreign exchange settlement and sales by banks in February was basically the same, and the foreign-related income and expenditure of non-bank sectors such as enterprises and individuals were more balanced. Looking at the situation in the first two months of 2023, the foreign-related income and expenditure surplus of the non-bank sector was 31.40 billion US dollars, and cross-border capital flows generally started well. Domesticforeign exchange marketSupply and demand maintain a basic balance.

Statistics from the foreign exchange administration show that in February 2023, banks settled 182.90 billion US dollars and sold 184.80 billion US dollars in terms of US dollars. From January to February 2023, banks settled 358.20 billion US dollars and sold 357.50 billion US dollars. Overall, Wang Chunying believes that in February 2023, the supply and demand of our country's foreign exchange market remained basically balanced, and the foreign exchange trading behavior of market entities remained rational. In February, the settlement exchange rate to measure the willingness to settle foreign exchange was 70.3%, an increase of 8.9 percentage points from the previous month. Market entities showed a rational transaction mode of "settling foreign exchange at high prices", and the willingness to settle foreign exchange was enhanced. The sale exchange rate to measure the willingness to sell foreign exchange was 68.6%, which was basically flat from the previous month, indicating that the willingness of market entities to purchase foreign exchange was generally stable.

At the same time, Wang Chunying pointed out that trade in goods continued to play a fundamental role in stabilizing cross-border capital flows. In February, the surplus of foreign trade in goods was 25.90 billion US dollars, which was basically the same as the same period in 2022 and still maintained a relatively high scale. The service trade deficit was 4.30 billion US dollars, which fell slightly month-on-month and year-on-year. While cross-border travel expenditure recovered in an orderly manner, some emerging service industry exports increased steadily.

Looking to the future, Wang Chunying believes that our country's foreign exchange market has the foundation and conditions to maintain stable operation. The current policy effect of supporting economic growth has further emerged, the pace of expansion of enterprise production and operation activities has accelerated, our country's economic prosperity level has continued to pick up, and the foundation for stable cross-border capital flows has become more solid. At the same time, our country's financial marekting continues to advance, and the investment attributes and hedging attributes of RMB assets are prominent, which will still attract foreign capital to steadily invest in the domestic market. In addition, our country's foreign exchange market has become more resilient, and market players are more mature and rational, which can better adapt to changes in the external environment.