In the first quarter, the foreign exchange market maintained a basic balance between supply and demand

On April 21, the State Council Information Office held a press conference to introduce China's foreign exchange revenue and expenditure in the first quarter of 2023. The relevant person in charge of the State Administration of Foreign Exchange said that in the face of a complex external environment, Chinaforeign exchange marketThe start was stable, the RMB exchange rate appreciated slightly, and cross-border capital flows became more balanced. In the future, with the dual support of macroeconomic fundamentals and the inherent resilience of the foreign exchange market, the foreign exchange market is more conditioned and has a better foundation to maintain stability.

Corporate foreign exchange financing is basically stable

"In the first quarter of this year, in terms of US dollars, banks settled foreign exchange for 546 billion US dollars, sold foreign exchange for 561.30 billion US dollars, and the foreign exchange settlement and sales deficit was 15.30 billion US dollars." Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, said that in the first quarter, China's foreign exchange revenue and expenditure mainly showed the following characteristics:

Cross-border capital flows were generally stable. The bank's foreign-related income and expenditure surplus was 34.20 billion US dollars, and the bank's foreign exchange settlement and sales deficit was 15.30 billion US dollars. After considering other supply and demand factors, the supply and demand in the foreign exchange market remained basically balanced.

The current account cross-border capital flow performed steadily, and the capital flow was stable and orderly. In the first quarter, the net inflow of funds under trade in goods was still at a relatively high level; the net outflow of funds from trade in services increased year-on-year, mainly due to the resumption of cross-border travel by residents. Foreign direct investment in China maintained a net inflow, and foreign investment in domestic securities generally showed a net inflow. China's foreign direct investment and foreign portfolio investment maintained a reasonable and orderly development trend.

The selling exchange rate continued to be stable for nearly a year, and the foreign exchange financing of enterprises was basically stable. In the first quarter, the selling exchange rate, which measures the willingness to buy foreign exchange, that is, the ratio of customers buying foreign exchange from banks to customers' foreign exchange expenditure, was 68%, which was basically the same as the fourth quarter of 2022. Since the second quarter of 2022, the selling exchange rate has remained around 68% in each quarter. From the perspective of foreign exchange financing, as of the end of February this year, the balance of domestic foreign exchange loans of Chinese enterprises and other market entities was 281 billion US dollars, an increase of 9.70 billion US dollars compared with the end of 2022.

The settlement rate rose slightly from the fourth quarter of 2022, and the balance of domestic foreign exchange deposits was basically stable. The settlement rate, which measures the willingness to settle foreign exchange, that is, the ratio of customers selling foreign exchange to banks to customers' foreign exchange income, was 64%, a slight increase of 1 percentage point from the fourth quarter of 2022. As of the end of February this year, the balance of domestic foreign exchange deposits of market entities such as Chinese enterprises was 640.60 billion US dollars, an increase of 6.50 billion US dollars from the end of 2022.

The scale of foreign exchange reserves remained basically stable. As of the end of March this year, the scale of China's foreign exchange reserves was 3.1839 trillion US dollars, an increase of 56.20 billion US dollars from the end of 2022, mainly due to valuation factors such as exchange rate translation and asset price changes.

The return on foreign investment in China is stable

Referring to foreign direct investment (FDI) in recent years, Wang Chunying said that China's foreign direct investment has performed well in the world, and the net inflow of related funds in the past 10 years ranks among the top in the world. "From a global perspective, China has always been the main destination for global foreign direct investment. Foreign investment in China can share the investment dividends, transformation dividends and market dividends of China's high-quality economic development. Such investment can achieve a win-win situation," Wang Chunying said.

The return on foreign investment in China is stable and at a high level globally. It is estimated that the FDI ROI rate in China in the past five years is 9.1%, in Europe, America and other emerging economies it is about 3%, and in Brazil, South Africa and India it is about 4% to 8%.

Wang Chunying said that China's infrastructure is perfect, the supply chain system of the industrial chain is complete and stable, the manufacturing capacity ranks first in the world, and the quality of the labor force is relatively high. These continue to provide a very good foundation for the innovative development of multinational companies. At the same time, China's economy is gradually transforming to high-quality development, new growth points continue to emerge, and foreign capital inflows in related fields such as scientific and technological innovation and development, and the expansion and opening up of the service industry have increased significantly.

"Recently, we have seen surveys by some foreign chambers of commerce and global management consulting firms showing that as China's economy recovers, foreign investors' confidence in investing in China has further increased, and they are more optimistic about China's economic development prospects. We judge that foreign investment in the Chinese market will continue to be steady in the future," Wang Chunying said.

The resilience of the foreign exchange market is gradually increasing

At present, the downside risks of the global economy are increasing, the monetary policy tightening of major developed economies is slowing down, and there are still uncertainties in the international financial marekt situation. Can the good start of China's foreign exchange market continue?

Wang Chunying believes that the recovery of China's economy has further consolidated the internal foundation for the smooth operation of the foreign exchange market. According to the forecast of the international monetary fund, China's GDP will grow by 5.2% this year, which is 2.2 percentage points higher than last year. Well-known investment banks around the world have raised their expectations for China's economic growth, most of which are above 6%. Relatively speaking, the downward pressure on the economy of major developed economies has increased. The predicted value of global economic growth in 2023 is 2.8%, which is 0.6 percentage points lower than last year.

"At the same time, China will unswervingly deepen reform, expand high-level opening up, and continue to advance policies to stabilize foreign investment and foreign trade, which will further strengthen the support for the smooth operation and healthy development of the foreign exchange market," Wang Chunying said.

In addition, the resilience of the foreign exchange market has gradually increased, and it can better adapt to changes in the external environment. Wang Chunying said that the flexibility of the RMB exchange rate has increased, the market players have further deepened their understanding and cognition of the two-way fluctuation of the exchange rate, the exchange rate expectation has become more stable, and the exchange rate has a more obvious role in adjusting the balance of payments and the automatic stabilizer of the macro economy. The proportion of the RMB in cross-border use continues to rise, approaching 50% in 2022, and the proportion has further increased in the first quarter of this year, which helps to reduce the risk of currency mismatch in cross-border transactions. The concept of neutral exchange rate risk has been continuously popularized, and more enterprises have learned the knowledge of exchange rate

"Overall, the maturity of the foreign exchange market and the rationality of market players continue to improve, which has formed an internal positive factor for the stability of the foreign exchange market," Wang Chunying said.