Cross-border capital flows are trending towards equilibrium

This newspaper reported from Beijing on June 18th (Reporter Qiu Haifeng): Data released by the State Administration of Foreign Exchange on the 17th shows that in May, China's cross-border capital flows tended to be balanced, and the foreign exchange market operated generally steadily. Among them, banks settled US$1760 billion and sold US$1919 billion; banks' agency's foreign exchange income was US$5848 billion, and outward payments were US$5851 billion.

According to the bank's settlement and sale of foreign exchange and bank's agency's foreign exchange receipts and payments data released that day, from January to May, banks cumulatively settled US$8919 billion and cumulatively sold US$9707 billion; banks' agency's cumulative foreign exchange income was US$28355 billion, and cumulative outward payments were US$28709 billion.

Wang Chunying, Deputy Director and Spokesperson of the State Administration of Foreign Exchange, said that in May, cross-border income and expenditure by non-bank sectors such as enterprises and individuals were roughly balanced, showing a significant improvement in the cross-border capital flow situation; market expectations remained stable, foreign exchange transactions were rational and orderly, the settlement and sale of foreign exchange deficit narrowed significantly, and the supply and demand situation in the foreign exchange market further improved.

Net inflow of cross-border funds from goods trade grew rapidly, and the scale of foreign investment in domestic bonds remained at a high level. Supported by the continued positive trend in China's foreign trade development, the net inflow of cross-border funds under goods trade in May increased by 23% year-on-year and 76% month-on-month, reaching a new monthly high since the second half of 2023, and continuing to play a fundamental role in stabilizing cross-border capital flows. At the same time, foreign investors' willingness to allocate RMB assets was strong, with a net purchase of US$320 billion in domestic bonds in May, an 86% month-on-month increase, which is at a historically high level. In addition, various outbound investments by domestic entities have become more stable and orderly.

What about the foreign exchange receipts and payments situation next? Wang Chunying said that China's foreign exchange market has a solid foundation for maintaining stable operation. As macroeconomic policies are accelerated and take effect, China's economic recovery and improvement will be further consolidated and strengthened, and the economic fundamentals will provide strong support for the foreign exchange market and the RMB exchange rate. Recently, several international institutions such as the World Bank and the International Monetary Fund have raised their expectations for China's annual economic growth rate, showing the international community's confidence in China's economic development. At the same time, in recent years, Chinese enterprises have continuously innovated and developed, and their international competitiveness and ability to adapt to changes in the external environment have continued to improve; foreign exchange market participants have become more mature, the use of exchange rate hedging tools has become more widespread, the proportion of RMB cross-border use has steadily increased, and the ability to manage exchange rate risks has continuously strengthened, and the inherent resilience of the foreign exchange market has enhanced the stability of the market.