China's Foreign Exchange Reserves Reach $3.4163 Trillion at End-June; FX Market Shows Strong Vitality and Resilience

“In the first half of the year, China's foreign exchange market operated smoothly, with active and more resilient transactions,” said Li Bin, Deputy Director of the State Administration of Foreign Exchange (SAFE), at a recent State Council Information Office press conference. Since the beginning of this year, SAFE has continued to deepen reform and opening up in the foreign exchange sector, increased the supply of policies facilitating cross-border trade and investment, strengthened foreign exchange market supervision, effectively responded to external shocks and challenges, and supported the healthy development of the foreign economy.

In the first half of the year, China's foreign exchange market saw many highlights. The scale of foreign-related payments and receipts hit a new high. Banks' foreign-related income and expenditure on behalf of clients totaled USD 9.2 trillion, up 21% year-on-year, reaching a record high for the same period; banks' foreign exchange settlement and sales totaled USD 2.9 trillion, up 24% year-on-year, also a record high for the same period. “These data show that China's foreign-related economy maintains a good momentum of development, and cross-border trade and investment are becoming more active,” Li said.

Foreign exchange market trading volume grew steadily. In the first half of the year, the onshore RMB foreign exchange market trading volume totaled USD 22.1 trillion, up 5% year-on-year, 1.5 percentage points higher than the full-year growth rate of last year.

Cross-border capital recorded net inflows. In the first half of the year, non-bank sectors, including enterprises and individuals, saw net inflows of cross-border capital of USD 247.2 billion. By item, net inflows under goods trade continued to increase year-on-year; foreign investment in China recovered overall; service trade income grew faster, and the service trade deficit narrowed; and domestic entities' outward investment generally maintained growth.

Foreign exchange market expectations remained stable. In the first half of the year, banks' foreign exchange settlement and sales recorded a surplus of USD 271.2 billion. Looking at recent developments, the U.S. dollar index rebounded in June, and the RMB exchange rate against the U.S. dollar moved slightly lower. Some enterprises' “selling foreign exchange at high levels” pushed the settlement and sales surplus to increase month-on-month. Since July, foreign exchange settlement and sales have been basically balanced. In the first half of the year, the foreign exchange income settlement ratio, which measures the willingness to settle foreign exchange, was 65%, while the foreign exchange expenditure sales ratio, which measures the willingness to purchase foreign exchange, was 61%. The data shows that the foreign exchange settlement and sales behavior of enterprises, individuals and other entities was generally rational and orderly.

Foreign exchange reserves increased steadily. At the end of June, China's foreign exchange reserves stood at USD 3.4163 trillion, up USD 58.4 billion from the end of last year. “This year, China's foreign exchange market has withstood external shocks and maintained stable operation, showing strong vitality and resilience,” Li said.

“China's international balance of payments is expected to remain basically balanced in the future,” Li said. China will adhere to expanding domestic demand, vigorously boosting consumption, expanding effective investment, and promoting balanced import and export development, which will support the current account surplus to remain at a reasonable and balanced level in the medium to long term. At the same time, as China steadily expands institutional opening up and expands space for overseas investment cooperation, domestic enterprises will continue to carry out global diversified operations and asset allocation, and China's external assets will steadily increase.

Li noted that since the beginning of this year, facing external shocks, China's foreign exchange market has operated steadily, fully demonstrating that internal factors play a decisive role in the trend of the foreign exchange market. In the face of a still complex and changeable external environment in the future, China's high-quality development is accelerating, high-level opening up is steadily expanding, foreign trade shows strong vitality, and the resilience of the foreign exchange market is increasing. These positive factors will support China's foreign exchange market to maintain stable operation.