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Sixth straight month of settlement-sales surplus
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Chinese banks’ foreign exchange settlement in January stood at 1.2 trillion yuan (US$196 billion), the State Administration of Foreign Exchange announced yesterday.
Foreign exchange sales by Chinese banks in the same month stood at 793.7 billion yuan, according to the SAFE.
The discrepancy resulted in a settlement-sales surplus of 447.5 billion yuan, the sixth consecutive monthly surplus, as well as the biggest in recent years.
Settlement-sales surplus is a major contributor to a country’s foreign exchange reserve. Financial expert Zhao Qingming said: “The surplus suggests that China is confronted with high pressure of trans-border capital inflows.”
China’s currency, the yuan, has already been affected by the fluctuation in trans-border foreign capital flows.
The yuan saw a string of appreciations in January, and hit a record high of 6.0930 against the US dollar on January 14.
But the currency started to tumble in February.
China may continue to receive large net capital inflows in 2014, the SAFE said.
It noted that China’s exports this year are likely be boosted by the improving world economy, especially in developed economies, and that the country’s deepening reform measures may also bolster overseas investors’ confidence.
The administration also attributed the possible inflow increase to higher interest rates in China compared with developed economies.
But at the same time, the US QE tapering and potential economic risks at home, especially when hyped, could increase the uncertainty of the one-sided capital flow.
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