Thirteen consecutive monthly declines in foreign exchange share

On September 19, according to data released on the official website of the Central Bank, the balance of foreign exchange accounts for 21.2364 trillion yuan at the end of August, a decline of 8.372 billion yuan annually, which is also the thirteenth consecutive decline in the monthly scale of foreign exchange accounts. On the same day, the State Administration of Foreign Exchange (SAFE) released the data on the settlement and sale of foreign exchange by banks and the collection and payment of foreign exchange by bank agents in August 2019, showing a deficit of 37.8 billion yuan in the settlement and sale of foreign exchange by banks in August. Analysts pointed out that the future foreign exchange share and settlement of foreign exchange is expected to maintain a relatively stable trend.

Foreign exchange share is often regarded as a measure of cross-border capital flows by the market, which refers to the RMB paid by the central bank for purchasing foreign exchange assets such as US dollars.

Since August 2018, the overall scale of foreign exchange accounts has been declining annually for 13 consecutive months, with a cumulative decrease of 293.755 billion yuan. Xiao Lei, a senior financial analyst, said that the share of foreign exchange has been affected by multiple factors. From the perspective of initiative, China has been promoting the mode of independent settlement and sale of foreign exchange by enterprises. Therefore, if the enthusiasm of enterprises to settle foreign exchange is not high, the share of foreign exchange will decline objectively. On the other hand, lower export expectations and weaker RMB exchange rate will affect the foreign exchange share.

From the most intuitive exchange rate fluctuations, throughout August, the RMB-US dollar exchange rate has been depreciating from 6.89 to around 7.08. On September 19, the intermediate exchange rate of RMB against US dollar was 7.0732 yuan, which was 4 basis points lower than the previous trading day. The official closing price of the onshore RMB against the US dollar was 7.0987, which was 108 basis points lower than the closing price of the previous trading day.

On September 19, the data of bank settlement and sale of Foreign Exchange released by the State Administration of Foreign Exchange showed that in August 2019, 12.13 billion yuan of bank settlement and 12.39 billion yuan of sale were sold, and the balance of settlement and sale of foreign exchange was 37.8 billion yuan, which was narrower than the balance of 42.3 billion yuan in July.

Bank settlement and sale of foreign exchange refers to the settlement and sale services provided by designated foreign exchange banks for customers and themselves. The difference between bank settlement and sale of foreign exchange is the main source of changes in China's foreign exchange reserves. Bank settlement and sale of foreign exchange consists of bank settlement and sale of foreign exchange and bank settlement and sale of foreign exchange on behalf of customers. Among them, in August, the bank settled 1055.5 billion yuan on behalf of customers, sold 1078.5 billion yuan, and had a deficit of 23 billion yuan; the bank settled 145.9 billion yuan, sold 160.7 billion yuan, and sold 14.8 billion yuan. According to the data of the previous August, from January to August 2019, banks accumulated 8333.7 billion yuan in foreign exchange, 8 638.6 billion yuan in foreign exchange sales, and a total deficit of 304.9 billion yuan in foreign exchange sales. In interpreting the data, Wang Chunying, spokesman and chief economist of the State Administration of Foreign Exchange, said that although the balance of foreign receipts and payments of non-banking sectors such as enterprises and individuals had widened in August, the balance of supply and demand in the domestic foreign exchange market continued to be basically balanced in August, taking into account the foreign exchange receipts and payments of the banking sector. On the one hand, the balance of bank settlement and sale of foreign exchange has steadily declined. In August, the balance of bank settlement and sale of foreign exchange has slightly decreased by 5.4 billion US dollars, a 12% annualized decrease and a 64% year-on-year decrease. On the other hand, the balance of foreign exchange reserves has remained basically stable, with 31.72 billion US dollars at the end of August, an annualized increase of 3.5 billion US dollars. From the point of view of willingness to settle and sell foreign exchange, "trade in goods and direct investment are still the main surplus items of settlement and sale of foreign exchange in August"; the income of enterprises'investment in purchasing foreign exchange recedes seasonally; the personal settlement of foreign exchange increases by 8% and the purchase of foreign exchange decreases by 17%. Xiao Lei said that the share of foreign exchange may decline, but overall, there will be no more large-scale fluctuations. At present, the growth and demand of the domestic market are still very attractive to many enterprises, and the demand for foreign exchange settlement will not be greatly impacted. Wang Lijuan, a researcher in the Strategic Research Department of Hengfeng Bank, believes that although there was a deficit in the settlement and sale of foreign exchange in August, the scale of the deficit decreased by 12% compared with July and 64% compared with the previous year, and the overall situation of settlement and sale of foreign exchange remained relatively stable. The current trade situation will still have a certain impact on foreign exchange accounts, but the impact will not be too great. Foreign exchange accounts and settlement of foreign exchange are expected to remain relatively stable.