Out­bound cash flow slows in June

Con­trols start to work, as 1st half to­tal fell 46% from a year ear­lier

China Daily (Hong Kong) - - FRONT PAGE - By XIN ZHIMING xinzhim­ing@chi­nadaily.com.cn

China faces less pres­sure from cap­i­tal out­flows, ac­cord­ing to data re­leased by its currency reg­u­la­tor on Thurs­day, and econ­o­mists said the situa- tion may con­tinue to im­prove in the sec­ond half of this year.

China’s banks sold a net $93.8 bil­lion of for­eign ex­change to clients in the first six months of this year, down 46 per­cent year-on-year, ac­cord­ing to data re­leased by the State Ad­min­is­tra­tion of For­eign Ex­change.

The for­eign ex­change sav­ings by in­di­vid­u­als dropped by $1.7 bil­lion in the first half of the year, com­pared with a rise of $12.9 bil­lion in the same pe­riod a year ear­lier, Wang Chun­y­ing, the ad­min­is­tra­tion’s spokes­woman, said at a news con­fer­ence.

The fall­ing net for­eign ex­change sales and sav­ings, to­gether with other statis­tics re­leased by the reg­u­la­tor, show that “the cross-bor­der cap­i­tal flow sit­u­a­tion China faces is im­prov­ing in the first half of this year”, Wang said.

China has faced heavy cap­i­tal out­flow pres­sure in re­cent years, with its for­eign ex­change re­serves fall­ing to about $3 tril­lion at the end of 2016 from nearly $4 tril­lion in 2014. As the coun­try’s eco- nomic fun­da­men­tals im­prove and its man­age­ment of cross­bor­der cap­i­tal flow has strength­ened in re­cent months, the sit­u­a­tion has sta­bi­lized, with for­eign ex­change re­serves ris­ing for five con­sec­u­tive months by June.

China’s GDP growth reached a faster-than-ex­pected 6.9 per­cent year-on-year in the first half. Mean­while, au­thor­i­ties have tight­ened checks of du­bi­ous over­seas in­vest­ment projects in some sec­tors, such as real es­tate, ho­tel and sports, which has helped re­duce ab­nor­mal out­flows of cap­i­tal.

“In terms of sup­ply-de­mand bal­ance in the for­eign ex­change mar­ket, we are fac­ing the best sit­u­a­tion in three years,” Wang said.

An­a­lysts said al­though China suf­fers from a for­eign ex­change sales deficit, it is not wor­ri­some. “The SAFE (ad­min­is­tra­tion) data show the sit­u­a­tion is im­prov­ing, and so long as it is con­trol­lable, we should not worry about the deficit,” said Dong Yup­ing, an econ­o­mist at the Chi­nese Academy of So­cial Sci­ences.

Based on the cur­rent devel­op­ment, cross-bor­der cap­i­tal flows in terms of for­eign ex­change sales by banks may reach equi­lib­rium in the fourth quar­ter of this year, with cap­i­tal out­flows largely match­ing inflows, said Chen Xing­dong, deputy man­ag­ing di­rec­tor and chief econ­o­mist of BNP Paribas Pere­grine Se­cu­ri­ties in China. “There could still be fluc­tu­a­tions in the third quar­ter, but bal­ance is ex­pected to emerge in the fourth quar­ter.”

De­spite the tight­en­ing of

du­bi­ous over­seas in­vest­ments in some sec­tors, Wang of the ad­min­is­tra­tion said China’s stance on sup­port­ing nor­mal cross-bor­der busi­ness deals has not changed.

“We sup­port ca­pa­ble en­ter­prises con­duct­ing gen­uine and nor­mal for­eign in­vest­ment ac­tiv­i­ties,” Wang said. “On the other hand, we will ef­fec­tively guard against out­bound in­vest­ment risks.”

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