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The data released yesterday by the State Administration of Foreign Exchange showed that in January 2012, banks converted $123.6 billion worth of foreign exchange on behalf of clients, while selling $104.2 billion worth of foreign exchange, resulting in a surplus of $19.4 billion in the bank's foreign exchange buying and selling on behalf of customers.
This is a rebound after two consecutive months of deficits in this data.
Bank agency foreign exchange buying and selling refers to the part of bank foreign exchange trading where designated foreign exchange banks handle foreign exchange transactions on behalf of clients. Among these, conversion involves foreign exchange owners selling foreign exchange to designated foreign exchange banks, while selling involves designated foreign exchange banks selling foreign exchange to foreign exchange users. The difference formed by bank foreign exchange trading is one of the important origins of changes in our country's foreign exchange reserves.
There have been indications of a rebound in foreign exchange purchases.
Affected by the strengthening of RMB depreciation expectations at the end of last year and the narrowing of trade surpluses, China's bank agency foreign exchange buying and selling had deficits of $8 billion and $15.3 billion respectively in November and December 2011, which were the only two deficits since the data was first published monthly in January 2010.
However, this rebound seems to be in line with market expectations, because the foreign exchange purchases, which mainly reflect changes in the amount of foreign exchange transactions, showed a rebound trend in January.
According to data published by the central bank a few days ago, the new foreign exchange purchases in January amounted to 140.922 billion yuan. This was the first rebound since foreign exchange purchases fell for three consecutive months in October, November, and December last year.
The industry generally believes that the phenomenon of large-scale capital outflows at the end of last year is tending to stop, and there are signs of some capital inflows.
Regarding this, Mei Xinyu, a researcher at the Institute of International Trade and Economic Cooperation of the Ministry of Commerce, pointed out that since the end of last year, the overall increase in bank agency foreign exchange sales has been very significant. Although the amount of agency foreign exchange sales in January has declined somewhat, the residual effects of RMB depreciation expectations and US dollar appreciation expectations should still continue.
"Last January, the amount of agency foreign exchange sales was only $8.19 billion, but by June it had increased to $10.05 billion. In August, September, and October, it was more than $10 billion each month, reaching $12.97 billion in November and $15.78 billion in December," said Mei Xinyu. Despite the decline in January's agency foreign exchange sales, it remains higher than the level at the beginning of last year.
The willingness of enterprises and residents to hold foreign exchange has slightly increased.
The rate of receipt-to-conversion refers to the proportion of enterprises and individuals converting foreign exchange into domestic currency in cross-border receipts (i.e., receipt-to-conversion rate = conversion / cross-border receipts). The rate of payment-to-purchase refers to the proportion of enterprises and individuals purchasing foreign exchange from banks in cross-border payments (i.e., payment-to-purchase rate = purchase / cross-border payments). Therefore, the former reflects the willingness of enterprises and individuals to convert foreign exchange, while the latter reflects the willingness to purchase foreign exchange.
In January 2012, the foreign-related income of domestic banks on behalf of clients was $18.32 billion, and outbound payments were $15.67 billion, resulting in a net surplus of $2.65 billion in foreign-related income and payments on behalf of clients.
Based on this calculation, in January 2012, China's receipt-to-conversion rate was 67.4%, and the payment-to-purchase rate was 66.4%. There was a situation where the receipt-to-conversion rate was again higher than the payment-to-purchase rate, indicating that the willingness to convert foreign exchange began to exceed the willingness to purchase foreign exchange.
The data also shows that in January 2012, the forward conversion contracts of banks amounted to $1.11 billion, while forward sale contracts were $0.77 billion, resulting in a net conversion of $0.34 billion, ending the deficit trend at the end of last year.
The characteristic of two-way fluctuations will become increasingly evident.
Despite the rebound in conversion intentions, the surplus has not returned to the previous average level.
Since the State Administration of Foreign Exchange started publishing monthly bank agency foreign exchange buying and selling data in January 2010, the average monthly surplus has been around $3.55 billion. Clearly, the $1.94 billion surplus in January is still far below the average.
Mei Xinyu pointed out that since the second half of last year, enterprises and residents have shown stronger intentions to hold foreign currencies, and their conversion intentions have weakened. From this perspective, the foreign exchange situation faces increasingly evident expectations of two-way capital flows and exchange rate fluctuations.
"This contrasts with the original single-directional fluctuations and unidirectional expectations, reducing the pressure brought by long-term single-directional expectations, but also making policies face the challenge of two-way fluctuations. The two-way expected foreign exchange buying and selling behavior also makes changes in foreign exchange reserves more complex."
Mei Xinyu believes that judging from the changes in agency foreign exchange buying and selling and foreign-related income, it is impossible for the overall pattern of current account surplus in China to reverse in the foreseeable future, but the scale and proportion of GDP of current account surpluses are trending downward.
"At the beginning of last year, the surplus in bank agency foreign exchange buying and selling was almost $7 billion. By December, there was a deficit of $1.53 billion in bank agency foreign exchange buying and selling. In January this year, it rebounded to a surplus of $1.94 billion, indicating that the characteristics of two-way market fluctuations are becoming increasingly evident," he said.