MNI POLICY: China Current Account to Continue A Surplus: SAFE

     BEIJING (MNI) - China's current account may continue a surplus in the first

quarter on exports of goods and services remaining strong, the State

Administration of Foreign Exchange (SAFE) said. Here are some points noted by

MNI from a briefing by spokeswoman Wang Chunying on Thursday.

     - Current account is likely to remain in a reasonable range and the capital

account will be balanced as outbound investments, including direct investment,

securities investment and loans, increase.

     - An expectation of a more stable yuan, helped by good economic

fundamentals, capital inflow and improving trade talks with the U.S., led to a

decline in net sales of FX by banks for their clients: CNY16.6 billion from

CNY102.3 billion in February, while purchases of FX forward contracts stayed

positive for the third month at CNY122.5billion. 

     -The countercyclical policies adopted this year played a positive role in

bolstering the economy and the FX market has operated smoothly.

     -The flexibility of the yuan's exchange rate will be enhanced to absorb the

impacts of opening up securities market. There is still large potential for

foreign capital in the domestic securities market, where it takes up as little

as 2% in bond and equities combined.

     -SAFE will keep a two-way opening-up of FX market, satisfying both legal

outbound investment by domestic companies and foreign investors' demand. China

will further expand the range of qualified investors to push forward the opening

up of its capital account.

     -SAFE will introduce securities and mutual fund companies into the FX

market and enrich FX derivative instruments to facilitate hedging in the

interbank bond market.

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

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