MNI POLICY: SAFE Sees China Current Account Surplus Thru 2020

     BEIJING (MNI) - China's current account is expected to see a modest surplus

in 2020, boosted by a stabilization in trade with the U.S. as the 'phase 1'

trade deal kicks in and helps boost confidence and revive consumption levels,

said Wang Chunying, spokesperson and Chief Economist at the State Administration

of Foreign Exchange (SAFE), China's foreign-exchange regulator. 

     Here are the main points of Friday's press conference: 

     - Overseas institutional investors, particularly central banks, will

increase their holdings of yuan-denominated assets seeking higher yields and

relatively cheap stocks. In 2019, foreign investment in the bond market

increased by a net of USD86.6 billion and that in stocks by USD41.3 billion,

twice as much as in 2016, but still proportionally small.

     - China banks sold a net CNY279.3 billion equivalent of forex on behalf of

clients in 2019,  more than the CNY124.5 billion deficit in the same period in

2018. However, banks bought a net CNY25.5 billion on behalf of clients in

December, compared with a CNY31.9 billion deficit in November. Greater net sales

correspond to a larger FX outflow. 

     - Banks' net purchases of FX forward contracts totalled CNY999.4 billion

last year, compared with a net sale of CNY180.6 billion in 2018. banks' net

purchase of FX forward contracts totalled CNY107.7 billion in December, compared

with CNY94.4 billion in November. The increased net purchase position suggested

market participants were betting on a stronger yuan over the longer term. 

     - Cross-border capital flows in 2020 will be 'stable and balanced'

supported by a resilient economy and counter-cyclical macro policy, despite

risks in the international market. 

     - Risks of bigger cross-border capital moves will be controllable and

overseas institutions should not be worried about sending profits out of the

country as long as their operations are legal. 

     - Companies should learn to use the increasing flexibility of the yuan

exchange rate and make good use of derivatives to offset any risk.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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