REPEAT: China Banks Larger FX Buys In Dec; Inflow Expands

Repeats Story Initially Transmitted at 07:17 GMT Jan 18/02:17 EST Jan 18

     BEIJING (MNI) - China banks were net buyers of foreign exchange from their

clients in December, another sign that capital inflows are building momentum as

the stronger yuan exchange rate and capital outflow controls had their intended

effect, according to the latest figures from the State Administration of Foreign

Exchange.

     SAFE said Thursday that Chinese banks bought a net CNY44.5 billion from

clients in December, compared with a net sale of CNY31.2 billion in November.

The number is treated as a key indicator of the level of capital flows in       

          to and out of the country. The bigger the purchase number, the less

the outflows.

     Wang Chunying, a SAFE spokeswoman, noted to journalists in a press

conference Thursday how banks' clientele were less willing buyers of forex in

2017.

     "The willingness of market participants to purchase foreign exchange fell

for 2017... in contrary, the intention of forex sales trended to rise," she

said.

     SAFE said that the forex sales ratio of banks' clients, measuring clients'

forex sales as a proportion of their forex incomes, was 63% for the whole year,

3 percentage points higher than in 2016, while the forex purchase ratio of

clients was 65%, down 9 percentage points compared with that in 2016. 

     Including banks' proprietary trading, their net purchases surged to CNY39.5

billion in December, compared with November's net sales of CNY49.7 billion.

     For the 2017, net forex sales by banks to clients stood at CNY476.2

billion, according to SAFE. Meanwhile, net forex sales including banks'

proprietary trading totalled CNY764.8 billion.

     "The international payments now are basically balanced and cross-border

capital has turned to net inflow," Wang noted.

     In the first three quarters, the ratio between surplus of current account

and GDP in China stood at 1.3%, compared with 2.7% in 2015 and 1.8 in 2016.

     As of the end of December, outstanding foreign reserves stood at $3.14

trillion, an increase of $129.4 billion since the end of 2016, SAFE said. 

     The cross-border capital flow is expected to remain stable considering the

influence of normalization of the Federal Reserve' monetary policy and the U.S

tax reduction is reducing, Wang said, adding the robust domestic economy will

also make a positive contribution

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

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