It’s not scary if foreign exchange reserves fall below 3 trillion

China Central Broadcasting Network, Beijing, February 9 News According to the Economic Voice's "Central Broadcasting Financial Review" report, the State Administration of Foreign Exchange website yesterday published a response to a reporter's question saying that in 2016, my country's international balance of payments continued to show "one smooth and one negative", that is, current account surplus, capital and financial account (excluding reserve assets) deficits. It shows the following characteristics: first, the current account still maintains a surplus; second, external financial assets increase, and domestic entities continue to allocate overseas assets; third, all types of investment in China show net inflows, of which the net inflow of securities investment in China exceeds 30 billion US dollars, an increase of about 4 times over the previous year; fourth, reserve assets decrease. In 2016, my country's reserve assets decreased by US$443.6 billion, of which foreign exchange reserves due to balance of payments transactions decreased by US$448.7 billion, and reserve positions in the International Monetary Fund increased by US$5 billion.

A spokesman for the State Administration of Foreign Exchange predicts that the current account will maintain a certain size of surplus in 2017. Trade in goods will continue to show a surplus; trade in services deficit growth may continue to slow; investment income will gradually increase. At the same time, the capital and financial accounts are expected to continue to show deficits, but the size of the deficits will narrow. In terms of absorbing foreign investment, the cross-border financing demand of my country's corporate sector has gradually recovered since the second quarter of 2016, and has been rising steadily for three consecutive quarters. Foreign capital has also continued to flow in because of its optimism about my country's economic development prospects. In particular, the absorption of foreign direct investment in China will continue to maintain a large-scale net inflow, and the continuous opening of the domestic securities market will also attract more foreign investment. In the future, my country's cross-border capital flows will generally converge toward equilibrium.

Although the global economy will remain generally sluggish in the coming period, with issues such as trade and investment deceleration, overall the fundamental factors supporting a country's cross-border capital flows still depend on a country's own economic conditions. my country's performance in this regard is relatively outstanding, including a relatively high economic growth rate in the world, a relatively good financial situation, an overall sound financial system, a continued current account surplus, and the largest reserve scale in the world. my country's future cross-border capital flow risks are generally controllable.

Against this background, we need to view "China's foreign exchange reserves falling below 3 trillion US dollars" with a normal mind, and at the same time face the outflow pressure faced by cross-border capital in 2017.

Economist Ma Guangyuan analyzed and interpreted this topic.

Ma Guangyuan: "A country's cross-border capital flows fundamentally depend on a country's economic fundamentals. In terms of the amount of foreign exchange reserves, even if China's foreign exchange reserves currently fall below the three trillion US dollar mark, China's foreign exchange reserves are still the largest in the world, and our economic fundamentals are excellent. In this case, regardless of Will China's decline in foreign exchange reserves continue in the future? Currently, the amount of foreign exchange reserves is more than sufficient. There is no need to worry about China's international balance of payments problems due to the decreas