CNBC:

First, what are the trends and prospects of foreign capital inflows into China? Second, foreign investors often worry about money withdrawal when considering an increasing investment in China. Does the SAFE provide specific guarantees for that? Thank you.

Wang Chunying:

I see that one of your questions is about the recent changes and prospects of foreign investments in China, and the other is about concerns over investment withdrawal.

How has foreign investment in China changed amid the outbreak? First, medium- and long-term foreign investment, such as foreign direct investment and bond investment for the purpose of allocating medium- and long-term RMB assets, kept flowing in. On the one hand, foreign direct investment remained generally stable and well structured. According to the statistics of the Ministry of Commerce, the actual use of foreign investment by the non-financial sector in the first quarter of 2020 was $31.2 billion. Though on a year-on-year decrease, the use of foreign investment in the high-tech service sector grew rapidly, indicating that foreign investors saw the opportunities along with the transformation of the Chinese economic structure. On the other hand, bond investment for the purpose of allocating medium- and long-term RMB assets increased. Foreign investors held $16.7 billion more Chinese bonds in the first quarter in the net figure, an increase of 48%. Second, foreign investment in the stock market fluctuated slightly within a short period and a reasonable range under external shocks. There was a fall in global stock markets in general and a rise of risk-aversion emotions in the first quarter. Therefore, it is normal for some foreign investors to have reduced their investment in the stock market under the tight liquidity of the U.S. dollar. Foreign investors held around $10 billion less Chinese stocks in the first quarter in net figure, with a relatively more decrease in March compared with the other two months. The market value of the Chinese stock market ranks second in the world and registers around $7-8 trillion, among which the 10 billion accounts for a very small proportion and has had minimal influence. At the same time, the capital flow in the stock market fluctuated in both directions, which showed that the decrease did not last. The northbound investment to Chinese mainland through Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect showed net outflows in mid-March and turned into net inflows in late March, so in our view, the investment has changed within a reasonable range.

Where the prospect of investment is concerned, we believe that in the future, Chinese market and RMB assets will still be rather attractive to foreign capital. This is because China's economic fundamentals for long-term growth remain unchanged, and China also has huge potential in its domestic market. Additionally, China has made positive progress in domestic pandemic prevention and control, which greatly contributes to global economic development. Considering direct investment, in the past four years, foreign direct investment (FDI) across the world has seen a continuous decline. Against this backdrop, the scale of foreign investment in China keeps rising, and China remains the world's second-largest country in attracting foreign investment. It shows the long-term strong interest of foreign investors in doing business in China. In terms of investment in bonds, the yields of bonds in China are very high. This is very attractive to investors who allocate RMB assets in the medium and long term. From the perspective of the stock market, the actual valuation of China's stock market is relatively low, and the prospect of value investing is quite promising in China. For example, compared with the rest of the world, the stock market in China is less volatile. In the first quarter, the Dow Jones industrial average was down 23%, whereas the volatility of the Shanghai Composite stayed within 10%. Therefore, China's market remains attractive to foreign investors from the three aspects of direct investment, bond investment, and stock investment. We always welcome foreign investors to invest in China and share in the dividends of China's economic development.

I'd also like to talk about the security of funds, as you mentioned earlier. As a matter of fact, since 1996, China has already realized the convertibility of current accounts. This means that all the incomes and expenses under the current accounts, as long as they are real and compliant, will be processed at banks with the legitimate documents. As for capital accounts, according to the 40 standards of the International Monetary Fund in seven major categories, China already keeps a high level of openness. Also, we have been making efforts on the reform of investment facilitation. As I said just now, our reform efforts are always proactive, progressive and controllable. This means that we will not "go backward." This is why we say that windows will not be closed once opened. Therefore, investors should no longer be worried about this issue.