Transaction summary

Average daily turnover increased as compared with the same period of last year.

There were a total 120 sections of trade in the first half of 2002, ending up with an accumulative turnover of 38.47 billion in US dollar terms. The average daily turnover was US$321 million, up 29 per cent compared with the same period of last year.

The average daily turnover of the USD declined slightly as compared to the second half of 2001, while the average daily turnover of the HKD and EUR went up. Compared to the first half of 2001, the average daily turnovers of USD, HKD and JPY all increased to some extent. Trade of EUR against RMB was introduced on April 1, but trade was inactive.

USD and HKD fluctuated within a narrow band, JPY and EUD went up.

USD maintained a fluctuating situation in the first half of 2002. The weighted average price of USD was 8.2768 on the first trading day, and 8.2771 on the last trading day of June, five bps up from 8.2766 at the end of 2001. The weighted average price fluctuated within a band of ten bps between the high of 8.2775 and low of 8.2765 during this period.

HKD remained stable in the first half of 2002. The weighted average price of HKD was 1.0605 on the first trading day, and 1.0606 on the last trading day of June, only one bp higher than 1.0605 at the end of 2001. The weighted average price ranged within a band of six bps from the high of 1.0610 to the low of 1.0604 during this period. In the second quarter, the fluctuation further narrowed to three bps.

JPY was relatively stable in the first quarter of 2002 and shot up in the second quarter. The weighted average price of JPY was 6.3095 on the first trading day, and 6.9256 on the last trading day of June, 6244 bps higher than 6.3012 at the end of 2001. During the first half of 2002, the lowest weighted average price was 6.1331, and the highest was 6.9256 on the last trading day, resulting in a fluctuation of 7925 bps.

The weighted average price of EUR was on an upward trend since the introduction of EUR trading to the domestic market. From the lowest weighted average price of 7.2244 on April 1, the first trading day of EUR, to the highest 8.1840 on June 28, the last trading day of June, EUR increased by 9596 bps. However, trading of EUR was inactive for several reasons. First, a small portion of international trade was settled in EUR. Second, it takes time for traders to get familiar with EUR. The recent exchange rate fluctuation of USD against EUR made some market participants more prudent.

The excess of forex supply over demand increased.

During the first half of 2002, the surplus of supply over demand was 1.8 times as much as that in the first half of 2001. The supply increased by 39 per cent and the demand declined by 14 per cent, leading to an 86 per cent increase of surplus compared to the same period last year.

The broking service of foreign currency deposit was successfully introduced.

With careful preparations and official approval by the State Administration of Foreign Exchange, China Foreign Exchange Trade System (CFETS) introduced the broking service of foreign currency deposit in June 2002, which was welcomed by the market. The service is another milestone in the development of China's forex market. However, because of the inexperience of participants and other policy issues such as taxes, trade was slack. In June, six financial institutions involved in this trade, with an accumulative turnover of US$30 million and a funding rate a bit lower than that on the international markets.

Brief analysis

National economy performs well, and is in a good situation.

The domestic economy made a good beginning, performing better than expected. The State Information Center estimated that GDP in the first half of 2002 was about RMB 4.5795 trillion, an increase of 7.5 per cent over the same period last year. There are more favorable factors than unfavorable ones for economic growth in the second half of the year, and so it is predicted that GDP growth rate can reach 7 per cent for the whole year.

Foreign trade remained in surplus and foreign investment kept growing.

The grand total of exports and imports in the first five months 2002 was US$221.55 billion, with an increase of 12.1 per cent. The newly contracted FDI amounted to US$27.86 billion, rising 7.29 per cent over the same period last year, and the real utilized FDI was US$16.92 billion, up 12.38 per cent over same period last year.

The prospect of the USD exchange rate deserves attention.

The exchange rates of the USD against EUR and JPY had depreciated almost 10 per cent during the first half of the year, and the exchange rates of EUR and JPY against RMB in domestic market appreciated accordingly. The fluctuation of USD exchange rate will widely affect our foreign trade, FDI, foreign loans and official forex reserve structure, and so deserves further research.

(by Zhang Shengju)