AVERAGE DAILY TURNOVER SET A NEW RECORD AGAIN, AND THE EXCESS OF FOREX SUPPLY OVER DEMAND INCREASED

Transaction summary

There were 18 sessions in October 2002, ending with an accumulative turnover equivalent to US$ 8.73 billion. The average daily turnover was US $485 million, which set a new record again, and was up 29.46 per cent over last month and 15.36 per cent over the same period of last year. The average daily turnover of USD, HKD, JPY and EUR all increased as compared with last month.

USD dropped before rising this month. In the first ten days, USD dropped from a high price with an increasing turnover. In the second ten days USD rallied, and it recovered in the last ten days. The lowest and the highest weighted average rate of USD/RMB were 8.2767 and 8.2772 respectively. The weighted average price ended up at 8.2771 this month, one bip lower than that of last month.

HKD stably increased this month. The weighted average price of HKD/RMB at the beginning of this month was 1.0607, also the lowest of the month. It leveled off at 1.0608 in the first ten days and steadily increased seven days later. The weighted average price ended up at 1.0612, the highest in October and four bips higher than 1.0608 of last month.

JPY recovered after declining. At the beginning of this month, the weighted average price of JPY was 6.6548, and it began to decline after increasing for two days. It fell to its low of 6.6130 in the second ten days, and then recovered gradually. At the end of the month, JPY jumped to its highest weighted average price of 6.7341, 211 bips lower than that of last month.

EUR topped out. At the beginning of this month, the weighted average price of EUR/RMB was 8.1383. It reached its high of 8.1859 after a slight drop of one day. It then fell to 8.0448, the lowest of the month. The weighted average price of EUR ended up at 8.1720, 794 bips higher than that of last month.

Compared with September, the average daily supply in the interbank forex market increased while the average daily demand decreased. The excess of supply over demand increased by US $1.16 billion as compared with last month. The average daily excess increased by 59 per cent but decreased by 8 per cent respectively as compared with September and the same period last year.

In October, fifteen domestic and foreign-funded banks as well as non-bank financial institutions were involved in interbank forex deposits with an accumulative turnover of US$95 million. Overnight forex deposit was launched this month, and three deals were transacted. The most frequently traded variety was one-month, whose average lending rate was 1.737 per cent, slightly lower than the rate on the international market.

Brief analysis

Driven by foreign trade and investment, the economy in general grew constantly during the third quarter. Adequate foreign exchange encouraged active trading in the interbank forex market.

The economy grew constantly and stably. According to statistics, the national value added by industries (by enterprises above scale) amounted to RMB 2.25 trillion yuan in the past nine months, 12.2 per cent higher over the same period last year. It grew gradually and stably through the first three quarters, with a growth rate of 10.9 per cent, 12.5 per cent, 13.1 per cent respectively. The rapid growth of industry accelerated economic growth. The GDP in the third quarter increased by 8.1 per cent year-on-year. The GDP in the first nine months of this year increased by 7.8 per cent, higher than that of 2001, and better than the governmentÕs expectation.

Foreign trade retained a surplus and forex reserve kept growing. The grand total of exports and imports in the first nine months was US$445.14 billion, up 18.3 per cent over the same period in 2001. The favorable balance was US$19.99 billion, 49.4 per cent more than that of the same period last year. Trade surplus with the U.S. in the first nine months added up to US$30.3 billion, which indicated that ChinaÕs foreign trade relies greatly on the U.S. market and any change in American policies would impact China's foreign trade. At the end of September, the foreign exchange reserve was US $258.6 billion, US$12.6 billion more than that of the end of last year.

Foreign investment kept flourishing. According to statistics, the contracted FDI in the first nine months of 2002 reached US$69.85 billion, up 37.5 per cent year-on-year. The utilized FDI reached US$41.18 billion, 22.4 per cent higher than the same period in 2001.

International economic situations will influence China's economy. After the surprising recovery at the beginning of this year, the three major economies, the U.S., Japan and the EU, all presented a downward trend to different extents, which will affect China's exports in the foreseeable future. Other uncertainties such as the situation in Iraq and oil price are also bound to influence the global economy.

(by Wu Jingjing)