China banks' forex settlement sees surplus in May

Chinese banks bought more foreign currency than they sold in May, in the first such surplus in nine months, official data showed on Thursday.

The banks bought 872.4 billion yuan (142.55 billion U.S. dollars) in foreign currencies and sold 864.6 billion yuan, resulting in a surplus of 7.8 billion yuan or 15.08 million U.S. dollars, the State Administration of Foreign Exchange (SAFE) said in a statement.

The first surplus since August indicates more balanced development of China's foreign exchange revenue and expenditure.

Of the total, banks bought 840.7 billion yuan and sold 816.1 billion yuan in foreign currencies for clients, resulting in 24.5 billion yuan of surplus in May.

The banks themselves bought 31.7 billion yuan in foreign currencies and sold 48.4 billion yuan in foreign currencies, resulting in a deficit of 16.7 billion yuan in May.

Banks' forex spending and purchasing began a favorable trend in April, with May the turning point that saw capital inflows instead of outflows, according to SAFE official Wang Yungui.

"The surplus is what we were hoping for, as it creates a stable environment for reform of forex management," Wang said.

The banks' foreign exchange settlement registered a deficit of 50.4 billion yuan in January, 105.4 billion in February, 406.2 billion in March and 887.6 billion in April. The first quarter saw a total of 562 billion yuan in deficit, up 97 percent from the fourth quarter last year.

It is a common practice for banks to sell foreign currencies to firms or individuals and buy foreign currencies from them. Known as the bank exchange, it can be used to measure the supply-demand relationship in the interbank forex market and impact the yuan's exchange rate. Endi