Jiemian News:
How do you evaluate the profit outflow of foreign companies since the beginning of this year? Compared with previous years, will the pressure of profit outflows increase this year? Thank you.
Wang Chunying:
Each year, the second and third quarters are the peak seasons for profit remittance of foreign companies. Based on the current situation, profit remittance of foreign companies this year has maintained a reasonable, orderly, and generally stable momentum. Its impact on China's cross-border capital flow and supply and demand for foreign exchange has been controllable. I would like to share with you the following respects in this regard.
First, the current profit remittance of foreign companies matches the scale of China's investment stock. China's business environment has continued to improve in recent years. Foreign investors are confident in the long-term prospects of the Chinese market. More and more multinational companies invest and do business in China and share the benefits of China's economic growth, reform, and opening up. Furthermore, their profits have been growing steadily, so their profit remittance has been increasing accordingly. From 2020 to 2021, the direct investment stock absorbed by Chinese enterprises increased by an average of 14% annually, and the profit remittance went up by an average of 13% annually.
Second, the impact of profit remittance on the country's international balance of payment and foreign exchange market supply and demand is within a reasonable range. Return on investment (ROI) is part of the current account. There are capital inflows and outflows under the categories of trade in goods, trade in service, and ROI, which have jointly ensured the reasonable and balanced surplus pattern of the current account. Meanwhile, the proper and orderly profit remittance has not influenced the overall balance of foreign exchange market supply and demand at home. In addition, benefitting from the growing internationalization of the RMB and its stable value, a considerable proportion of foreign companies' profits are remitted in RMB, which has a relatively small direct impact on the supply and demand of the domestic foreign exchange market.
Third, profit remittance does not mean withdrawing the investment but has formed a virtuous cycle with the inflow of direct foreign investment. International investors' willingness to invest long-term in China continues to be strong because China's prosperous economic outlook can bring sustainable and stable returns. Besides the newly added investment capital and the inflow of shareholder loans, many foreign companies have reinvested a considerable proportion of their profits in China. Compared with other major economies, the proportion of profits reinvested by foreign companies in China is high.
I would like to take this opportunity to stress that the SAFE's policies on profit remittance are consistent and continuous. There are policy guarantees for profit remittance of foreign companies as long as they are conducted in accordance with laws and regulations. Thank you.
