Central Bank of China

PRESS RELEASE Release Date: February 20, 2002




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BALANCE OF PAYMENTS

Balance of payments accounts are divided into the current account, the capital account, the financial account and reserves. If the current account registers a surplus, external claims increase and are distributed to the capital account, the financial account and reserves.

For the fourth quarter of the year 2001, the current account of the country registered a surplus of US$7,062 million, while reserves increased by US$8,138 million and inflows of financial capital amounted to US$1,881 million.

This quarter's current account surplus represented the highest quarterly figure on record. This was mainly due to a greater reduction in imports than in exports, causing the surplus in merchandise trade to hit a historic high of US$7,158 million. Also adding to the current account surplus was a narrower services deficit. This mainly resulted from the increased net proceeds from merchanting, as well as the sharp drop in residents' traveling expenses following the September 11 terrorist attacks on the U.S.

The financial account recorded a net inflow of US$1,881 million for the fourth quarter, reversing the net outflow of US$738 million for the third quarter. This was largely attributable to residents converting their foreign currency deposits with domestic banks into NT dollar deposits, which led to a drop in banks' net foreign assets. In addition, foreign portfolio investments in the local market continued its trend of inflows. Broken down by the components of the financial account, direct investments shifted from an inflow of US$4 million in the third quarter to a net outflow of US$446 million. This reflected larger direct investments abroad by residents than foreign direct investments in the local market. A net outflow of US$1,689 million was recorded in portfolio investments mainly because of the widened outflow of residents' portfolio investments abroad. Nevertheless, foreign portfolio investments in the local market still exhibited a net inflow of US$2,930 million, indicating confidence of foreign investors in the prospects of the Taiwan stock market. In addition, other investments showed a net inflow of US$4,016 million mainly due to the conversion of foreign currency deposits into NT dollar deposits, which reduced domestic banks' net foreign assets.

For the year 2001 as a whole, the current account surplus reached US$19,028 million, showing the highest figure on record. Reserves increased by US$17,353 million and the financial account registered a small net outflow of US$836 million. The balance of payments of the country were in a good shape.

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