Central Bank of China

PRESS RELEASE Release Date: August 20, 2002




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BALANCE OF PAYMENTS

For the second quarter of the year 2002, the current account of the country registered a surplus of US$6,063 million, while the net inflow of financial capital amounted to US$10,665 million and reserves increased by US$16,192 million, representing the largest quarterly increase on record.

Of the current account, exports grew 6% year-on-year, mainly driven by exports to Hong Kong, mainland China and South Korea, while imports decreased slightly by 0.3%, resulting in a goods trade surplus of US$5,983 million. Meanwhile, services deficit, income surplus and current transfers deficit amounted to US$880 million, US$1,592 million and US$632 million, respectively. In total, the current account surplus reached US$6,063 million, showing a large increase of 78.6% from the same period last year.

The financial account hit a historic high net inflow of US$10,665 million for a single quarter. Broken down by the components of the financial account, both direct investment and portfolio investment exhibited net outflows, with US$1,201 million and US$198 million, respectively, while other investment recorded a huge net inflow of US$12,064 million for the quarter.

The US$1,201 million net outflow of direct investment translated to 141% widening of outflow from the same period last year, mainly due to the large decrease in direct investment in Taiwan by non-residents in addition to the continuing direct investment abroad by residents. Of the US$198 million net outflow of portfolio investment, residents' portfolio investment abroad posted a net outflow of US$2,997 million, while non-residents' portfolio investment in the local market continued to post a net inflow of US$2,799 million. The latter featured more investment in debt securities than in equity securities, primarily led by the issuance of overseas corporate bonds by local firms reaching US$2,347 million in total, 70% of which was issued by financial holding companies.

Other investment recorded a huge net inflow of US$12,064 million, largely because a weakening US dollar triggered expectations of an NT dollar appreciation. Under the influence, foreign currency deposits decreased, causing the foreign asset of the banking sector to drop by US$3,649 million; meanwhile, banks sold US dollars in the spot market, resulting in a US$5,598 million increase in their foreign liabilities.

Notes: 1. The upcoming balance of payments data are to be released at 16:20 on November 20, 2002.

2. For the release schedule for the next six months, check the CBC website at http://www.cbc.gov.tw/account/index.html.

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