Central Bank of China

PRESS RELEASE Release Date: November 20, 2001




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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 third quarter of the year 2001, our current account registered a surplus of US$4,475 million, while reserves increased by US$4,150 million and financial capital out flowed US$748 million as a result.

This quarter's current account surplus hit the highest level since the third quarter of 1987. This was mainly due to a greater reduction in imports than in exports, rendering a surplus of US$4,650 million in merchandise trade. Also adding to the current account surplus was the increased net proceeds from merchanting, which caused services deficit to narrow.

The financial account recorded a net outflow of US$748 million for the third quarter, showing a far smaller net outflow from the US$3,323 million for the second quarter. This was largely attributable to residents converting their foreign currency deposits with domestic banks into NT dollar deposits in anticipation of an NT dollar appreciation, which led to a drop in the increase of banks' net foreign assets. Broken down by the components of the financial account, direct investments exhibited a net inflow of US$34 million mainly because direct investments abroad by residents waned amidst the global down turn. This was the first time that direct investment had shown an inflow since the fourth quarter of 1995. A net outflow of US$2,177 million was recorded in portfolio investments mainly because residents' portfolio investments abroad continuing its trend of outflow. In addition, other investments showed a net inflow of US$1,395 million mainly because expectations of an NT dollar appreciation prompted the inward remittances of export proceeds retained overseas and the conversion of foreign currency deposits into NT dollar deposits. The latter caused foreign currency deposits with domestic banks to decrease by US$2.9 billion, and therefore the increase in domestic banks' net foreign assets became smaller.

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