(Yicai) Aug. 16 -- The net inflow of foreign direct investment to China recovered last month, reaching the second-highest level in the past year, according to an official at the State Administration of Foreign Exchange.

Foreign capital inflow has gradually picked up, SAFE Deputy Administrator Wang Chunying said in a question-and-answer piece posted on the regulator’s website yesterday. Cross-border funds for securities investment also maintained a net inflow, and foreign investors made net purchases of onshore stocks and bonds, she said.

Moreover, the net inflow of cross-border funds for the trade in goods remained higher than the first-half average, Wang said, adding that the main capital flow channels were generally stable.

FDI into China stood at CNY442.6 billion (USD60.8 billion) in July, according to data from the People's Bank of China. In the first six months of the year, it was CNY2.34 trillion (USD321.5 billion), averaging CNY390 billion a month.

Banks had a forex settlement deficit of CNY106.2 billion last month, as they settled CNY1.2 trillion of foreign exchange and sold CNY1.31 trillion, the SAFE said yesterday.

Market entities bought more US dollars at low levels as the Chinese yuan steadied and rebounded in the month, Wang said, adding that this is normal and rational. Moreover, profit sharing and dividend distribution entered a seasonal peak, with these factors causing a modest deficit, she added.

Looking ahead, major global economies are expected to stop monetary tightening soon, with the spillover effects easing, Wang said. China’s economy will go on improving as policies continue to have an effect and the foundation for steady forex operations is still firm, she added.

The central bank unexpectedly cut key policy rates yesterday for the second time since June. The People's Bank of China lowered the rates on its one-year medium-term lending facility loans by 25 basis points to 2.5 percent and on its seven-day reverse repurchase agreements by 10 bips to 1.8 percent.

Following the rate cuts, the PBOC set the yuan’s daily reference rate at 7.1986 versus the US dollar today, a softening of 218 bips from yesterday.

Editor: Emmi Laine