Recently, the director-generals of the branches of the State Administration of Foreign Exchange (SAFE) attended a symposium in Nanchang, the capital of Jiangxi province. The participants earnestly studied and implemented the decisions and plans of the Party Central Committee and the State Council on economic work for the second half of this year, reviewed and summarized foreign exchange administration work in the first half of the year, conducted in-depth analyses of the current foreign exchange situation, and mapped out the management tasks for the latter half of the year. Mr. Yi Gang, administrator of the SAFE, delivered a work report. The deputy director-generals, chief economists, and chief accountants of the SAFE were also present at the meeting.

It was pointed out at the meeting that during the first half of 2011, efforts were made by the foreign exchange authorities to accelerate the five transformations of the concepts and methods of foreign exchange administration, rigorously crack down on the inflows of hot moneyand other illegal and irregular funds, actively prevent the risks of cross-border capital flows, and constantly deepen the reform of the foreign exchange administration system so as to improve the operation and management of foreign exchange reserves and to make further progress in various tasks. Following the overall planning of the Party Central Committee and the State Council, and under the guidance of the Party Committee of the Peoples Bank of China (PBOC), such efforts focused on scientific development and the transformation of the mode of economic development. The progress can be demonstrated in the following eight respects:

First, policy measures were introduced to strengthen the management of foreign exchange business and to curb irregular capital inflows. In 2011 efforts were made to reinforce administration of the position of the banks foreign exchange settlement and sales, foreign exchange collections from transit trade, advances on sales and deferred payments, and to further downsize the total scale of the short-term external debt quota of domestic financial institutions;

Second, the foreign exchange authorities stepped up efforts to crack down on hot money and other illegal and irregular capital inflows. Efforts were made to carry out special inspections of major market player, such as financial institutions and large-scale enterprises, as well as of items such as foreign exchange settlement of capital funds and short-term external debt, to investigate and deal with serious violations, and to severely punish underground money shops, speculation in foreign currency via the Internet, and other criminal activities. During the first half of 2011, 1,865 relevant cases were closed, involving a total amount of over USD16 billion;

Third, the SAFE strengthened the monitoring and management of cross-border capital flows. Efforts were made to advance the reform of supervision and control of foreign exchange entities in a steady manner and to integrate and comprehensively utilize the related managerial system and data. Examinations and verifications of the authenticity of cross-border capital flows were intensified. Meanwhile, the system of checking up on the banks execution of the foreign exchange administrative provisions was refined so as to encourage compliance of bank operations;

Fourth, reform of foreign exchange administration of trade in goods was steadily promoted. Efforts were made to promote the policy of overseas deposits of export proceeds throughout the country, to popularize the reform of the verification and writing-off system of foreign exchange payments for imports with a down-to-earth attitude, and to take an initiative to study the reform of the verification and writing-off system of exchange collected from exports;

Fifth, efforts were made to further facilitate foreign exchange receipts and payments of market entities, to adjust and streamline the management policies for some items under the capital account, to perfect the administration of foreign exchange settlements and sales for individuals via e-banking, and to launch RMB-foreign currency option trading to further satisfy the market demand for hedging the exchange rate;

Sixth, investment and risk management of foreign exchange reserve assets was strengthened. Efforts were made to closely follow and analyze market changes, maintain diversified investment strategies, optimize the allocation of medium- and long-term currencies and assets, and continuously improve risk management;

Seventh, the transparency of foreign exchange administration was constantly enhanced by releasing for the first time a monitoring report on Chinas cross-border capital flows to the public and announcing data on the position of international investments on a quarterly basis to spread thorough knowledge among the general public about cross-border capital flows; and

 Eighth, the fundamental work for foreign exchange administration was consolidated, Striving for Excellencecampaigns were intensively launched, and Party construction of the foreign exchange authorities and the building of ranks of cadres and honest and clean government were reinforced.

It was put forward at the meeting that during the second half of 2011 Chinas foreign exchange receipts and payments may face pressures due to large net inflows. Therefore, it is imperative to fully recognize the seriousness and complexity of the current foreign exchange situation, to keep close track of the development of the economic situation both at home and abroad, to carry out in-depth assessments of market risks, to grasp the latest trends and changes in a timely manner, and to formulate effective response plans and measures.

It was proposed at the meeting that the key points of foreign exchange administration for the second half of 2011 will follow the unified arrangements of the Party Central Committee and State Council, adapt to the new changes in domestic and overseas conditions, attach greater importance to slowing down the excessively growing surplus of banks foreign exchange settlement and sales, expedite the preventing and cracking down on inflows of hot moneyand making steady progress in the reform of the import and export verification and writing-off system, and vigorously carry out the various tasks of foreign exchange administration so as to promote the stable and relatively rapid growth of the national economy. Efforts should be made in two major respects as follows:

First, rigorously fighting against the inflows of hot moneyand other illegal and irregular funds as well as cross-border arbitrage funds. Further unifying thinking, strengthening macro-awareness about the overall concepts, continuing to maintain  high pressure to crack down on hot money,and seriously punishing illegal foreign exchange collections and settlement. Meanwhile, adopting positive measures to encourage and facilitate foreign exchange purchases and payments, restraining market entities from arbitrage in cross-border asset management, slowing down the excessive growth of the surplus in foreign exchange settlement and sales, and continuing to implement policies for the convenience of legitimate foreign exchange fund flows.

Second, steadily boosting the reform of the import and export verification and writing-off system. Promoting progress in preparation of a pilot reform of the import and export verification and writing-off system and steadily moving ahead with the reform of the system. Further intensifying the joint coordination mechanism among the trade administrative departments in an effort to lay a foundation for the overall reform of the import and export verification and writing-off system.

In addition, it is also imperative to proceed with various tasks in an orderly fashion in light of the work arrangements defined at the national work conference on foreign exchange administration at the beginning of this year, further perfect the operation and management of foreign exchange reserves, actively advance law-based administration and regularize the laws and regulations, thoroughly carry out Striving for Excellencecampaigns, enhance the construction of a clean and honest government, and continually improve the internal control system and the level of internal management.