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    Press Conference of the SAFE on Foreign Exchange Administration Policies for September 2016
Press Conference of the SAFE on Foreign Exchange Administration Policies for September 2016

[Xu Weigang]: Good afternoon, friends from the press. Welcome to this press conference on the SAFE's policies for September 2016. I am Xu Weigang and I am deputy director of the SAFE General Affairs Department. We are also glad to have here with us Wang Chunying, director of the Balance of Payments Department, Du Peng, director of the Current Account Management Department, Guo Song, director of the Capital Account Management Department, and Zhang Shenghui, director of the Management and Inspection Department. [15:11]

[Xu Weigang]: Since the beginning of this year, the SAFE, while strictly following the plans of the CPC Central Committee and the State Council, has been committed to streamlining administration and delegating powers to lower levels, advancing foreign exchange administration reform, and facilitating trade and investment, with the aim of serving the development of the real economy. Meanwhile, the SAFE has highlighted the ongoing and ex-post regulation, urged banks to perform authenticity and compliance reviews, stepped up inspections and punishment of foreign exchange irregularities, and tackled unusual cross-border capital flows to effectively safeguard the stability of foreign exchange markets. [15:12]

[Xu Weigang]: On behalf of the SAFE, I will now be announcing the recent foreign exchange administration policies. The highlights are as follows: [15:14]

[Xu Weigang]: I. Efforts have been made to press ahead with the reform in key aspects and expand opening up [15:17]

[Xu Weigang]: (1) Promoting macro-prudential management of full-scale cross-border financing [15:17]

[Xu Weigang]: In January 2016, the People's Bank of China published the Circular on Rolling out the Pilot Program of Macro-prudential Management of Full-scale Cross-border Financing (Yinfa No. 18 [2016]), with the aim of expanding the pilot program applicable to both domestic and foreign currencies to cover 27 financial institutions and enterprises registered under the four free trade zones, respectively in Shanghai, Tianjin, Guangzhou and Fujian. [15:17]

[Xu Weigang]: At the end of April, the SAFE cooperated with the People's Bank of China in publishing the Circular on Rolling out Nationwide the Pilot Program of Macro-prudential Management of Full-scale Cross-border Financing (Yinfa No. 132 [2016]), specifying that the pilot program applicable to both domestic and foreign currencies will be expanded to include financial institutions and enterprises across China starting from May 3, 2016. Financial institutions and enterprises will be insulated from ex-ante approval of external debt, and allowed to independently conduct cross-border financing in domestic and foreign currencies within the ceiling of cross-border financing that is linked to their capital or net assets. This policy has further diversified the financing channels for market players in China, especially Chinese companies, and is favorable for reducing financing costs to address financing difficulties and high financing expenses, thereby better serving and supporting the development of the real economy. [15:17]

[Xu Weigang]: (II) Promoting the opening up of interbank bond markets [15:18]

[Xu Weigang]: To cooperate with the People's Bank of China's move to further open up the domestic interbank bond market, the SAFE published in May the Circular on Foreign Exchange Administration for Overseas Institutional Investors Investing in the Interbank Bond Market (Huifa No.12 [2016]). The highlights of the Circular are as follows: overseas institutional investors will be subject to registration management via their settlement agents; no individual or total quota will be set, and overseas institutional investors can go through funds remittances and foreign exchange settlements or purchases directly with banks by presenting relevant registration information, with no need for verification or ex-ante approval with the SAFE; outward remittances will not be subject to lock-up period or installment remittances; currencies for outward and inward remittances shall be consistent, with the ratio of domestic and foreign currencies in outward remittances consistent with the ratio in inward remittances, with the fluctuation range of less than 10%. Up to now, more than 30 overseas institutions or products have been filed with the People's Bank of China Shanghai Head Office. [15:18]

[Xu Weigang]: (III) Reforming the RMB qualified foreign institutional investors (RQFII) management system [15:19]

[Xu Weigang]: In February, the SAFE published the Regulations on Foreign Exchange Administration for Domestic Securities Investments by QFII (No.1 of SAFE Announcement [2016]), further relaxing the quota limitations for qualified foreign institutional investors (QFIIs) and simplifying approval processes. The market has responded positively to relevant policies implemented. As at the end of August, 270 QFIIs had obtained quotas of USD 81.478 billion. [15:19]

[Xu Weigang]: At the beginning of September, the People's Bank of China and the SAFE released the Circular on Managing Domestic Securities Investments by RQFIIs (Yinfa No. 227 [2016]), in a bid to further enhance the consistency of foreign exchange administration for RQFIIs and QFIIs and boost the liberalization of domestic financial markets. The highlights are as follows: first, with reference to QFII management, a proportion of an institution's assets will be taken as the ground for obtaining the quota (basic quota), with balance management as a common way of quota management. Second, quota approval management will be simplified, with application for a quota lower than the basic quota subject to filing management and automatic attainment. Third, efforts will be made to facilitate outward and inward remittances by RQFIIs. With reference to QFII management, no term will be set for inward remittances. No requirements on proportion and installment remittances will be imposed on outward remittances. No lock-up period will be set on quotas for open-end funds, and daily outward remittances will be allowed. The lock-up period for other products or funds will be shortened from one year to 3 months, with daily outward remittances allowed. Fourth, outward remittances via purchasing foreign exchange will be cancelled and RQFIIs will be required to remit funds in the RMB. Fifth, the requirements on data reporting will be simplified so as to collect and monitor data in the capital account information system. [15:20]

[Xu Weigang]: II. Efforts will be made to support the development of the real economy and facilitate trade and investment. [15:22]

[Xu Weigang]: (I) Implementing policies in an all-round way to facilitate trade and investment activities [15:22]

[Xu Weigang]: In April, the SAFE released the Circular on Further Promoting Trade and Investment Facilitation and Improving Authenticity Reviews (Huifa No. 7 [2016]), providing nine measures such as further expanding the positions held by banks in foreign exchange sales and settlements, unifying the policies on external borrowings by foreign and Chinese enterprises, simplifying the procedures of foreign exchange receipts and settlements by class-A enterprises, clarifying the requirements on reviewing documents on offshore resales under trade in goods, and standardizing the reminder system with regard to risks arising from trade in goods. Some of the measures are favorable for providing better financial services by banks for the real economy, reducing costs on enterprises for receipts and settlements of foreign exchange and facilitating more flexible use of external debt by Chinese enterprises, especially private and micro and small businesses. [15:23]

[Xu Weigang]: (II) Unifying and simplifying the management policy for foreign exchange settlements under the capital account [15:23]

[Xu Weigang]: In June, the SAFE published the Circular on the Policy for Reforming and Standardizing the Management of Foreign Exchange Settlements under the Capital Account (Huifa No.16 [2016]), in an effort to implement discretionary foreign exchange settlements with external debt in an all-round way, and unify the policy for discretionary settlements of foreign exchange receipts under the capital account for domestic institutions. Moreover, a common negative list approach will be adopted for the use of the receipts under the capital account, and relevant negative lists will be significantly reduced in order to offer convenience for domestic enterprise to meet their needs for production and capital operations, and facilitate cross-border investment and financing. [15:24]

[Xu Weigang]: (III) Improving the management of BOP statistics declaration [15:24]

[Xu Weigang]: In March, the SAFE published the Operating Guidelines for the Declaration of Balance of Payments Statistics through Banks (2016 version) (Huifa No.4 [2016]), to direct declarers and relevant banks in declarations of BOP statistics. The Guidelines updates and integrates the existing regulatory documents on indirect declarations, and refines the statistics system for indirect declarations. To support business innovations of banks, the Guidelines clearly defines and standardizes new situations and problems in time, thereby greatly facilitating declarations by enterprises and banks. This measure is also designed for cost cuts. These are the three facilitation measures that have been introduced. [15:25]

[Xu Weigang]: III. Cracking down on foreign exchange irregularities to guard against cross-border capital flow risks [15:26]

[Xu Weigang]: Since the beginning of this year, the SAFE has closely tracked the changes in situations, organized various special inspections against illicit cross-border capital flows, and stepped up crackdowns on major cases and foreign exchange-related crimes such as underground banks to safeguard the normal trading order and stability of foreign exchange markets. From January to August, more than 1,100 foreign exchange-related cases were investigated and cracked, with the administrative penalty of over RMB 190 million collected. First, organizing special inspections of financial institutions. In the first 8 months, 504 cases involving regulatory violations by financial institutions were investigated and cracked, involving a penalty of RMB 32.397 million. Second, cracking down on irregularities like underground banks. In the first eight months, the SAFE worked with public security authorities and reported 36 underground bank-related cases cracked or under investigation, cracked 20 cases involving illicit trading of foreign exchange, destroyed 226 hideouts and arrested 298 persons. [15:26]

[Xu Weigang]: Overall, the SAFE has actively adapted to the new normal of foreign exchange administration, and broken new grounds in reform and risk prevention and controls. While being committed to facilitation and risk prevention, the SAFE has worked to ensure smooth implementation of reformative measures for foreign exchange administration. At the time of preventing cross-border capital flow risks, the SAFE has systematically pushed forward foreign exchange administration reform, and strongly supported economic restructuring, transformation and upgrades.[15:27]

[Xu Weigang]: Now I will be taking your questions, with one from each reporter. Please tell us your organization before asking your question. [15:27]

[Financial News]: President Xi Jinping said at the opening ceremony of the 2016 G20 Hangzhou Summit that, in the face of the existing challenges, we should build an open world economy, continue to boost trade and investment liberalization and facilitation. I am wondering what measures have been taken with regard to foreign exchange administration? What new measures, if any, will be taken in the future? [15:54]

[Xu Weigang]: During the G20 Summit that has just been closed, President Xi Jinping proposed in his speech that an open world economy should be built. Since the 18th CPC National Congress was held, especially since the 13th Five-Year Plan was published, five development concepts including openness have been proposed. In recent years, the SAFE has been committed to implementing the decisions and plans of the CPC Central Committee and the State Council. To be specific, it has been dedicated to pushing ahead with reforms, simplifying administration while delegating powers, promoting trade and investment facilitation, and supporting trading and investing activities that are in compliance with regulations, so as to serve the development of the real economy. The earlier-mentioned three aspects of reform in foreign exchange administration and three measures for trade and investment facilitation, which have been adopted since the beginning of this year, are all favorable for serving the development of the real economy and building an open world economy. Specifically, as at the end of 1996, the current account had been made convertible. Currently, the policies for foreign exchange receipts and payments under trade in goods and trade in services offer great convenience to market players, allowing them to go through procedures relative of foreign exchange receipts, payments, sales and settlements with banks without any barrier. The earlier-said facilitation policy, introduced in April, makes it easier for class-A enterprises to go through foreign exchange receipts and settlements procedures under trade in goods. [15:55]

[Xu Weigang]: In cross-border financing, the earlier-said macro-prudential management of full-scale cross-border financing, registration of foreign exchange under direct investment with banks, and discretionary foreign exchange settlements under capital funds are all conducive to building a sound environment for attracting foreign investments, and supporting going global of domestic institutions. In bonds investment, the SAFE has cooperated with the People's Bank of China to boost the opening up of the interbank bond market, further simplified the procedures for portfolio investments by QFIIs and RQFIIs, expanded the liberalization of the capital market, and diversified tradable products and trading participants in foreign exchange markets. To sum up, we have adopted many measures to boost reforms in key aspects and trade and investment facilitation, which have delivered positive outcomes, and drastically reduced enterprises' financing costs, making it easier for them to carry out trading and investing activities. [15:56]

[Xu Weigang]: While continuing to follow the requirements of the 13th Five-year Plan and the third and fifth plenums of the 18th CPC Central Committee, we will be committed to facilitation and risk prevention. On the one hand, we will be dedicated to reform, continue to simplify administration and delegate powers to forge ahead, and study and introduce measures that are conducive to achieving an equilibrium between foreign exchange receipts and payments and aligned with the direction of the long-term reform, in a bid to enhance trade and investment facilitation. On the other hand, we will intensify monitoring and analysis of cross-border capital flows, and crack down on foreign exchange irregularities to ensure stability of foreign exchange markets. [15:56]

[Economic Information Daily]: Since the beginning of this year, many Chinese enterprises have gone global for overseas M&As. Could you brief us on the SAFE's foreign exchange policies for these enterprises? The return of China Concept Stocks in recent years also involves foreign currency exchanges. What are the SAFE's policies in this regard? [16:09]

[Guo Song]: Thank you for your attention to China's overseas M&As. The Ministry of Commerce disseminated the 2015 growth data this morning, which were high still. How to look at this issue objectively is crucial for the moment. Is it welcome news that many enterprises go global? From our point of view, global experience has taught that when it becomes a middle-income country, China will gradually shift from a country with net capital inflows to the one with net capital outflows, given the current stage of China's economic development. This was explained this morning by Zhang Xiangchen, deputy minister of the Ministry of Commerce. So we believe this is a normal and reasonable case. [16:11]

[Guo Song]: The number of enterprises going global has grown a bit too quickly now, to be sure. Will this impact China's foreign exchange? Absolutely, especially on the supply and demand of foreign exchange. In the past, the surplus under the capital account came primarily from FDI or investments. By comparison, a deficit of USD 10 billion has been registered in FDI and ODI under the capital account, according to the data disseminated by the Ministry of Commerce this morning. In a word, the SAFE supports real and reasonable M&As abroad, and we also expect the acquirers are competent and qualified. [16:12]

[Guo Song]: It could be more suitable to inquire of the China Securities Regulatory Commission about the return of China Concept Stocks. The principles of the return are the same with those of foreign exchange administration. The centralized return of China Concept Stocks could have adversely hurt the images of Chinese enterprises going global. But in our opinion, we will support valuable considerations provided that you have real demands. However, we do have to prevent the return of China Concept Stocks for the purpose of arbitrages. We will support normal cross-border M&As and the return of China Concept Stocks that are in compliance of regulations, and be dedicated to maintaining the equilibrium of BOP. [16:12]

[Financial Channel of CCTV]: Could you brief us on the measures taken by the SAFE in response to the foreign exchange regularities since the beginning of this year, especially the unusual outflows of cross-border capital? What would you say about the effects? [16:18]

[Zhang Shenghui]: This is not a complex question, but should be answered in two aspects. First, allow me to brief you on the crackdowns on foreign exchange irregularities. This involves the SAFE's attitude and stance first: the SAFE has always maintained a tough stance on foreign exchange irregularities. Given its performance this year, the SAFE has upgraded its off-site inspection system, which has been in operation for several years as you all know. This upgrade involves the improvement of the database and the refinement of off-site monitoring indicators. When it comes to training on system use and organization of off-site inspections, we proposed to bring the latter to a new high last year, which has delivered satisfactory outcomes. This system has dramatically enhanced our capability to spot leads on unusual capital and capital obtained in violation of regulations, and strengthened the relevance, effectiveness and timeliness of our inspections, making inspections more aligned with the demands and more relevant in cracking down on actions violating regulations and laws. [16:45]

[Zhang Shenghui]: The second aspect concerns how to deal with leads on irregularities. Foreign exchange inspections are carried out in several links, namely, off-site inspections, on-site inspections and case solving. Since last year, we have rebuilt and integrated the processes for the combination and interfacing of these three aspects, which has significantly ramped up inspection efficiency and delivered positive outcomes. In the first half, we organized two phases of off-site inspections, primarily against outflows of capital obtained in violation of regulations, and found out 2,335 leads that were suspected of irregularities and involved more than USD 8.4 billion. Most of these cases have been solved, except some that are still being dealt with now. [16:46]

[Zhang Shenghui]: One more thing, foreign exchange authorities have made authenticity reviews the foundation and focus of foreign exchange inspections for a while, stressing the authenticity of trading and its consistency with foreign exchange receipts and payments. To this end, we stepped up inspections of banks' performance of their responsibilities and proposed relevant requirements. We have recently announced dozens of cases involving banks that did business in violation of regulations, which was useful to educate banks. We expect that bank employees, either frontline tellers or internal controls/compliance staff in the back office, could strengthen authenticity reviews and effectively perform their obligations in accordance with laws and regulations. [16:46]

[Zhang Shenghui]: Last but not least, we have been committed to innovating our way of work while stepping up crackdowns on irregularities, such as the way of off-site inspections and the combination of off-site and on-site inspection and disposal stages. We are also intensifying training to our branches and provide support for bank training. Moreover, we highlight law-based administration and are increasing relevant education and training on branches and the SAFE itself. [16:46]

[Xinhua News Agency]: Data show that a foreign trade surplus of USD 354.9 billion was registered by the Customs in the first eight months, while the surplus of USD 121.6 billion in foreign exchange sales and settlements under trade in goods was recorded by the SAFE for the same period. The gap is large, and I am wondering whether there were false trading. [16:47]

[Du Peng]: I am very glad to answer this question. Although it seems that the foreign trade surplus posted by Customs is somewhat related to the surplus in foreign exchange sales and settlements under trade in goods, yet we fear that direct comparison of the two figures that are quite different in statistical coverage could lead to misinterpretation of the BOP situation. Specifically, the differences lie in the following aspects: [16:48]

[Du Peng]: First, different points of time for statistics collection. Customs foreign trade statistics are based on the right-responsibility generation system, or accrual system, while statistics on foreign exchange receipts, payments, sales and settlements are based on the debit-credit realization system, or receipt & payment system. Enterprises can settle foreign exchange that is either the receipts for the current period or those for the past, and also can buy foreign exchange ahead of external payments. In practice, enterprises also engage in trade finance and trade credit, which have further widen the time gap between the two statistics. [16:48]

[Du Peng]: Second, different items for statistics collection. No Customs statistics on the circulation of goods and materials are recorded under some special trade such as entrepot trade, but the figures will be recorded under foreign exchange receipts and payments, or foreign exchange sales and settlements under trade in goods in BOP statistics. Another example is inward processing. The figure is recorded by Customs under foreign trade, while foreign exchange settlements data for processing fees of inward processing is not recorded under trade in goods. [16:48]

[Du Peng]: Third, impact on the data from enterprises' sales and settlements of foreign exchange. According to the existing foreign exchange regulations, discretionary sales and settlements of foreign exchange under trade in goods are adopted, with enterprises allowed to settle foreign exchange for the current period or previous years, and to buy foreign exchange in advance. Moreover, enterprises can also use the RMB in the receipts and payments of fees. [16:49]

[Du Peng]: All these contribute to the mismatch between foreign trade data recorded by Customs and foreign exchange sales and settlements data under trade in goods. But it is not a scientific approach to judging whether there is false trading based on the discrepancy of the two figures, which are not comparable.[16:49]

[Du Peng]: The current account management has been computerized. There are the monitoring system for foreign exchange under trade in goods, the monitoring system for foreign exchange under trade in services, as well as the monitoring system for individual foreign exchange. The current monitoring results show no large-scale cross-border arbitrages or outflows of funds through false trading. [16:49]

[Du Peng]: Since the beginning of this year, the SAFE has continued with special inspections of trade in goods. For areas where foreign trade volume and foreign exchange receipts and payments are high or grow rapidly, foreign exchange authorities have verified and analyzed unusual cross-border capital flows including false trading. Meanwhile, foreign exchange authorities have strengthened cooperation with Customs and tax authorities for data sharing, information sharing, mutual help and recognition in law enforcement. Given the verification results, no large-scale unusual capital outflows or inflows have been identified yet. [16:49]

[Reuters]: According to the data on banks' sales and settlements of foreign exchange that have were just disseminated by the SAFE, a deficit of about USD 9.5 billion was registered under foreign exchange sales and settlements for August. By comparison, a deficit of USD 22.8 billion was registered under the funds outstanding for foreign exchange for August released by the Central Bank. My question is why the discrepancy is so large. Has the pressure on the RMB exchange rate been remarkably relieved? [17:03]

[Wang Chunying]: As for the Central Bank's data, it is more authoritative for the department that disseminated the data to interpret. The outflow pressure of cross-border capital is being relieved, based on relevant data. Therefore, the depreciation pressure of the RMB exchange rate, as you asked, is being eased too. [17:03]

[Wang Chunying]: As for the BOP data, measured by cross-border capital flows, as is widely adopted in the international community, a deficit of USD 123.3 billion was registered under the non-reserve financial account in the first quarter, down by 26% quarter-on-quarter. The deficit for the second quarter went down by 60% from the first quarter. As for official data, please wait until the end of September. [17:03]

[Wang Chunying]: As for banks' sales and settlements of foreign exchange, a deficit of USD 89.4 billion was registered in December 2015, and dropped to USD 41.6 billion per month on average in the first quarter of this year, and then fell further to USD 16.3 billion per month on average in the second quarter. In July, due to Britain's exit from the EU and seasonal factors such as travel and study abroad, and distribution of bonuses and dividends, the deficit picked up to USD 31.7 billion, and then plunged to USD 9.5 billion in August. [17:04]

[Wang Chunying]: The balance of foreign exchange reserves tumbled at the beginning of this year. But since February, the margins have narrowed drastically, with ups and downs in month-on-month changes. Currently, the balance stays at around USD 3.2 trillion. [17:04]

[Wang Chunying]: According to enterprises' behaviors, with importers' cross-border financing as an example, Chinese importers' balance of cross-border financing in foreign currencies such as refinancing and forward L/C has rebounded since March, which has continued for 6 months. This indicates that the funds from such overseas financing are flowing into China again. [17:04]

[Xu Weigang]: Just as Premier Li Keqiang said, there is much leeway for China' economic development, which exhibits a tilt towards stable and optimistic growth, proving any speculation of RMB depreciation is groundless. Instead, the RMB exchange rate will stay stable at a reasonable and balanced level. [17:07]

[] The Fed announced today at midnight that the FOMC meeting for September agreed that interest rates will not be raised, but also implied that an interest rate hike would be likely at the end of this year. What would you say about the expectation? Is there any response to the expectations of the Fed's interest rate hikes and the changes of specific time for the hikes? [17:10]

[Xu Weigang]: This conference is about the SAFE's policies, and another conference that is on the situations of foreign exchange will be held at the State Council Information Office next month, where more details will be unveiled. You are welcome to the conference and raise questions on issues of interest. In fact, I have answered your question earlier. Since there is much leeway for China's economic development, there is no ground for sustained depreciation of the RMB exchange rate. [17:10]

[Wall Street Journey]: I have a question for Director Guo Song. You said the SAFE supports normal overseas M&As, but will also strive to maintain the equilibrium of BOP. Can this be interpreted as the SAFE's future efforts to intensify authenticity reviews of overseas M&As? Or Has the SAFE already intensified the reviews?

[Guo Song]: We do support authentic outbound investments that conform to laws and regulations, and will surely take a tough stance on fake investments. Director Zhang Shenghui mentioned just now our solving of some cases for the year. Over the past year, we did have identified assets transfer by individual enterprises and persons through outward investments, which is surely our focus for the moment. [17:18]

[Zhang Shenghui]: One more thing about authenticity reviews. There is no case about authenticity reviews already strengthened or to be strengthened now. According to the Regulations of the People's Republic of China on Foreign Exchange Administration, foreign exchange administration practices and inspections, there have always been such requirements on authenticity reviews, as well as on consistency between receipts and payments and transactions. A case in point is the requirements on the earlier said crackdowns on foreign exchange trading activities in violation of laws and regulations. [17:18]

[Xu Weigang]: In the last modified Regulations of the People's Republic of China on Foreign Exchange Administration, published on August 5, 2008, Article 12 says that foreign exchange receipts and payments under the current account shall be based on authentic and legitimate transactions. Both international conventions and domestic regulations require that banks should conform to business operation principles. Specifically, they should know their customers, understand their business and conduct prudential due diligence in handling cross-border receipts and payments, which, from the perspective of anti-money laundering or of knowing customers, indicate that banks must strengthen authenticity reviews. This is a requirement of the past, present and future, as well as an international convention and domestic practice. [17:19]

[Securities Times]: In response to the just released foreign exchange sales and securities data for August, some argue that the deficit for August is not closely related to the reduction in foreign exchange purchases, and heavy pressure is still on residents to buy foreign exchange, which shows that there are expectations of RMB depreciation in the short and middle term. What would you say about this? The growth in foreign exchange settlements for August contributed greatly to the declines of foreign exchange purchases, because the net inflows of cross-border foreign exchange loans surged against the previous months. Could you tell us why? [17:42]

[Wang Chunying]: We made an explanation right after the dissemination of the August data. Just as I did when answering the reporter from the Reuters, I would here like to cite some data for explanation despite your different opinions. As for the rises in enterprises' cross-border financing, I view it a positive change. External debt is necessary for a company while there is still a bottom line in servicing external debt. It has been a while since enterprises began deleveraging their external debt, which, however, has slowed down. Data also show that enterprises' trade financing for imports is picking up. All this indicates that enterprises have delivered good performance in production, operation and credit activities. [17:44]

[Xu Weigang]: This also explains why "there is much leeway for China' economic development, and the RMB exchange rate will stay stable at a reasonable and balanced level". Do you have something to add, Director Guo, since it involves external debt[17:45]

[Guo Song]: It is true that the rises in foreign exchange settlements have something to do with inflows of external debt. A pilot program on macro-prudential management of cross-border financing started in January, and then was rolled out nationwide at the end of April. The program involves a wide range of areas, such as financial institutions and enterprises, making it easier for enterprises, especially Chinese enterprise, to borrow external debt. In addition, at the foreign exchange settlement end, we have standardized the procedures for foreign exchange settlement under external debt, just as was mentioned in our earlier introduction of the policies, making foreign exchange settlement more convenient. With these two policies in place, administrative approval has been made unnecessary. Second, borrowing external debt has since become more flexible. This is why some institutions believe it is better to conduct overseas financing at this moment. [17:46]

[]: We noted that the quotas for QDIIs for last December haven't been increased all along. What are your considerations for this? Have the approved QDII quotas been used up? I learned that some trust companies are also applying for QDII quotas. Could you tell us when will the approval of new QDII quotas restart? Thank you. [17:47]

 [Guo Song]: The total quotas for QDIIs of USD 90 billion were used up last March, and the accumulated quotas for QDIIs approved later amounted to USD 89.993 billion. No new quotas have been granted since then. This is true. We are now coordinating relevant departments to apply for new quotas, yet status quo will be maintained and no new QDII quotas will be approved before new quotas are granted. [17:47]

[Nihon Keizai Shimbun]: The RMB will be officially included in the SDR basket on October 1. Do you think this would impact China's cross-border capital flows? [17:48]

[Wang Chunying]: This issue seems to have attracted much of your attention. Last year the IMF decided to include the RMB in the SDR basket, and the new SDR basket will come into force on October 1, 2016. Before that, the People's Bank of China and the SAFE have introduced a series of open market policies, offering convenience to overseas institutions in their adjustment of their allocation of assets. When it comes to the direct impact on cross-border capital flows, the inclusion of the RMB in the SDR basket will attract overseas institutions such as central banks, reserves managers and private sectors to hold more RMB assets, and the liberalizing capital market in China will also boost capital inflows, but this will be a long-term and gradual process. On the other hand, the inclusion will promote RMB internationalization and convertibility, enhance the global position of the RMB, and support "going global" of Chinese enterprises. China's demand for foreign investment portfolios will rise too. As for market expectations, the inclusion will help strengthen market confidence in RMB assets, and enhance its international creditability and reputation, which is of positive importance. A managed floating exchange rate system for the RMB exchange rate will be established based on supply and demand, with reference to a basket of currencies. In the foreseeable future, it will be the keynote of the RMB exchange rate formation mechanism to intensify reference to and maintain stability of a basket of exchange rates. In general, after the inclusion, the two-way fluctuations of cross-border capital flows will be more apparent, with the size not to be significantly expanded though. Put it together, China's cross-border capital flows have good conditions to remain in a properly balanced and stable range. [17:50]

[Xu Weigang]: Reform and opening up is China's national strategy. The SAFE has been committed to reform and will continue to do so in the future. We will simplify administration and delegate powers to lower levels, continue to systematically enhance convertibility of cross-border capital and financial transactions, in a bid to achieve the convertibility of the RMB capital account. As time is running short, I have to end this press conference here. Thank you for your understanding and support of foreign exchange administration. Thank you all! [17:52]

(The original text is available at



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