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A briefing on the inspection of the banks’ foreign exchange was recently held by the SAFE. The heads of the relevant businesses of 21 Chinese-funded banks and 11 foreign counterparts attended the meeting. It was pointed out at the meeting that in 2013 the SAFE earnestly implemented the decisions and arrangements of the CPC Central Committee and the State Council, rigorously promoted facilitation of trade and investment, carefully prevented risks arising from cross-border capital flows, increased efforts to inspect the banks, as the major channel of cross-border capital flows, seriously investigated foreign exchange–related violations by banks and actively warned the banks of the risks of foreign exchange operations so as to encourage the banks to improve their compliance with foreign exchange operations. Based on the findings, on a whole the banks’ compliance with foreign exchange operations has been improved, but violations still exist as banks put an emphasis on business expansion and neglect administration of internal controls. The meeting provided information on foreign exchange–related violations by banks, revealing a total of 439 cases discovered during 2013. The violations mainly included: 1. not handling foreign exchange settlements and sales in accordance with the relevant regulations. For example, some banks failed to create foreign exchange settlement and sale items separately and failed to handle their own foreign exchange settlement and sale business in compliance with the relevant regulations; while some banks handled foreign exchange capital settlements for companies and foreign exchange settlements and sales for individuals in violation of the relevant rules. 2. Failing to review the authenticity and consistency of the capital receipts and payments on the current account in accordance with the relevant regulations. For instance, some banks handled the balance of foreign exchange generated through trade in goods for unlisted companies, and some banks failed to review the retained data during the handling of capital receipts and payments for trade in goods (transit trade included) in compliance with the relevant regulations and provided receipts and payments business for Class B and Class C companies which is in violation of the relevant rules. 3. Violating the relevant regulations to provide capital receipts and payments on the capital account. Some banks failed to make timely foreign payments using the capital (RMB) acquired by handling foreign exchange capital settlements and sales in accordance with the relevant regulations. 4. Not complying with the relevant regulations to make statistical declarations on the balance of payments and to submit the relevant data. In addition, internal control systems were not improved, authenticity reviews were mere formalities, and some banks engaged in arbitrage by taking advantage of inbound and outbound linkages and avoiding the regulations by means of off-balance-sheet business innovations. All these issues require more attention. It was requested at the meeting that all banks should enhance their macro awareness, handle the relationship between individual benefits and the policy orientation in a correct manner, actively conduct their foreign exchange business in a rational way, enhance a sense of responsibility, practically carry out “understanding your customers,” seriously fulfill their duty of authenticity reviews, improve compliance awareness, strengthen internal control administration and system construction, and further improve the operational level of compliance to create a sound environment for the foreign exchange market. It was stressed at the meeting that in 2014 the SAFE will, in accordance with the decisions and operations of the CPC Central Committee and the State Council, continue to decentralize and further improve the level of facilitation of trade and investment, promote growth of the real economy, and, at the same time, closely monitor cross-border capital flows, prevent shocks from two-way capital flows across borders, maintain the bottom line in avoiding systemic and regional financial risks, and continuously reinforce and improve inspections of the foreign exchange business of financial institutions, such as banks, to encourage the finance industry to better serve the real economy and maintain foreign-related economic and financial security. 2014-04-23/en/2014/0423/1112.html
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For the purpose of adapting to the requirements for statistics and monitoring of foreign-related receipts and payments under the new situation of China’s opening-up and for providing better services for macroeconomic decision making and social analysis and applications, the State Administration of Foreign Exchange (SAFE) recently revised and released the Classification and Codes for Foreign-related Receipt and Payment Transactions (2014 version) (HuiFa [2014] No. 21, hereafter referred to as “Codes [2014 version]”). The Codes (2014 version) will serve as an important institutional basis for preparing the balance-of-payments statistics in line with the Balance of Payments and International Investment Position Manual (Sixth Edition) issued by the International Monetary Fund (IMF). The major changes in the Codes (2014 version) are reflected in the following areas. First, adjustments have been made to adapt to the new international standards. For example, in line with the principle of ownership changes, transit trade has been transferred from trade in services to trade in goods, while the receipt and payment of processing fees for processing trade with supplied materials and outward processing have been transferred from trade in goods to trade in services; c investments, reverse investments among associated enterprises and corresponding revenue items have been added under direct investments. Second, monitoring of fund flows under trade in services will be further strengthened. For example, service items such as freight services, import and export freight insurance, travel, project contracting, and intellectual property rights are refined and adjusted. Third, statistical preparations and regulatory requirements are better met. For example, capital flows under trade in goods are classified by whether they are integrated into the Customs statistics, and transaction categories that are not covered in the Customs statistics are further refined; relevant codes are added under the securities investments for trading activities market conducted by non-residents in the domestic securities. Fourth, the declaration burdens of the declaring entities are lessened. Revision work has been conducted in line with the principles of necessity and minimization to delete and combine certain items. The Codes (2014 version) will take effect as of May 1, 2014. The recommended national standards for the previous classification of foreign-related receipt and payment transactions will be adjusted accordingly. 2014-04-17/en/2014/0417/1111.html
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In 2013 the State Administration of Foreign Exchange (SAFE) received and handled 61 proposals from the NPC and the CPPCC. These proposals mainly involved areas such as the facilitation of trade and investment, support for enterprises “going-global,” and management of foreign exchange reserves. The SAFE attached great importance to the handling of these proposals, arranged relevant work, and made great efforts to carry out the related tasks. As a result, the handling of the relevant proposals for 2013 was completed successfully. The leadership placed great emphasis on the handling of the proposals and made detailed plans for the relevant tasks. The leading Party group of the SAFE also attached great importance to the handling of the proposals; the leadership of the Party branches held special meetings to make plans for the relevant work and to complete the specific requirements. Efforts were made to make institutional improvements to standardize the relevant work. A series of measures was formulated to ensure that the relevant work would be implemented in a systematic and standardized manner. The SAFE also managed to enhance coordination and communicationsso as to improvethe effectiveness and efficiency of the handling of the proposals. Various measures were taken to communicate with the delegates through a number of channels and to listen to comments and suggestions from the delegates in order to ensure the quality of the handling of the proposals. Efforts were intensified to provide training to relevant personnel and to enhance supervision. Relevant personnel who handle proposals from the NPC and the CPPCC were trained in a focused way, and supervision was enhanced so that there would be a response to each task. After the handling of the proposals, meetings were held to sum up the experience and good practices. The year 2014 is the first year that the SAFE has carried out the spirit of the Third Plenary Session of the 18th Central Committee of the CPC and it is an important year to fulfill the objectives of the 12th Five-Year Plan. The SAFE will make conscientious efforts to handle the 2014 proposals from the NPC and the CPPCC, which will be regarded as a benchmark for assessing implementation of the eight-point regulations of the Party Central Committee and for making efforts to carry out the mass line educational campaign. In 2014 the SAFE will further improve its work style, fulfill the relevant tasks in a pragmatic manner, and endeavor to achieve good performance with regard to the handling of the relevant proposals. 2014-02-27/en/2014/0227/1110.html
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A meeting was recently held by the State Administration of Foreign Exchange (SAFE) to convey and study the spirit of the second clean government work conference of the State Council and to make plans for implementation. Yi Gang, administrator and secretary of the Party Leadership Group of the SAFE, presided over the meeting. The meeting underlined the importance of studying and implementing the spirit of the conference for the present and for the foreseeable future. The SAFE should conscientiously implement the central government's requirements for combating corruption and upholding integrity, promote the building of a clean government through institutional reforms, and strive to achieve new progress in its efforts to combat corruption and to build a clean government. At the meeting it was emphasized that the SAFE should implement the spirit of the third plenum of the eighteenth Central Commission for Discipline Inspection and the second clean government work conference of the State Council, further integrating anti-corruption and upholding integrity in foreign exchange administration efforts. Specifically, the SAFE should (1) continue to implement the eight-point guideline and the three-point covenant; (2) deepen the reform of foreign exchange administration in key areas and continue to streamline administration and delegate power to lower levels; (3) enhance the building of institutional systems to combat corruption, to uphold integrity, and to deepen risk controls in this regard; (4) impose stringent rules on financial discipline and management; (5) advance transparency in foreign exchange administration; and (6) enforce rigid discipline. Leadership teams should play an exemplary role in implementing the rules for improving the work styles of CPC officials, for building clean government, and for ensuring that decrees of the central government are adequately conveyed to the lower levels. 2014-02-12/en/2014/0212/1105.html
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In order to improve foreign exchange administration regarding the conversion of external debts into loans (loan conversion), to streamline administration, to institute decentralization, and to promote facilitation of investment and financing, the State Administration of Foreign Exchange (SAFE) recently released the Circular of the State Administration of Foreign Exchange on the Issuance of the Foreign Exchange Administration Regulations on the Conversion of External Debts into Loans (Huifa No.5 [2014], hereinafter referred to as “the Circular”). The Circular mainly includes the following: (1) Ending deal-by-deal registration and remittance approval of loan conversions at the SAFE, and replacing them with a centralized registration of creditors for loan conversions; (2) Terminating the account opening and approval for loan conversions; as a result, loan conversion debtors will be allowed to complete account-opening procedures at the banks by presenting an application to open an account and an agreement to convert the loan; (3) Loan conversion creditors or debtors will be allowed to complete the procedures for the transfer of the relevant funds within China directly at the opening bank by presenting the agreement regarding the loan conversion; (4) Ending examination and approval of policy-based foreign exchange settlements for loan conversions; loan conversion debtors will be allowed to complete the procedures for foreign-exchange settlements of funds for the loan conversions directly at the opening bank by presenting the agreement for the loan conversion; (5) Removing the procedures for the approval of capital repayments with interest and foreign exchange purchases under the item of loan conversions; as a result, loan conversion debtors will be allowed to complete repayment procedures directly at the banks by presenting items such as the agreement on the loan conversion and the repayment notification. This Circular will enter into effect as of March 1, 2014. 2014-02-21/en/2014/0221/1106.html
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In order to further increase the transparency of information regarding the BOP statistics and to make it easier for the general public to study and analyze information related to the foreign-exchange circumstances, the State Administration of Foreign Exchange (SAFE) beginning from February 2014 began to release aggregate data on outstanding forward foreign exchange settlements and sales by banks on behalf of their clients and aggregate data on foreign-related receipts and payments and data on China international trade in services, based on the specifications and category of data released each month. The previous Timetable for the Release of the BOP and Relevant Data was revised and promulgated. With the release of the aggregate data on the outstanding forward foreign exchange settlements and sales by banks on behalf of their clients, users of the relevant data will be able to obtain comprehensive insights into aggregate forward foreign exchange settlements and sales. The release of the aggregate data on foreign-related receipts and payments will enable users of the data to obtain insights into changes in the foreign-related receipts and payments in various currencies. The data on China international trade in services will enable users to obtain timely insights into China’s development of trade in services, thus increasing the reliability of relevant data for research, analysis, and policy adjustments. To facilitate utilization of relevant time-series data, beginning from 2010 the SAFE also released aggregate monthly historical data on outstanding forward foreign-exchange settlements and sales by banks on behalf of their clients. 2014-02-24/en/2014/0224/1108.html
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In order to increase transparency in the release of data on foreign exchange administration and to facilitate efforts by the general public to acquire and use the BOP and relevant data, the Timetable for the Release of the BOP and Relevant Data is hereby revised and promulgated (see the Appendix for details). FILE: Timetable for the Release of the BOP and Relevant Data 2014-02-24/en/2014/0224/1107.html
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The State Administration of Foreign Exchange (SAFE) recently disseminated the data for February 2016 on banks' settlement and sales of foreign exchange and their foreign-related receipts and payments for customers. The press spokesperson of the SAFE answered media questions on recent cross-border capital flows. Q: Could you brief us on China's recent cross-border capital flows? A: The pressure from cross-border capital outflows from China has been significantly eased. The deficits in foreign exchange settlement and sales and in foreign-related payments and receipts by the non-banking sectors, companies or individuals, have contracted since the beginning of this year. In February, the non-banking sectors recorded a deficit of USD 35 billion in foreign exchange settlement and sales, down by 50% month on month, or by a daily average of 37% month on month if calculated by trading days after the adjustment of the impact from the Chinese New Year holiday. The non-banking sectors also registered a deficit of USD 30.5 billion in foreign-related payments and receipts, down by a daily average of 39% month on month. In particular, the deficit in foreign-related payments and receipts of foreign exchange was USD 10.5 billion, down by a daily average of 42% month on month. Chinese market players' adjustment of their structure of assets and liabilities in domestic and foreign currencies has become smoother. On the one hand, efforts have been made to steadily encourage people to hold more foreign exchange. The balance of foreign exchange deposits grew by USD 8.3 billion in February, which was down by USD 11.3 billion month on month. On the other hand, companies slowed down debt servicing. For example, the balance of cross-border financing for imports dropped by USD 2.5 billion in February, which was down by USD 7.2 billion month on month. The changes in domestic and external market environments have helped ease the pressure from cross-border capital outflows. First, global financial markets are being stabilized after fluctuations. The US dollar index has sustained small fluctuations after being downgraded at the end of January, and the VIX that reflects market aversion has dropped from the peak in mid-February. Second, the domestic RMB exchange rate has stayed stable. In February, the RMB exchange rate against a basket of currencies fluctuated slightly, but the central parity rate of the RMB against the USD and domestic and overseas trading prices rose, and the spread between the CNY and the CNH further narrowed, indicating market players' weaker desire to buy foreign exchange. In addition, no adjustment has been made to the foreign exchange administration policy except the requirement on the authenticity and compliance of foreign exchange transactions has been highlighted to curb speculations, which stabilizes market sentiment. China's cross-border capital flows are expected to stay stable in the near future. China will continue to register a large trade surplus and heavy use of foreign capital, and companies' external debt will be more stable after more than one year's deleveraging. As for internal and external environments, market expectations of the Fed's interest rate hikes have been lowered recently, and the Fed's adjustment of the monetary policy, if meeting market expectations, will be favorable for stabilizing international financial markets and capital flows. China's GDP growth target for 2016 is 6.5%-7%, which is high at the global level, indicating the fundamentals for attracting inflows of foreign capital have not changed. 2016-08-30/en/2016/0830/1204.html
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To press ahead with the foreign exchange administration reform, promote trade and investment facilitation, support the growth of the real economy and guard against the risks arising from cross-border capital flows, the State Administration of Foreign Exchange (SAFE) recently issued the Circular of the State Administration of Foreign Exchange on Further Promoting Trade and Investment Facilitation and Improving Authenticity Review (Huifa No. 7 [2016], "Circular"). The Circular sets out 9 measures in 4 aspects: First, expanding inflows and increasing supply of foreign exchange. The lower limits of positions of banks in the settlement and sales of foreign exchange will be extended. The more the negative positions banks hold, the easier it will be for banks to collect and supply foreign exchange to enhance the self-adjustment capability of foreign exchange markets and provide better financial services for the real economy to guard against exchange rate risks. Policies for the administration of foreign exchange settlement for the external debt of Chinese and foreign-funded enterprises will be unified, with the external debt of Chinese non-financial institutions to be subject to foreign exchange settlement in accordance with the provisions on external debt administration for foreign-funded enterprises. The foreign exchange receipts by Class-A enterprises from trading (other than foreign exchange refunds and offshore entrepot transactions) will temporarily not be recorded in the accounts pending verification for receipts from exports, but will be directly recorded in the foreign exchange accounts under the current account or settled. Procedures for receipts and settlements of foreign exchange by companies will be simplified to reduce the cost of funds for doing so. Second, intensifying document reviews and standardizing management. The requirements on document reviews for offshore entrepot transactions for trade in goods will be specified, with the receipt and payment of the same offshore entrepot transaction to be processed by the same outlet of the bank in the same currency (foreign currency or RMB). The receipts and payments for offshore entrepot transactions will be suspended for Class-B enterprises subject to foreign exchange administration for trade in goods. The outward remittance administration will be standardized for foreign exchange profits from direct investments. The requirements on document reviews for handling outward remittances of the profit equivalent to more than USD 50,000 (exclusive) by banks for domestic institutions will be specified. The measures for the administration of risk reminder notifications will be standardized for trade in goods. Risk reminders will be sent to companies with unusual receipts and payments of foreign exchange for trade in goods. Third, products will be diversified to hedge exchange rate risks. Banks will be allowed to handle the net delivery of forward transactions for foreign exchange settlement for institutional customers to satisfy their needs to hold foreign currency assets while guarding against exchange rate risks. Fourth, regulations will be streamlined and rules of punishments will be specified. The Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening Administration of Inflows of Foreign Exchange Funds (Huifa No. 20 [2013]) will be abolished. It is specified that any companies violating the Circular will be punished in accordance with the Regulations on Foreign Exchange Administration. The Circular shall take effect as of the date of promulgation. 2016-07-11/en/2016/0711/1201.html
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The State Administration of Foreign Exchange (SAFE) released statistics on foreign exchange settlement and sales by banks and foreign-related receipts and payments through banks in April 2016. The SAFE press spokesperson answered media questions on recent cross-border capital flows. Q: China's cross-border capital outflow pressure was eased in the first quarter this year, are there any new developments in April? A: The gradual easing of cross-border outflow pressure of the first quarter continued in April. Since the beginning of this year, both the deficit in foreign exchange settlement and sales and the deficit in foreign-related receipts and payments of banks have been on the decline. In April 2016, banks' deficit in foreign exchange settlement and sales stood at USD 23.7 billion, down by 35percent month on month. In January to March, banks' deficit in foreign exchange settlement and sales was USD 54.4 billion, USD 33.9 billion and USD 36.4 billion respectively. In April, the non-banking sectors posted a deficit in foreign-related receipts and payments of USD 8.9 billion, down by 66 percent month on month. Specifically, the net outflow of foreign exchange funds hit USD 2 billion, down by 67 percent month on month. In January to March, the net outflow of cross-border capital was USD 55.8 billion, USD 30.5 billion and USD 26.1 billion respectively and the net outflow of foreign exchange was USD 20.1 billion, USD 10.5 billion and USD 5.9 billion respectively. Besides, the balance of foreign exchange reserves rebounded in two consecutive months, with an increase of USD 10.3 billion and USD 7.1 billion in March and April respectively. The details are as follows: Firstly, domestic players were less willing to buy foreign exchange, and their external debt repayment continued to slow down. In April, the foreign exchange sale ratio (or the ratio of foreign exchange purchased by clients from banks to their foreign-related foreign exchange payments) that measures the motivation to buy foreign exchange was 75 percent, down 5 percentage points from the first quarter. Meanwhile, the balance of import financing such as refinancing and forward L/C dropped by USD 1.3 billion, which was 88% lower than the monthly average fall for the first quarter. Secondly, enterprises and individuals were more willing to settle exchange settlement but less willing to hold foreign exchange. In April 2016, the foreign exchange settlement ratio (or the ratio of foreign exchange sales to banks by clients to their foreign-related foreign exchange receipts) that measures the willingness to settle foreign exchange was 63 percent, 4 percentage points higher than the first quarter. In the same period, the balance of foreign exchange deposit increased by USD 900 million, which contracted by 93 percent from the monthly average growth for the first quarter. Since the beginning of this year, China has been under easing pressure from cross-border capital outflows, which reflects the changes in internal and external market environments. In the near future, China's economy will continue to operate within the reasonable range and at a relatively high rate compared with those of the rest of the world, which will be conducive to the overall stability of China's cross-border capital flows. 2016-07-11/en/2016/0711/1199.html