-
To implement the requirements of the State Council on streamlining administration and delegating power to lower levels, combining regulation and deregulation, and optimizing services, as well as other reform measures, and further promote trading policy facilitation, the State Administration of Foreign Exchange (SAFE) has continued streamlining regulations, abolishing and nullifying more than 900 copies of documents on foreign exchange administration since 2009. The SAFE has recently released the Circular of the State Administration of Foreign Exchange on Announcing 6 Regulatory Documents on Foreign Exchange Administration Abolished and Nullified(Huifa No. 25 [2017]), to step up efforts to streamline regulations, announcing two regulatory documents on foreign exchange administration abolished and four invalid. The six regulatory documents involved individual foreign exchange-related business and the construction of the foreign exchange system. The contents abolished and made invalid were abolished in accordance with the requirements of the ongoing reform of "delegation, regulation and service" such as all-in-one certificates, or were substituted by new regulatory documents on relevant regulatory requirements, or were about temporary work that is not in line with current management practices. But none of them involved new policy adjustment. Next the SAFE will continue to implement the requirements on the reform of "delegation, regulation and service", refine the regulatory system of foreign exchange, deepen the streamlining and integration of regulations, and enhance policy transparency, so as to better serve the development of the real economy. 2017-12-07/en/2017/1207/1384.html
-
The Brazil-China Cooperation Fund for the Expansion of Productive Capacity (China-Brazil Fund) was officially launched on 30 May 2017 local time in So Paulo, Brazil. China-Latin America Production Capacity Cooperation and Investment Fund Co., Ltd. (China-Latin America Production Capacity Fund) signed the fund establishment documents with the Brazilian Ministry of Planning, Budget and Management (Brazilian Ministry of Planning). The China-Brazil Fund Steering Committee held its first meeting, deliberating and adopting the China-Brazil Fund Operating Procedures, thus officially kick-starting the China-Brazil Fund. Pan Gongsheng, Deputy Governor of the People's Bank of China and Administrator of the State Administration of Foreign Exchange, Li Jinzhang, Ambassador of China to Brazil, and Dyogo Oliveira, Brazilian Minister of Planning, were present at the ceremony. The official launch of the China-Brazil Fund, established based on the consensus between the heads of state of both countries, is a key measure of the China-Latin America Production Capacity Fund to implement China's Belt and Road Initiative and going global strategy, and will be favorable for both sides to carry out production capacity cooperation and seek mutual benefit. Next, the China-Brazil Fund will focus on boosting strategic cooperation between China and Brazil and robust operation of the Fund, based on the market-oriented operation mechanism. 2017-06-02/en/2017/0602/1270.html
-
To expand the opening up of the foreign exchange market and boost the liberalization of the interbank bond market, the State Administration of Foreign Exchange (SAFE) has recently released the Circular of the State Administration of Foreign Exchange on Foreign Exchange Risk Management for Foreign Institutional Investors in the Interbank Bond Market (Huifa No. 5 [2017], "Circular"). The Circular mainly includes the following: Firstly, any foreign institutional investor in the interbank bond market could handle the RMB-foreign exchange derivatives business with a qualified domestic financial institution to enhance the level of opening-up of the foreign exchange market. Secondly, under the principle of transaction for actual requirements, foreign institutional investors shall carry out the foreign exchange derivatives business only for the purpose of hedging against the foreign exchange risk exposure arising from the investments in the interbank bond market with funds remitted from abroad, so as to guarantee the order of the foreign exchange market. Thirdly, diverse trading tools and mechanisms will be provided for foreign institutional investors' foreign exchange derivatives business to facilitate foreign exchange risk management. The Circular shall come into force as of the date of issuance. 2017-02-27/en/2017/0227/1251.html
-
[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] [China.com.cn] 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] [caixin.com]: 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 www.people.com.cn) 2016-09-22/en/2016/0922/1212.html
-
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
-
Q: Recent media reports say that China UnionPay will adopt a policy to impose a limit of USD 5,000 per transaction on overseas insurance merchants. Could you give us more details? A: The SAFE and China UnionPay do not change the policy on the use of bank cards with overseas insurance merchants. According to the Circular of the State Administration of Foreign Exchange on Issuing Merchant Category Codes for Prohibited and Restricted Use of Bank Cards Overseas (Huihan No. 19 [2004]) and the Circular of the State Administration of Foreign Exchange on Regulating the Management of Foreign-Currency Bank Cards (Huifa No. 53 [2010], the document updated and repealed the document of Huihan No. 19 [2004]), four merchant category codes (MCC) involve overseas insurance merchants. These merchants provide insurances under the current account that involves travel consumption, such as accident and illness insurances, and life insurance under the capital account that is of investment nature. Considering that domestic cardholders have the requirement for buying micro-insurance on their overseas trips or during their business communication, the SAFE defines insurance merchants as those allowed to accept a limited amount of payments by bank cards, while implementing the policy of the current account convertibility under bank cards. The amount per transaction between cardholders and such merchants should be no more than USD 5,000 or the equivalent, which can meet the reasonable requirements for buying micro-insurance and restrict investment insurance that involves the capital account. China UnionPay recently investigated overseas acquirers and found that some insurance merchants did not use the MCCs that are for merchants allowed to accept a limited amount of payments by bank cards and correspond to the industry codes, and required these acquirers to regulate the logo and use of MCCs to ensure the implementation results of regulatory policy and business rules. The SAFE has long supported and will continue to support cross-border use of bank cards to pay for normal travel consumption that is in compliance with regulations to facilitate international communication, and will not change the policy of buying foreign exchange domestically to pay for overseas consumption. Note: Merchant category code (MCC) is a code assigned to businesses based on their main business scope and industry classification. Q: Can domestic bank cards with logos of international card organizations such as VISA and MASTER be used with overseas insurance merchants? A: Both domestic bank cards with logos of international card organizations such as VISA and MASTER and of China UnionPay can be used with overseas insurance merchants. The SAFE has recently required the issuing banks of the domestic bank cards with logos of international card organizations such as VISA and MASTER to implement the regulations on merchants that are allowed to accept a limited amount of payments by bank cards in accordance with the compliance and authenticity requirements. Q: Can domestic cardholders evade the limit of USD 5,000 or the equivalent per transaction by swiping cards many times? A: Domestic cardholders are allowed to use their bank cards to pay for normal and reasonable insurance requirements involved in overseas trips and business communication. Given that cardholders may swipe cards many times to pay for insurance transactions for other purposes, the SAFE will work with bank card organizations and issuing banks to rigorously monitor cardholders and merchants suspected of getting involved in transactions paid for by swiping the cards many times, based on the records of bank card transactions. 2016-03-14/en/2016/0314/1192.html
-
To further enhance the transparency of foreign exchange administration policies, the State Administration of Foreign Exchange (SAFE) has stepped up efforts to introduce legislations and streamline regulations in key areas since the very beginning of 2015. Legislations introduced involve centralized operation and management of foreign exchange funds by MNCs, administration of individuals' foreign exchange, receipts and payments of foreign currency banknotes by domestic institutions, funds management in cross-border issuance and sales of mainland and Hong Kong securities investment funds, engagement in the trading of domestic specified futures products by overseas trading participants and overseas brokers, exchange business by franchised institutions of domestic and foreign currency exchange for individuals through the internet, and foreign exchange account management for foreign central banks and similar institutions investing in inter-bank markets. Regulation streamlining is focused on nullifying or announcing ineffective some foreign exchange administration regulations that cannot adapt to the requirements for business development and reforms. To facilitate public enquiry and application, the SAFE then upgraded the Catalogue of Major Existing Laws and Regulations in Effect on Foreign Exchange Administration (Catalogue) and released it at its official website. The upgraded Catalogue contains 222 policies and regulations on foreign exchange administration released as of December 31, 2015, which fall into 8 categories including general foreign exchange administration, foreign exchange administration under the current account, foreign exchange administration under the capital account, regulation of the foreign exchange business of financial institutions, the RMB exchange rate and the foreign exchange market, balance-of-payments and foreign exchange statistics, foreign exchange inspections and application of the laws and regulations, and the scientific administration of foreign exchange, and several sub-categories by specific business type. This is the sixth straight year that the SAFE has regularly updated and published the list of currently effective regulations. The SAFE will make further efforts to build and improve a long-term mechanism for streamlining regulations, and sort out and update the Catalogue regularly to enhance policy transparency, facilitate banks, companies, and individuals to understand and apply foreign exchange administration regulations, promote law-based foreign exchange administration and support development of the real economy. 2016-02-02/en/2016/0202/1185.html
-
To further satisfy individuals' currency exchange demand for cross-border transactions, the State Administration of Foreign Exchange (SAFE) recently released the Circular of the State Administration of Foreign Exchange on Printing and Distributing the Regulations on Management of Currency Exchange Agencies and Self-service Currency Exchange Machines (Huifa No. 11 [2016], "Regulations") to improve management of currency exchange agencies and self-service currency exchange machines. The Regulations is in line with the reform ideas of further streamlining administration and delegating powers and optimizing currency exchange services. The highlights are as follows: first, administration streamlining and power delegation will be promoted. Ex-ante market access management will be canceled, with no ex-ante access approval required from foreign exchange authorities for currency exchange agencies and self-service foreign exchange machines to provide currency exchange services. Second, the ways of regulation will be changed. Banks will be required to push forward and incorporate management of currency exchange agencies and self-service foreign exchange machines into their internal management, engage in the currency exchange business prudentially and in compliance with regulations and foreign exchange authorities will focus on enhancing ex-post and internal control inspections of banks. Third, business scope is defined. Currency exchange agencies and self-service currency exchange machines are positioned as the extension of banks' teller business to enhance the service capability and diversify channels to facilitate individual currency exchange. Fourth, business management will be improved to guard against money laundering risk. It is stressed that individuals should exchange foreign currency banknotes for RMB banknotes with currency exchange agencies and self-service currency exchange machines within the limit, which will not affect the annual limit of USD 50,000 or the equivalent on foreign exchange settlement for individuals. Fifth, regulations integration will be pressed ahead with. Three regulations on foreign exchange administration for currency exchange are integrated and abolished to facilitate understanding and implementation of foreign exchange administration policies by market players. The Regulations shall come into force as of the date of issuance . 2016-07-11/en/2016/0711/1200.html
-
To promote facilitation of receipts and payments under trade in goods and satisfy banks' and enterprises' demand for handling of foreign exchange through electronic data interchange (EDI), the State Administration of Foreign Exchange (SAFE) has recently released the Circular of the State Administration of Foreign Exchange on Standardizing Reviews of Electronic Documents for Receipts and Payments of Foreign Exchange under Trade in Goods (Huifa No. 25 [2016], the "Circular"). The highlights of the Circular include: First, allowing reviews of electronic documents when receipts and payments of foreign exchange under trade in goods are handled. While observing the existing regulations on the administration of foreign exchange under trade in goods and implementing the three principles of business operation, banks can choose to review paper or electronic documents at their discretion. Second, encouraging credible enterprises and banks doing business in compliance with regulations to handle receipts and payments of foreign exchange under trade in goods by using electronic documents. In particular, it is required that the handling bank should be class-B or above (excluding B-) in foreign exchange administration assessment over the past three years, and the enterprise should be class-A with regard to trade in goods. Third, defining the obligations of banks and enterprises. Banks shall make further efforts for authenticity reviews, independently and cautiously choose enterprises subjected to reviews of electronic documents and keep the documents for future reference. Enterprise shall work to ensure the authenticity and compliance of electronic documents presented, and cooperate with banks in authenticity reviews. Fourth, standardizing ex-post administration. The SAFE will verify or inspect reviews of electronic documents and punish irregularities in accordance with the law. This Circular shall come into force as of November 1, 2016. 2016-11-08/en/2016/1108/1226.html
-
To push ahead with capital account convertibility and promote cross-border investment and financing facilitation, the State Administration of Foreign Exchange (SAFE) recently released the Regulations on Foreign Exchange Administration for Domestic Securities Investments by QFII (Announcement No. 1 of the SAFE in 2016, hereinafter referred to as the Regulations) to reform the foreign exchange administration system for qualified foreign institutional investors (QFII). The highlights of the Regulations include: first, easing the upper limit on the investment quota of a single QFII. The SAFE will no longer define a unified upper limit on the investment quota of a single institution and assign an investment quota (basic quota) to the institution in proportion to the size of its assets or assets under management (AUM). Second, simplifying quota approval management. A QFII's application for an investment quota that is within the basic quota will be subject to filing management, while the application for an investment quota that goes beyond the basic quota will be subject to SAFE approval. Third, further facilitating inward and outward remittances of funds. No requirements will be imposed on the deadline for the inward remittance of investment principal by a QFII. QFIIs will be allowed to subscribe and redeem open-end funds on a daily basis. Fourth, the lock-up period will be shortened from one year to three months, but the requirement that funds should be remitted out in batches and installments will remain unchanged, with the monthly total of outward remittance by a QDII no more than 20% of its domestic assets. The Regulations shall come into force as of the date of release. 2016-03-14/en/2016/0314/1194.html