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On October 30, Pan Gongsheng, administrator of the State Administration of Foreign Exchange (SAFE) met with a delegation headed by Kanno Akatuki, President and CEO of Pinnacle Asset Management Inc. The two sides exchanged views on issues such as the opening-up of China's capital market and foreign investors' investment in Chinese market. According to Administrator Pan Gongsheng, China has sound economic fundamentals and the overall economic performance is stable, the economic structure has been constantly optimized and the potential for endogenous growth is tremendous. Presently, the overall stock market valuation is at a historically low level. With the increasing openness of the capital market to the outside world and the inclusion into the major global stock and bond indexes, it will provide a broader market for global investors. 2018-11-01/en/2018/1101/1468.html
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On September 28, Pan Gongsheng, administrator of the State Administration of Foreign Exchange (SAFE) met with the former Federal Reserve Chairman Ben Bernanke and his delegation, invited Mr. Bernanke to give a special speech on "Reflection on the 10th Anniversary of the Global Financial Crisis" and exchanged views on topics such as coping with international financial crisis, financial regulatory reform and trend of the US economic and monetary policies. 2018-09-29/en/2018/0929/1467.html
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Opening-up is imperative to the flourishing of our country. In his report to the 19th CPC National Congress, Secretary-general Xi Jinping said: "We shall make new ground in pursuing opening-up on all fronts". In the third group study among the members of the Political Bureau of CPC Central Committee, Xi Jinping stressed: "A system of pursuing opening-up on all fronts that is diversified, balanced, secure and efficient should be built to develop an open economy of higher standards". The foreign exchange market is a window for China's reform and opening up and communication with the rest of the world, and a hub that connects domestic and foreign markets and resources. In recent years, under the leadership of the CPC Central Committee with Comrade Xi Jinping at its core, foreign exchange authorities have established "four consciousnesses". Following the underlying principle of pursuing progress while ensuring stability, foreign exchange authorities have been committed to pressing ahead with the foreign exchange administration reform, promoting the liberalization of the foreign exchange market, and preventing the risks associated with cross-border capital flows, thus safeguarding the national economic and financial security. In addition, the healthy and orderly foreign exchange market environment is conducive to making new ground in pursuing opening-up on all fronts. I. China's cross-border capital flows have reached a basic equilibrium Under the combined impact of both domestic and foreign factors, cross-border capital flows had shifted from long-term net inflows to net outflows for a while in the past few years, leaving China's foreign exchange market seriously affected by cross-border capital flows for a period of time. Under the leadership of the CPC Central Committee and the State Council, authorities such as the People's Bank of China and the State Administration of Foreign Exchange (SAFE) adopted multi-prolonged measures and policies, particularly the macro-prudential policy for the counter-cyclical regulation of cross-border capital flows, which has produced positive results and ensured stability of the foreign exchange market and national economic and financial security. Under the combined effect of the macroeconomic fundamentals, global economic and financial environments, policies and measures, the cross-border capital flows and the supply and demand of foreign exchange in China reached a basic equilibrium in 2017, with foreign exchange reserves recovering slightly, the RMB exchange rate against the USD rising stably and the RMB exchange rate against a basket of other currencies becoming basically stable. (I) The supply and demand in the foreign exchange market has become more balanced. In 2017, a deficit of USD 111.6 billion was registered in banks' foreign exchange sales and settlements, down by 67% year on year. With spot and forward foreign exchange sales and settlements as well as options taken into consideration, the supply and demand of foreign exchange have moved towards an equilibrium since February 2017 and now stay basically balanced. Cross-border capital flows have also become more balanced. In 2017, non-banking sectors such as enterprises and individuals registered USD 124.5 billion in net outflows of cross-border capital, down by 59% year on year. Specifically, China posted USD 25.2 billion, USD 59 billion, USD 27.3 billion and USD 13 billion respectively in net outflows of cross-border capital from the first to the fourth quarter, indicating net outflows were on the decline. (II) Market participants' behaviors in foreign-related transactions have become more stable. Amid the two-way fluctuations of the RMB exchange rate, enterprises' and individuals' behaviors in foreign-related transactions have been diversified rather than simplistic as they were previously, and more of them arrange cross-border receipts and payments, and foreign exchange sales and settlements based on real demand. In 2017, the surplus in foreign exchange sales and settlements under trade in goods and foreign exchange settlements under FDI were on an upward trend, cross-border financing continued stable growth, and outbound investment and individual purchases of foreign exchange declined systematically. (III) The balance of foreign exchange reserves has perked up for 11 consecutive months. As at the end of 2017, the balance of foreign exchange reserves hit USD 3.1399 trillion, up by USD 129.4 billion year on year, representing rises for 11 straight months since February 2017. (IV) The RMB exchange rate has risen stably against the USD and remained stable against a basket of other currencies. In 2017, the central parity rate of the RMB against the USD rose by 6.2%, and the CFETS RMB exchange rate index compiled by China Foreign Exchange Trade System climbed by 0.02%. II. Favorable factors will help reduce risks associated with cross-border capital flows in China going forward In 2018, following the underlying principle of pursuing progress while ensuring stability, the new vision for development and the requirements for high-quality development, China will witness rising stability and resilience in economic performance and may continue to see stable development with strong momentum for growth. As external demand is strengthened alongside the world economic recovery, the financial markets are further liberalized, and market expectations improve, China's balance of payments and cross-border capital flows will maintain a basic equilibrium. The high-quality development model will help strengthen market confidence in the long term. In 2018, the first year of implementing the spirit of the 19th CPC National Congress, China will focus on the supply-side structural reform while stabilizing growth, promoting reform, adjusting structure, benefitting the people and preventing risks, so as to boost the sustainable and healthy development of the economy and society, which will consolidate the confidence of domestic and foreign market participants in investing and operating in China in the long term. The sound economic fundamentals are still a driver of stable cross-border capital flows in China. China's economic growth is relatively high at the global level, and in particular, the economic structure is improved, the aggregate supply and demand is more balanced and the momentum for endogenous growth is strengthened. The domestic industrial chains and supporting facilities are being enhanced, and workers' skills are well matched with companies' requirements, which will help ensure smooth operations and high returns. At the same time, residents' incomes are on the rise, and their consumption is further upgraded, indicating high potential of the domestic markets, which will be a key consideration in attracting investments. Further, China's macro policies are well targeted, systems and regimes are flexible, financial markets are robust and foreign exchange reserves are adequate, indicating China will be capable of responding to and solving risks. Making new ground in pursuing opening-up on all fronts will help balance cross-border capital flows. In 2018, the 40th anniversary of the implementation of the reform and opening up policy, the scope and level of opening up will be further expanded, market entry will be loosened, laws on foreign capital will be improved, and intellectual property rights protection will be intensified, so as to attract more capital to flow into the country on a long-term basis. With the smooth implementation of financial market reforms and opening up, foreign investors will become more aggressive in investing in China's capital market. Focusing on the Belt and Road Initiative, China will attach equal importance to "bringing in" and "going global" to make it easier to achieve balanced capital flows. The external environment will be favorable as the global economic and financial performance remains stable. In 2018, the global economy will continue to recover, with its growth rate expected by the IMF to be 3.9%, up by 0.2 percentage point from a year earlier. The consumption and employment in the US will be generally optimistic and Trump's tax plan will be favorable to boost the country's economy and push up the expectations of inflation. Spurred by a greater momentum for stronger domestic demand and rising external demand, manufacturing PMI in the Eurozone set a new record in January 2018 and economies such as Germany, Italy and the Netherlands are expected to see higher growth rates, and therefore, the Eurozone may sustain a huge momentum beyond expectations in 2018. Japan's GDP has continued to rise for seven consecutive quarters and its manufacturing PMI reading has been above 50 for 16 straight months, and therefore, the country's central bank has recently expanded the prediction interval of economic growth in 2018. Benefitting from the perking up of the global economy, higher commodity prices and the positive results of domestic reforms, BRICS countries such as Russia, Brazil, India and South Africa have registered fast increases in foreign trade and their manufacturing PMI readings climb, indicating optimistic economic performance. It should also be noted that China's cross-border capital flows are still susceptible to instabilities and uncertainties. First, major economies may be homogeneous in normalizing their monetary policies with resonance effect, which, coupled with the tax reform, infrastructure investment and trade protectionism in the US, may impact global financial markets and global capital flows. Second, the foundation for the stability of global financial markets is still weak. Although risk aversion is at a historical low across the world, yet the risk of adjustment after continued rallies of the stock markets in some developed countries, and political risks and geopolitical conflicts in some regions may lead to changes in risk aversion and heightened volatility of cross-border capital. Third, economic and financial risks still exist in China. The country is now still at a critical moment in addressing major economic and financial risks. The leverage ratio of enterprises remains high, and issues such as hidden debt of local governments, real estate market, shadow banking, and internet finance are to be addressed. As a result, market sentiment and confidence may be impacted during risk exposure and disposal. III. Pursue All-round Opening-up with More Balanced Administration As China's cross-border capital flows find an equilibrium, all the macro-prudential policies adopted earlier have regained their neutrality. Going forward, the two-way flows of China's cross-border capital will become a normal and remain generally balanced. Next, foreign exchange authorities will boost the balanced management of cross-border capital flows: first, regarding the purposes of management, foreign exchange authorities will look at the increases and decreases in foreign exchange reserves more reasonably, placing a stronger emphasis on dynamic equilibrium of the balance of payments while achieving a higher level of trade and investment liberalization and facilitation. Second, in terms of management philosophy, policy neutrality will be adhered to. In micro regulation of the foreign exchange market, the consistency in the policies and standards for two-way cross-border capital flows will be stressed: both capital inflows and outflows in compliance with laws and regulations will be supported. Third, in enforcement of foreign exchange laws, authenticity and compliance with laws and regulations will be stressed, and consistency, stability and predictability of enforcement standards across cycles will be emphasized, while illicit outflows and inflows, especially irregularities such as underground banks, fabricated transactions and market manipulation, will be cracked down on, so as to safeguard the normal order of the foreign exchange market. (I) Policies for a higher level of trade and investment liberalization and facilitation will be adopted. First, law-based administration will be adhered to so as to satisfy authentic demands for foreign exchange under the current and capital accounts in conformity with regulations. Second, efforts will be made to serve the building of a trade giant and support and cultivate new trade formats. The regulatory system, service system and policy framework will be improved to continue to support the healthy development of new trading formats and models such as cross-border ecommerce, market purchases and comprehensive foreign trade services, and to standardize the development of cross-border payments through third-party payment institutions. Third, the Belt and Road Initiative will be focused on, with equal importance attached to "bringing in" and "going global". The new framework of foreign exchange administration for foreign-owned enterprises under the model of pre-establishment national treatment plus negative list will be studied to build stable, equitable, transparent, predictable and law-oriented business environment and protect legitimate interests of foreign-owned enterprises. International production capacity cooperation will be promoted under the Belt and Road Initiative. Efforts will be made to standardize and guide ODI, with focus on supporting capable and eligible domestic enterprises to make outbound investments in an active and steady manner, under the principle of classified management. (II) The two-way liberalization of the financial market will be pressed ahead with. First, the securities market will be boosted for two-way liberalization. Further efforts will be made to promote the liberalization of domestic stock and bond markets, by improving bond connect, studying Shanghai-London Stock Connect and supporting Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. The foreign exchange administration system for qualified institutional investors (QFII, RQFII, QDII, RQDII) will be reformed and improved. It will be made easier for market participants to allocate assets in larger space. The domestic market for derivatives such as commodity futures will be further opened up. Second, the open and competitive foreign exchange market will be opened up and improved. Efforts will be made to deepen the foreign exchange market, expand transaction participants, diversify transaction instruments, and expand the scope of transactions to boost market liberalization and satisfy participants' demands for risk mitigation. Third, education on risks will be intensified for market participants. Enterprises will be guided to build the awareness of "financial neutrality" and use various instruments on the foreign exchange market for hedging, so as to ensure sound exchange rate risk management. (III) The macro-prudential management system for cross-border capital flows will be built. The monitoring, early warning and response mechanism for the macro-prudential management of cross-border capital flows will be built and improved. The macro-prudential assessment system for cross-border capital flows will be built for the banking sector. Policy toolkits will be diversified, including management instruments aimed to reduce sharp fluctuations in cross-border capital, such as provisions of risks; the macro-prudential management policies focusing on bank and short-term capital flows. Efforts will also be made to adjust the short-term fluctuations of the foreign exchange market in a counter-cyclical manner to safeguard the security of the financial system and the equilibrium of the balance of payments. (IV) The micro-regulatory framework for the foreign exchange market will be enhanced. First, the cross-cyclical stability and consistency of policies will be ensured. The order of the foreign exchange market will be maintained in accordance with laws and regulations, the cross-cyclical consistency between law applicability and enforcement standards will be ensured, and a tough stance on foreign exchange irregularities will be maintained. Second, the authenticity, legality and compliance reviews will be conducted. Foreign exchange authorities will perform their review obligations in anti-money laundering, anti-tax avoidance and anti-terrorist marketing to protect the legitimate interests of market participants and crack down on price manipulation, false advertisement and consumer misleading. Third, penetrating regulation of cross-border transactions will be enhanced under the tracing principle. Fourth, the national security inspection of foreign investments will be ensured. (V)The operation and management capabilities of foreign exchange reserves will be strengthened. First, the coordination with monetary policy, foreign exchange rate policy, and cross-border capital flow policy will be further intensified to guard against systematic risks and make full use of the roles of foreign exchange reserves in ensuring external payment, and safeguarding stable foreign exchange rate and national economic and financial security. Second, investment capability building will be stepped up, and monetary and asset structure will be optimized so as to ensure security and liquidity while maintaining and increasing value. Third, key national strategies like the Belt and Road Initiative will be applied in a diversified way to boost international production capacity and equipment manufacturing cooperation to go deeper. 2018 is the first year to implement the spirit of the 19th CPC National Congress, the 40th anniversary of the implementation of the reform and opening up policy and a year crucial to securing a decisive victory in building a moderately prosperous society in all respects and to the implementation of the 13th Five-year Plan. Guided by the Xi Jinping thought on socialism with Chinese characteristics for a new era, foreign exchange authorities will uphold the underlying principle of pursuing progress while ensuring stability to fulfill the three tasks of serving the real economy, controlling financial risks and deepening financial reforms. Following the philosophy of balanced management, foreign exchange authorities will be committed to making new ground in pursuing opening up on all fronts, serving the development of the real economy, guarding against risks arising from cross-border capital flows and safeguarding national economic and financial security, in a bid to make new contributions to securing a decisive victory in building a moderately prosperous society in all respects and striving for the great success of socialism with Chinese characteristics for a new era. (The original text is available at caixin.com) 2018-02-07/en/2018/0207/1415.html
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Since the beginning of 2018, the State Administration of Foreign Exchange (SAFE) has implemented the spirit of the 19 CPC National Congress and the arrangements of the CPC Central Committee and the State Council, with focus on serving the real economy, defending against financial risks and deepening financial reforms. The SAFE has tightened regulation of the foreign exchange market and investigated and dealt with illegal or irregular inflows and outflows of foreign exchange. It also has cracked down on false and fraudulent transactions to ensure the robust operation of the foreign exchange market and guard against and address financial risks. In accordance with the Regulation of the People's Republic of China on the Disclosure of Government Information (Decree No. 492 of the State Council), a selection of typical cases where foreign exchange regulations were violated are presented as follows: Case 1: Evasion of foreign exchange by Tianjin Binhai Haitong Logistics Co., Ltd. From January 2015 to January 2016, Tianjin Binhai Haitong Logistics Co., Ltd. fabricated the background of entrepot trade and paid foreign exchange of USD 46.518 million using the bills of lading already accomplished by other companies. The company violated Article 12 and 14 of the Regulations on Foreign Exchange Administration and is considered getting involved in foreign exchange evasion, which has severely disturbed the order of the foreign exchange market. With a large amount of money involved, this is a serious case in nature. In accordance with Article 39 of the Regulations on Foreign Exchange Administration, the company was fined RMB 11.05 million. Case 2: Evasion of foreign exchange by Xilong Scientific Co., Ltd. From January 2015 to December 2016, Xilong Scientific Co., Ltd. in Shantou, Guangdong fabricated the background of entrepot trade and paid foreign exchange of USD 17.6102 million using the invalid bills of lading. The company violated Article 12 and 14 of the Regulations on Foreign Exchange Administration and is considered getting involved in foreign exchange evasion, which has severely disturbed the order of the foreign exchange market. This is a serious case in nature. In accordance with Article 39 of the Regulations on Foreign Exchange Administration, the company was fined RMB 5.77 million. Case 3: Evasion of foreign exchange by Chengdu Weiyi Trading Co., Ltd. In June 2015, Chengdu Weiyi Trading Co., Ltd. fabricated the background of entrepot trade and paid foreign exchange of USD 4.2528 million using the false bill of lading. The company violated Article 12 and 14 of the Regulations on Foreign Exchange Administration and is considered getting involved in foreign exchange evasion, which has severely disturbed the order of the foreign exchange market. This is a serious case in nature. In accordance with Article 39 of the Regulations on Foreign Exchange Administration, the company was fined RMB 1.3 million. Case 4: Evasion of foreign exchange by Zhejiang Juxiong Import and Export Co., Ltd. In February 2016, Zhejiang Juxiong Import and Export Co., Ltd. fabricated the background of entrepot trade and paid foreign exchange of USD 5.2476 million using the bills of lading already accomplished by other companies. The company violated Article 12 and 14 of the Regulations on Foreign Exchange Administration and is considered getting involved in foreign exchange evasion, which has severely disturbed the order of the foreign exchange. This is a serious case in nature. In accordance with Article 39 of the Regulations on Foreign Exchange Administration, the company was fined RMB 1.3752 million. Case 5: Evasion of foreign exchange by Guangxi Beitou ThangLong Import & Export Co., Ltd. From December 2016 to February 2017, Guangxi Beitou ThangLong Import & Export Co., Ltd. fabricated the background of entrepot trade and paid foreign exchange of USD 13.3822 million using the false bills of lading. The company violated Article 12 and 14 of the Regulations on Foreign Exchange Administration and is considered getting involved in foreign exchange evasion, which has severely disturbed the order of the foreign exchange market. This is a serious case in nature. In accordance with Article 39 of the Regulations on Foreign Exchange Administration, the company was fined RMB 4.5 million. Case 6: Inward Remittances of Foreign Exchange by Tianjin Haohua Minsheng Technology Development Co., Ltd. against foreign exchange regulations In June 2015, Tianjin Haohua Minsheng Technology Development Co., Ltd. fabricated the background of export and remitted USD 2 million under "advances from customers" into China, which is recognized as inward remittance in violation of the foreign exchange regulations. The company violated Article 12 and 13 of the Regulations on Foreign Exchange Administration, and the company was fined RMB 200,000 in accordance with Article 41 thereof. Case 7: Illegal foreign exchange settlement by Lianyungang Yunong Agricultural Technology Co., Ltd. From July to September 2015, Lianyungang Yunong Agricultural Technology Co., Ltd. in Jiangsu handled procedure for inward remittance of capital and settled USD 4.89 million in foreign exchange using the false contract. The company violated Article 23 of the Regulations on Foreign Exchange Administration and Article 9 of the Provisions on the Foreign Exchange Administration of Domestic Direct Investment from Foreign Investors and is considered getting involved in illegal foreign exchange settlement. In accordance with Article 41 of the Regulations on Foreign Exchange Administration, the company was fined RMB 980,000. Case 8: Illegal foreign exchange settlement by Rugao Chengyang Agricultural Technology Co., Ltd. On June 28, 2016, Rugao Chengyang Agricultural Technology Co., Ltd. in Jiangsu handled procedure for inward remittance of capital and settled USD 2.8 million in foreign exchange using the false contract. The company violated Article 23 of the Regulations on Foreign Exchange Administration and Article 9 of the Provisions on the Foreign Exchange Administration of Domestic Direct Investment from Foreign Investors and is considered getting involved in illegal foreign exchange settlement. In accordance with Article 41 of the Regulations on Foreign Exchange Administration, the company was fined RMB 400,000. Case 9: Illegal foreign exchange settlement by Xuzhou Haisheng Electronics Co., Ltd. In December 2016, Xuzhou Haisheng Electronics Co., Ltd. handled procedure for inward remittance of capital and settled USD 9.9999 million in foreign exchange by fabricating the purposes of funds, and after settlement, the company used the funds for personal purposes other than its normal production and operations, which is considered illegal foreign exchange settlement. The company violated Article 23 of the Regulations on Foreign Exchange Administration. In accordance with Article 41 of the Regulations on Foreign Exchange Administration, the company was fined RMB 1.234 million. Case 10: Illegal foreign exchange settlement by Nantong Tongzhou District Shuoqing Machinery Co., Ltd. From March to April 2017, Nantong Tongzhou District Shuoqing Machinery Co., Ltd. in Jiangsu handled procedure for inward remittance of capital and settled USD 8 million in foreign exchange using the false contract. The company violated Article 23 of the Regulations on Foreign Exchange Administration and Article 9 of the Provisions on the Foreign Exchange Administration of Domestic Direct Investment from Foreign Investors and is considered getting involved in illegal foreign exchange settlement. In accordance with Article 41 of the Regulations on Foreign Exchange Administration, the company was fined RMB 1.1 million. Case 11: Onshore guarantees by China Merchants Bank Quanzhou Branch for offshore loans against regulations From October 2013 to October 2015, China Merchants Bank Quanzhou Branch didn't carry out a due diligence investigation as required, with regard to the purposes of the loans, expected sources of repayment, possibility of performing the contracts for onshore guarantees and relevant transaction background, when handling the execution and performance of the contracts for onshore guarantees for offshore loans. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations on Foreign Exchange Administration, the illegal gains of RMB 2.1319 million were confiscated and the bank was ordered to rectify within the prescribed time limit and fined RMB 5.8 million. Case 12: Onshore guarantees by the Industrial and Commercial Bank of China TEDA Branch for offshore loans against regulations From December 2013 to January 2016, the Industrial and Commercial Bank of China TEDA Branch handled the purchase and payment of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, without carrying out a due diligence investigation as required, with regard to the purposes of the loans under guarantees, use of loans and relevant transaction background, although the messages on the use of loans were illegible, use of loans under guarantees was not specified in the letter of intent for loan extension, and the amount of funds for performance of the contracts was higher than that of loans. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations on Foreign Exchange Administration, the illegal gains of RMB 670,000 were confiscated and the bank was fined RMB 1.2 million. Case 13: Onshore guarantees by Hana Bank (China) Company Limited Tianjin Branch for offshore loans against regulations From August 2014 to August 2016, when handling the purchase and payment of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, Hana Bank (China) Company Limited Tianjin Branch didn't carry out a due diligence investigation as required, with regard to the qualifications of debtors, circulation of the ownership of goods during transactions and relevant transaction background. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations on Foreign Exchange Administration, the illegal gains of RMB 366,000 were confiscated, and the bank was fined RMB 2 million and suspended from handling foreign exchange settlement for and sales to enterprises for three months. Case 14: Onshore guarantees by China Minsheng Bank Taiyuan Branch for offshore loans against regulations From September 2014 to August 2015, when handling the purchase and payment of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, China Minsheng Bank Taiyuan Branch didn't carry out a due diligence investigation as required, with regard to the sources of repayment of debtors. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations on Foreign Exchange Administration, the illegal gains of RMB 2.07 million were confiscated, whilst the bank was ordered to rectify within the prescribed time limit and fined RMB 1.6 million. Case 15: Onshore guarantees by the Agricultural Bank of China Xinxiang Branch for offshore loans against regulations In December 2016, when handling the purchase and payment of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, the Agricultural Bank of China Xinxiang Branch didn't carry out a due diligence investigation as required, with regard to the purposes of funds under guarantees and relevant transaction background. Nor did it conduct continuous monitoring and tracking of the purposes of loans. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations on Foreign Exchange Administration, the bank was ordered to rectify within the prescribed time limit and fined RMB 1 million, with the illegal gains of RMB 472,100 confiscated. Case 16: Foreign exchange settlement for advances from customers by Harbin Bank Shenyang Branch against regulations From May to July 2015, Harbin Bank Shenyang Branch settled foreign exchange for advances from customers under trade in goods without carrying out a due diligence investigation into corporate documents such as export contracts and invoices, and consistency between foreign exchange receipt and payment. The bank violated Article 12 of the Regulations on Foreign Exchange Administration. In accordance with Article 47 of the Regulations on Foreign Exchange Administration, the bank was ordered to rectify within the prescribed time limit and fined RMB 400,000. Case 17: Foreign exchange receipts for individual trade handled by China Merchants Bank Jiangmen Branch against regulations From November 2015 to May 2017, China Merchants Bank Jiangmen Branch handled foreign exchange receipts for cross-border trade through the individual foreign exchange savings account against regulations. The bank violated Article 32 of the Measures for the Administration of Individual Foreign Exchange. In accordance with Article 48 of the Regulations on Foreign Exchange Administration, the bank was ordered to rectify within the prescribed time limit and fined RMB 160,000. Case 18: Foreign exchange settlement for external debt by China Construction Bank Taian Branch against regulations From February to May 2016, China Construction Bank Taian Branch settled foreign exchange for external debt of companies without reviewing and keeping the materials such as contracts and invoices that could prove the purposes of funds from settlement of foreign exchange of external debt and reviewing the consistency between the purposes of such funds and contract provisions. The bank violated Article 15 of the Measures for the Registration and Management of External Debt and the provisions of "Materials for Bank Review" and "Review Elements" in Chapter VI of Operating Guidelines on External Debt Registration and Management. In accordance with Article 47 of the Regulations on Foreign Exchange Administration, the bank was fined RMB 400,000. Case 19: Foreign exchange settlement for trade in goods by the Industrial and Commercial Bank of China Binzhou Xincheng Sub-branch against regulations From February to December 2016, the Industrial and Commercial Bank of China Binzhou Xincheng Sub-branch handled foreign exchange receipt and settlement in foreign currency banknotes for trade in goods without carrying out a due diligence investigation into the background where companies changed the way of foreign exchange receipt under trade and the necessity of receiving foreign exchange in foreign currency banknotes. The bank violated Article 6, 9 and 10 of the Measures for Managing the Receipts and Payments of Foreign Currency Banknotes by Domestic Institutions. In accordance with Article 47 of the Regulations on Foreign Exchange Administration, the bank was fined RMB 300,000. Case 20: Entrepot trade handled by Ping An Bank Ningbo Branch against regulations From June to December 2016, Ping An Bank Ningbo Branch handled foreign exchange payment for entrepot trade although the due diligence investigation into the authenticity of the entrepot trade was not carried out as required and the transaction documents for entrepot trade were not effective for picking up the goods. The bank violated Article 12 of the Regulations on Foreign Exchange Administration. In accordance with Article 47 of the Regulations on Foreign Exchange Administration, the bank was ordered to rectify within the prescribed time limit and fined RMB 800,000, with the illegal gains of RMB 506,200 confiscated. Case 21: Mr. Zhang, native of Shanghai, evaded foreign exchange through split-up In 2016, to transfer his assets overseas illegally, Mr. Zhang split up his personal funds, used the annual quotas of 27 individuals including his own to buy foreign exchange and transferred the foreign exchange into his overseas account. The funds thus transferred equaled USD 1.3419 million in total. Zhang violated Article 7 of the Measures for the Administration of Individual Foreign Exchange and is considered getting involved in the evasion of foreign exchange. In accordance with Article 39 of the Regulations on Foreign Exchange Administration, Zhang was fined RMB 460,000. Case 22: Illegal purchase and sales of foreign exchange by Mr. Chen, native of Shaanxi From August to September 2016, to transfer his assets overseas illegally, Mr. Chen transferred RMB 26 million into the domestic account controlled by an underground bank, exchanged the money into foreign exchange and then transferred the foreign exchange into his Hong Kong account. The funds thus transferred equaled USD 3.8906 million in total. Chen violated Article 30 of the Measures for the Administration of Individual Foreign Exchange and is considered getting involved in the illegal purchase and sales of foreign exchange. In accordance with Article 45 of the Regulations on Foreign Exchange Administration, Chen was fined RMB 1.69 million. Case 23: Mr. Tang, native of Jiangxi, evaded foreign exchange through split-up From January to October 2016, to transfer his assets overseas illegally, Mr. Tang split up his personal funds, used the annual quotas of 69 individuals including his own to buy foreign exchange and transferred the foreign exchange into several overseas accounts. The funds thus transferred equaled USD 3.211 million in total. Tang violated Article 7 of the Measures for the Administration of Individual Foreign Exchange and is considered getting involved in the evasion of foreign exchange. In accordance with Article 39 of the Regulations on Foreign Exchange Administration, Tang was fined RMB 1.5 million. Case 24: Mr. Tu, native of Jiangsu, evaded foreign exchange through split-up From January 2016 to April 2017, to transfer his assets overseas illegally, Mr. Tu split up his personal funds, used the annual quotas of 43 individuals in China including his own to buy foreign exchange and transferred the foreign exchange into his overseas account. The funds thus transferred equaled USD 2.1238 million in total. Tu violated Article 7 of the Measures for the Administration of Individual Foreign Exchange and is considered getting involved in the evasion of foreign exchange. In accordance with Article 39 of the Regulations on Foreign Exchange Administration, Tu was fined RMB 724,500. 2018-05-04/en/2018/0627/1442.html
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Since the beginning of 2018, the State Administration of Foreign Exchange (SAFE) has implemented the spirit of the 19 CPC National Congress and the arrangements of the CPC Central Committee and the State Council, with focus on serving the real economy, defending against financial risks and deepening financial reforms. The SAFE has tightened regulations of the foreign exchange market, investigated and punished acts violating foreign exchange laws and regulations, and cracked down on false transactions and frauds. In accordance with the Regulation of the People's Republic of China on the Disclosure of Government Information (Decree No. 492 of the State Council), a selection of typical cases where foreign exchange regulations were violated are presented as follows: Case 1: Entrepot trade handled by Huaxia Bank Shanghai Branch against regulations From November 2015 to January 2016, without carrying out due diligence investigations into the authenticity of entrepot trade as required, Huaxia Bank Shanghai Branch handled the payments and purchases of foreign exchange for entrepot trade based on the false bills of lading presented. The bank violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 47 of the Regulations, the bank was fined RMB 2 million and suspended from selling foreign exchange to companies for two years. Case 2: Entrepot trade handled by the Bank of Communications Xiamen Branch Qianpu Sub-branch against regulations From January to August 2016, without carrying out due diligence investigations into the authenticity of entrepot trade as required, the Bank of Communications Xiamen Branch Qianpu Sub-branch handled the payments and purchases of foreign exchange for entrepot trade based on the false bills of lading presented. The bank violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 47 of the Regulations, the bank was fined RMB 6 million and suspended from selling foreign exchange to companies for three months, with senior executives and other persons directly liable for the violation ordered to take responsibility for the violation. Case 3: Entrepot trade handled by Nanyang Commercial Bank (China) Hangzhou Branch against regulations From March to August 2016, without carrying out due diligence investigations into the authenticity of entrepot trade as required, Nanyang Commercial Bank (China) Hangzhou Branch handled the payments of foreign exchange for entrepot trade based on the false or irrelevant bills of lading presented. The bank violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 47 of the Regulations, RMB 1.31 million was fined and confiscated. Case 4: Entrepot trade handled by the Bank of Beijing Shanghai Branch against regulations In July 2017, without carrying out a due diligence investigation into the authenticity of entrepot trade as required, the Bank of Beijing Shanghai Branch handled the payment of foreign exchange for entrepot trade based on the bills of lading repetitively presented. The bank violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 47 of the Regulations, RMB 840,000 was fined and confiscated. Case 5: Trade financing handled by the Bank of Jinzhou Dalian Branch against regulations From September to October 2015, the Bank of Jinzhou Dalian Branch handled trade financing for a company based on the Customs Report of another company. The bank violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 47 of the Regulations, RMB 529,800 was fined and confiscated. Case 6: Trade financing handled by Huishang Bank Hefei Branch Tian'ehu Sub-branch against regulations From September to November 2016, Huishang Bank Hefei Branch Tian'ehu Sub-branch handled trade financing for a company based on a Customs report repetitively presented. The bank violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 47 of the Regulations, RMB 400,000 was fined. Case 7: Onshore guarantees by China Minsheng Bank Xiamen Branch for offshore loans against regulations From August 2014 to December 2016, China Minsheng Bank Xiamen Branch handled the payments of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, without carrying out required due diligence investigations with regard to qualifications of the debtors, purposes of the loans, expected sources of repayments, possibility of performing the contracts on guarantees, as well as relevant transaction backgrounds. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, a total of RMB 22.40 million was fined and confiscated, and the bank was suspended from selling foreign exchange to companies for three months. Case 8: Onshore guarantees by the Bank of Guangzhou Shenzhen Branch for offshore loans against regulations From May 2015 to January 2017, the Bank of Guangzhou Shenzhen Branch handled the payments of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, without carrying out required due diligence investigations, with regard to qualifications of the debtors, purposes of the loans, expected sources of repayments, possibility of performing the contracts on guarantees, as well as relevant transaction backgrounds. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, a total of RMB 2.958 million was fined and confiscated. Case 9: Onshore guarantees by Xiamen International Bank Quanzhou Branch for offshore loans against regulations From June 2015 to July 2016, Xiamen International Bank Quanzhou Branch handled the payments of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, despite the fact that the bank knew the companies' offshore loans were non-performing and it was set to perform the contracts on guarantees. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, RMB 2.80 million was fined. Case 10: Onshore guarantees by Hana Bank Guangzhou Branch for offshore loans against regulations From July to December 2015, Hana Bank Guangzhou Branch handled the payments of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, without carrying out required due diligence investigations with regard to expected sources of repayments, and relevant transaction backgrounds. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, a total of RMB 2.1626 million was fined and confiscated, and the bank was suspended from selling foreign exchange to companies for six months, with senior executives and other persons directly liable for the violation ordered to take responsibility for the violation. Case 11: Onshore guarantees by the Bank of Tianjin No. 6 Central Sub-branch for offshore loans against regulations From January 2016 to July 2017, the Bank of Tianjin No. 6 Central Sub-branch handled the payments of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, without carrying out required due diligence investigations with regard to expected sources of repayments, possibility of performing the contracts on guarantees, as well as relevant transaction backgrounds. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, a total of RMB 7.4025 million was fined and confiscated. Case 12: Individual foreign exchange business handled by the Bank of China Putian Branch against regulations From January 2016 to April 2017, the Bank of China Putian Branch handled split-up sales and payments of individual foreign exchange and withdrawals of foreign currency banknotes. The bank violated Article 7 and 34 of the Measures for the Administration of Individual Foreign Exchange. In accordance with Article 47 and 48 of the Regulations of the People's Republic of China on Foreign Exchange Administration, RMB 700,000 was fined. Case 13: Individual foreign exchange business handled by the Industrial and Commercial Bank of China Shenzhen Branch against regulations From October 2017 to January 2018, the Industrial and Commercial Bank of China Shenzhen Branch handled the settlements of individual foreign exchange without reviewing the valid ID certificates of individuals in China and the nature of funds as required. The bank violated Article 9 and 6 of the Measures for the Administration of Individual Foreign Exchange. In accordance with Article 47 and 48 of the Regulations of the People's Republic of China on Foreign Exchange Administration, RMB 430,000 was fined. Case 14: Foreign exchange evasion by DDBill Payment Co., Ltd. From January 2016 to October 2017, DDBill Payment Co., Ltd. went through cross-border payments of foreign exchange in the amount of USD 15.588 million, based on false logistic information. The company violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was involved in foreign exchange evasion, which had severely disturbed the order of the foreign exchange market and led to serious consequences. In accordance with Article 39 of the Regulations, the company was fined RMB 15.308 million. Case 15: Foreign exchange evasion by PayEase (Beijing) Technology Ltd. From February 2016 to June 2017, PayEase (Beijing) Technology Ltd. went through split-up purchases and payments of foreign exchange in the amount of USD 1.59 million, based on automatic setup of the system. The company violated Article 14 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was involved in foreign exchange evasion, which had severely disturbed the order of the foreign exchange market and led to serious consequences. In accordance with Article 39 of the Regulations, the company was fined RMB 1.0745 million. Case 16: Violations of regulations on foreign exchange administration by Alipay (China) Network Technology Co., Ltd. From January 2014 to May 2016, Alipay (China) Network Technology Co., Ltd. went through cross-border payments of foreign exchange beyond the approved scope and misstated the balance of payments. The company violated Article 6 of the Guidelines for the Pilot Program of Cross-border Payments of Foreign Exchange by Payment Institutions and Article 7 of the Measures for Declaration of Balance of Payments Statistics. In accordance with Article 48 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the company was fined RMB 600,000. Case 17: Violations of regulations on foreign exchange administration by Tenpay Payment Technology Co., Ltd. From January 2015 to June 2017, Tenpay Payment Technology Co., Ltd. handled cross-border payments of foreign exchange for non-residents without going through the filing procedures, and failed to submit the unusual risk report as required. The company violated Article 35 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 48 of the Regulations, the company was fined RMB 600,000. Case 18: Violations of regulations on foreign exchange administration by Shanghai Shengpay E-Payment Service Co., Ltd. From January 2015 to June 2017, Shanghai Shengpay E-Payment Service Co., Ltd. handled cross-border payments without abiding by relevant regulations and misstated the balance of payments. The company violated Article 9 and 6 of the Circular of the State Administration of Foreign Exchange on the Implementation of the Pilot Program of Cross-border Foreign Exchange Payment Business through Payment Institutions. In accordance with Article 39 and 48 of the Regulations of the People's Republic of China on Foreign Exchange Administration, the company was fined RMB 625,000. Case 19: Foreign exchange evasion by Qingdao Zerui Kaimao Foreign Trade Co., Ltd. Between January and December 2016, Qingdao Zerui Kaimao Foreign Trade Co., Ltd. paid USD 16.9289 million in foreign exchange by fabricating trade backgrounds and using false contracts and invoices. The company violated Article 12 and 14 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was involved in foreign exchange evasion, which had severely disturbed the order of the foreign exchange market and led to serious consequences. In accordance with Article 39 of the Regulations, the company was fined RMB 5.60 million. Case 20: Foreign exchange evasion by HaiKe Chemical Group Ltd. in Shandong In July 2016, HaiKe Chemical Group Ltd. in Shandong paid USD 22.9683 million in foreign exchange by fabricating entrepot trade backgrounds and using false contracts and invoices. The company violated Article 9 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was involved in foreign exchange evasion, which had severely disturbed the order of the foreign exchange market and led to serious consequences. In accordance with Article 39 of the Regulations, the company was fined RMB 7 million. Case 21: False trade financing by Anhui Whywin International Co., Ltd. From January to December 2016, Anhui Whywin International Co., Ltd. went through procedures for trade financing that involved USD 16.6675 million in total by presenting invalid trade documents and repetitively using the trade documents. The company violated Article 12 and 14 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 40 of the Regulations, the company was fined RMB 5.25 million. Case 22: Illegal foreign exchange settlement by Nanjing Samu'er Medical Instruments Co., Ltd. From August 2013 to June 2016, Nanjing Samu'er Medical Instruments Co., Ltd. went through inward remittances of capital and settlements of foreign exchange of USD 34.60 million based on false contracts. The company violated Article 23 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was involved in illegal foreign exchange settlements. In accordance with Article 41 of the Regulations, the company was fined RMB 4.2989 million. Case 23: Changes of the purposes of foreign exchange settlements for capital funds by Guangdong Heshan Ruishun Sales Co., Ltd. without permission From December 2016 to March 2017, Guangdong Heshan Ruishun Sales Co., Ltd. went through inward remittances of capital funds and settlements of foreign exchange of HKD 25.411 million by fabricating the purposes of the funds. By changing the purposes of foreign exchange settlements without permission, the company violated Article 23 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 44 of the Regulations, the company was fined RMB 1.125 million. Case 24: Illegal purchases and sales of foreign exchange by Mr. Zhong, native of Hunan From October 2013 to October 2016, to transfer his assets overseas without abiding by the law, Mr. Zhong transferred RMB 43.711 million into the domestic account controlled by an underground bank, exchanged the money into foreign exchange and then transferred the foreign exchange via the underground bank into his overseas account. Zhong violated Article 30 of the Measures for the Administration of Individual Foreign Exchange and was considered breaking the laws on the purchases and sales of foreign exchange. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Zhong was fined RMB 3.059 million. Case 25: Illegal purchases and sales of foreign exchange by Mr. Deng, native of Sichuan From February to August 2016, to obtain illegal gains, Mr. Deng exchanged RMB into HKD or vice versa many times via an underground bank, which involved RMB 13.6235 million in total. Deng violated Article 30 of the Measures for the Administration of Individual Foreign Exchange and was considered breaking the laws on the purchases and sales of foreign exchange. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Deng was fined RMB 2.0436 million. Case 26: Purchases and sales of foreign exchange by Mr. Xu, native of Sichuan, without permission In March 2017, Mr. Xu paid RMB 60 million to a domestic enterprise via a company he controlled to purchase US dollars without permission. Xu violated Article 30 of the Measures for the Administration of Individual Foreign Exchange by getting involved in the purchases and sales of foreign exchange without permission. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Xu was fined RMB 5.70 million. Case 27: Foreign exchange evasion by Mr. Zhao, native of Hebei, through split-up From January 2016 to December 2017, to transfer his assets overseas without abiding by the law, Mr. Zhao split up his personal funds, used the annual quotas of 55 individuals including his own to buy foreign exchange and transferred the foreign exchange into the overseas accounts. The funds thus transferred hit USD 2.4531 million in total. Zhao violated Article 7 of the Measures for the Administration of Individual Foreign Exchange and was involved in foreign exchange evasion. In accordance with Article 39 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Zhao was fined RMB 1.16 million. 2018-07-24/en/2018/0824/1446.html
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On the morning of August 2, the State Administration of Foreign Exchange (SAFE) held a video conferencing for the second half of 2018. The purposes of this meeting were to study and implement the arrangements of the CPC Central Committee and the State Council for the economic and financial undertakings, summarize the work of the first half, analyze the economic and financial environments both at home and abroad and the conditions of the foreign exchange market, and study and make arrangements for key tasks of foreign exchange administration for the second half. Pan Gongsheng, secretary of the CPC Leadership and administrator of the SAFE, delivered a work report. The meeting believed that in the year to date, foreign exchange authorities have studied, promoted and implemented Xi Jinping thought on socialism with Chinese characteristics for a new era and the spirit of the 19th CPC National Congress. Under the leadership of the CPC Central Committee and the State Council and the guidance of the People's Bank of China, they have implemented the requirements on Party self-governance, the general work guideline of making progress while maintaining stability, the new development philosophy and the requirements on high-quality development. With a focus on the supply-side structural reform, they have been committed to serving the development of the real economy, deepening the reform and opening up of foreign exchange administration, and guarding against risks associated with cross-border capital flows, successfully defending the economic and financial security of China. First, with political development as the top priority, foreign exchange authorities have remained committed to ensuring the "two safeguards" and stricter exercise of Party self-governance. Following the earnest intraparty political norm, they have implemented the system for collective activities within the Party. They have performed their principal responsibilities and ensured successful retrospective self-check of rectifications. With a focus on Party discipline, they have intensified management of Party officials and intensified the accountability for supervision and discipline enforcement. They have implemented the CPC Central Committee's eight-point decision on improving Party and government conduct, working ceaselessly to improve Party conduct and enforce Party discipline. Second, they have deepened the reform of delegation, regulation and service, with the levels of trade and investment liberalization and facilitation raised. They have devoted themselves to boosting the two-way opening up of the financial sector, and systematically advancing the capital account convertibility. To support the Belt and Road Initiative, they have promoted regional opening up and innovation to strengthen the roles of foreign exchange administration in serving the real economy. Third, they have been committed to guarding against risks arising from cross-border capital flows, and cracking down on violations of foreign exchange laws and regulations to safeguard the health and good order of the foreign exchange market. Fourth, they have intensified the building of operation and management capabilities of foreign exchange reserves, and continued to optimize asset arrangements to further diversify the utilization. The meeting pointed out that China's economy stayed stable and gathered momentum in the first half. The cross-border capital flows were steady, the supply and demand found a basic equilibrium in the foreign exchange market, and the receipts and payments under the current account remained reasonable, contributing to a stronger balance between the internal and external economies. Despite tremendous changes in the external environment, China's economy has achieved more resilient and higher-quality growth as the supply-side structural reform is advanced and economic restructuring is optimized. With an overall equilibrium in the balance of payments, adequate foreign exchange reserves, extensive experience and sufficient policy tools, we are confident about the stable operation of the foreign exchange market. The meeting stressed that, in the second half, foreign exchange authorities need to continue studying, promoting and implementing Xi Jinping thought on socialism with Chinese characteristics for a new era and the spirit of the 19th CPC National Congress. With thoroughly studying, fully understanding and effectively implementing the thought and the spirit as their top priority, they should maintain political integrity, think in terms of the big picture, follow the leadership core, and keep in alignment with the central Party leadership and have full confidence in the path, theory, system, and culture of socialism with Chinese characteristics, so as to make sure that they become highly aligned with the CPC Central Committee with Comrade Xi Jinping at its core in thoughts, politics and action. Following the strategic arrangements laid out at the 19th CPC National Congress, they should adhere to the general work guideline of making progress while maintaining stability, advance the supply-side structural reform, boost the two-way opening up of the financial market and ensure three breakthroughs, in a bid to promote the stability and health of China's economic growth. According to the meeting, focus should be on the following in the second half: first, with political development as the top priority, foreign exchange authorities should endeavor to ensure the leadership of the Party in foreign exchange administration. Following the political discipline and rules of the Party, they should be committed to developing the active and healthy political culture within the Party. They should conduct four forms of oversight over discipline compliance and consolidate and build on the advances made in implementing CPC Central Committee's eight-point decision on improving Party and government conduct. They should cultivate professional and high-quality officials teams who are loyal to the Party, have moral integrity, and demonstrate a keen sense of responsibility, for foreign exchange administration, so as to forever preserve their political characteristics. Second, they should deepen the foreign exchange administration reforms, and open the foreign exchange market wider to make new ground in pursuing opening-up on all fronts. They should systematically ensure the RMB capital account convertibility to guarantee the legal rights and interests of foreign investments. They should diversify the products and trading tools, increase the number of domestic and foreign participants to build an open and competitive foreign exchange market. While enhancing trade and investment liberalization and facilitation, they should support the development of new formats and models of trade and ensure sound foreign exchange administration services for the first China International Import Expo. To support the Belt and Road Initiative, they should advance the pilot programs for the reform and opening up of foreign exchange administration such as free trade zones and free trade ports. Third, they should adopt a multipronged approach to guarding against and addressing significant risks associated with foreign exchange. While establishing and improving the management framework of "macro-prudence + micro-regulation" for cross-border capital flows, they should crack down on false and fraudulent transactions, underground banks, and illegal foreign exchange trading platforms and other violations of foreign exchange laws to safeguard the sound order in the foreign exchange market and the country's economic and financial security. Fourth, they should work to ensure the security, liquidity, value growth and maintenance of foreign exchange reserves to serve government strategies. The meeting called on officials and staff of foreign exchange authorities to get united around the CPC Central Committee with President Xi Jinping at its core and follow the guidance of Xi Jinping thought on socialism with Chinese characteristics for a new era, and to bear the weight of responsibility and work diligently to make notable achievements in foreign exchange administration, and to effectively implement the decisions and arrangements of the CPC Central Committee and the State Council to deliver a good result for the upcoming 40th anniversary of reform and opening up. Members of the CPC Leadership, chief accountants, chief economists and heads of departments and units of the SAFE attended the meeting at the main venue, while members of the leaderships and department heads of SAFE branches (foreign exchange administrative departments), and heads of central sub-branches were present at local venues. 2018-08-02/en/2018/0808/1448.html
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Since the beginning of 2018, the State Administration of Foreign Exchange (SAFE) has implemented the spirit of the 19th CPC National Congress and the arrangements of the CPC Central Committee and the State Council, with focus on serving the real economy, defending against financial risks and deepening financial reforms. The SAFE has tightened regulations of the foreign exchange market, maintaining a tough stance against violations of the laws and regulations on foreign exchange, stepping up punishments and cracking down on false transactions, frauds, illegal arbitrages and other behaviors involving the departure of financial capital from the real economy into the virtual economy, so as to safeguard the healthy and good market order. In accordance with the Regulation of the People's Republic of China on the Disclosure of Government Information (Decree No. 492 of the State Council), a selection of typical cases where foreign exchange regulations were violated are presented as follows: Case 1: Entrepot trade handled by Hengfeng Bank Wenzhou Branch against regulations In January 2016, without carrying out the required due diligence investigations into the authenticity of entrepot trade, Hengfeng Bank Wenzhou Branch handled the payments of foreign exchange for entrepot trade based on the false bills of lading presented. The bank violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 47 of the Regulations, it was fined RMB 1.464 million. Case 2: Entrepot trade handled by Bank of Communications Xiamen Branch Guanyinshan Sub-branch against regulations From February to July 2016, without carrying out the required due diligence investigations into the authenticity of entrepot trade, Bank of Communications Xiamen Branch Guanyinshan Sub-branch handled the sales of foreign exchange for entrepot trade based on the false bills of lading presented. The bank violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 47 of the Regulations, it was fined RMB 4 million and suspended from selling foreign exchange to companies for three months, with senior executives and other persons directly liable for the violation ordered to take responsibility. Case 3: Entrepot trade handled by Bank of Tianjin Shanghai Branch against regulations From March to April 2016, without carrying out the required due diligence investigations into the authenticity of entrepot trade, the Bank of Tianjin Shanghai Branch handled the payments of foreign exchange for entrepot trade based on the false bills of lading presented. The bank violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration. In accordance with Article 47 of the Regulations, the bank was fined RMB 800,000. Case 4: Onshore guarantees by HSBC Beijing Branch for offshore loans against regulations From August 2014 to June 2017, HSBC Beijing Branch handled the payments of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, without carrying out the required due diligence investigations into the purposes of the loans and relevant transaction backgrounds. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, a total of RMB 8.4222 million was fined and confiscated. Case 5: Onshore guarantees by China Merchants Bank Xiamen Branch Jiahe Sub-branch for offshore loans against regulations From July 2014 to July 2016, China Merchants Bank Xiamen Branch Jiahe Sub-branch handled the payments of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, without carrying out the required due diligence investigations into the qualifications of the debtors, purposes of the loans, expected sources of repayments, and relevant transaction backgrounds. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, a total of RMB 4.3319 million was fined and confiscated. Case 6: Onshore guarantees by China Minsheng Bank Xi'an Branch for offshore loans against regulations From December 2014 to December 2016, China Minsheng Bank Xi'an Branch handled the payments of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, without carrying out the required due diligence investigations into the qualifications of the debtors, purposes of the loans, expected sources of repayments, and relevant transaction backgrounds. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, a total of RMB 6.454 million was fined and confiscated, and its senior executives and other persons directly liable for the violation were ordered to take responsibility. Case 7: Onshore guarantees by IBK (China) Tianjin Branch Xiqing Sub-branch for offshore loans against regulations From June 2015 to June 2017, IBK (China) Tianjin Branch Xiqing Sub-branch handled the payments of foreign exchange for the execution and performance of the contracts on onshore guarantees for offshore loans, without carrying out the required due diligence investigations into the qualifications of the debtors, expected sources of repayments, and relevant transaction backgrounds. The bank violated Article 12 and 28 of the Regulations on Foreign Exchange Administration for Cross-border Guarantees. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, RMB 1.022 million was fined and confiscated. Case 8: Split-up sales and payments of individual foreign exchange handled by China Construction Bank Lianjiang Sub-branch against regulations From June 2016 to June 2017, China Construction Bank Lianjiang Sub-branch handled split-up sales and payments of individual foreign exchange against regulations. The bank violated Article 7 of the Measures for the Administration of Individual Foreign Exchange. In accordance with Article 47 of the Regulations of the People's Republic of China on Foreign Exchange Administration, RMB 600,000 was fined. Case 9: Foreign exchange evasion by Solvay Biochemicals (Taixing) Co., Ltd. From November 2012 to December 2013, Solvay Biochemicals (Taixing) Co., Ltd. paid advance of EUR 2.2768 million and USD 50,500 based on the expired contracts, without importing anything. The company violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was involved in foreign exchange evasion. In accordance with Article 39 of the Regulations, the company was fined RMB 923,900. Case 10: Foreign exchange evasion by Yantai Pingrui Trade Co., Ltd. From August to September 2015, Yantai Pingrui Trade Co., Ltd. paid foreign exchange of USD 17.0682 million, based on the fabricated backgrounds of the entrepot trade, the bills of lading of a third party, false contracts and invoices. The company violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was involved in foreign exchange evasion. In accordance with Article 39 of the Regulations, the company was fined RMB 5.45 million. Case 11: Foreign exchange evasion by Qingdao Zhonglin Yongsheng International Trade Co., Ltd. From January to August 2016, Qingdao Zhonglin Yongsheng International Trade Co., Ltd. paid foreign exchange of USD 9.38 million, based on the fabricated backgrounds of the entrepot trade, and the bills of lading of third parties. The company violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was involved in foreign exchange evasion. In accordance with Article 39 of the Regulations, the company was fined RMB 3.10 million. Case 12: Foreign exchange evasion by Shandong Hengjing Property Co., Ltd. From November 2016 to April 2017, Shandong Hengjing Property Co., Ltd. transferred USD 1.8879 million overseas based on the annual quotas of 30 Chinese citizens for buying foreign exchange. The company violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was involved in foreign exchange evasion. In accordance with Article 39 of the Regulations, the company was fined RMB 644,200. Case 13: Illegal foreign exchange settlement by Changshu Zhongguan Metallic Materials Co., Ltd. From March 2015 to April 2016, Changshu Zhongguan Metallic Materials Co., Ltd. went through trade finance processes and settled foreign exchange of USD 4.18 million, with the false customs export declaration forms presented. The company violated Article 12 of the Regulations of the People's Republic of China on Foreign Exchange Administration and was involved in illegal foreign exchange settlement. In accordance with Article 41 of the Regulations, the company was fined RMB 1.33 million. Case 14: Illegal purchases and sales of foreign exchange by Mr. Guo, native of Henan From April 2011 to September 2014, to transfer his assets overseas without abiding by the law, Mr. Guo transferred RMB 104.9292 million into a domestic account controlled by an underground bank, exchanged the money into foreign exchange and then transferred the foreign exchange via the underground bank into his overseas account. Guo violated Article 30 of the Measures for the Administration of Individual Foreign Exchange and was considered breaking the laws on the purchases and sales of foreign exchange. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Guo was fined RMB 8.35 million. Case 15: Illegal purchases and sales of foreign exchange by Mr. Zhao, native of Zhejiang From January 2014 to June 2016, to transfer his assets overseas without abiding by the law, Mr. Zhao transferred RMB 18.0060 million into a domestic account controlled by an underground bank, exchanged the money into foreign exchange and then transferred the foreign exchange via the underground bank into his overseas account. Zhao violated Article 30 of the Measures for the Administration of Individual Foreign Exchange and was considered breaking the laws on the purchases and sales of foreign exchange. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Zhao was fined RMB 1.62 million. Case 16: Illegal purchases and sales of foreign exchange by Mr. Zhao, native of Guangdong From October 2015 to September 2016, to transfer his assets overseas without abiding by the law, Mr. Zhao exchanged his money into foreign exchange and then transferred the foreign exchange via the underground bank into his overseas account. The money involved totaled USD 2.2114 million. Zhao violated Article 30 of the Measures for the Administration of Individual Foreign Exchange and was considered breaking the laws on the purchases and sales of foreign exchange. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Zhao was fined RMB 797,800. Case 17: Purchases and sales of foreign exchange by Mr. Du, native of Sichuan, without approval From July to September 2016, without respecting the bank card management regulations, Mr. Du swiped his RMB cards many times via the overseas POS machines to exchange his money into HK dollars in cash. The money involved was RMB 6.7911 million. Du violated Article 30 of the Measures for the Administration of Individual Foreign Exchange and was involved in the purchases and sales of foreign exchange without approval. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Du was fined RMB 1.0187 million. Case 18: Purchases and sales of foreign exchange by Mr. Wang, native of Fujian, without approval In January 2017, to obtain illegal gains, Mr. Wang received RMB 11.2926 million through another person's account and sold HK dollars without approval. Wang violated Article 30 of the Measures for the Administration of Individual Foreign Exchange and was involved in the purchases and sales of foreign exchange without approval. In accordance with Article 45 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Wang was fined RMB 1.07 million. Case 19: Foreign exchange evasion by Mr. Wang, native of Sichuan, through split-up From January to April 2016, to transfer his assets overseas without abiding by the law, Mr. Wang split up his personal assets and bought foreign exchange based on the annual quotas of 46 Chinese persons for purchasing foreign exchange and then transferred the foreign exchange into the overseas accounts. The funds thus transferred totaled HKD 17.8476 million. Wang violated Article 7 of the Measures for the Administration of Individual Foreign Exchange and was involved in foreign exchange evasion. In accordance with Article 39 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Wang was fined RMB 800,000. Case 20: Foreign exchange evasion by Mr. Zhang, native of Jiangsu, through split-up From January to December 2016, to transfer his assets overseas without abiding by the law, Mr. Zhang split up his personal assets and bought foreign exchange based on the annual quotas of 41 Chinese persons for buying foreign exchange and then transferred the foreign exchange into the overseas accounts. The funds thus transferred totaled USD 1.8459 million. Zhang violated Article 7 of the Measures for the Administration of Individual Foreign Exchange and was involved in foreign exchange evasion. In accordance with Article 39 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Wang was fined RMB 615,200. Case 21: Foreign exchange evasion by Mr. Qiu, native of Jiangsu, through split-up From September 2016 to January 2017, to transfer his assets overseas without abiding by the law, Mr. Qiu split up his personal assets and bought foreign exchange based on the annual quotas of 69 Chinese persons for buying foreign exchange and then transferred the foreign exchange into the overseas accounts. The funds thus transferred totaled USD 3.4949 million. Qiu violated Article 7 of the Measures for the Administration of Individual Foreign Exchange and was involved in foreign exchange evasion. In accordance with Article 39 of the Regulations of the People's Republic of China on Foreign Exchange Administration, Wang was fined RMB 1.60 million. 2018-08-16/en/2018/0829/1452.html
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The People's Bank of China, the Ministry of Public Security of the PRC and the State Administration of Foreign Exchange issued the following reminder: Recently, some online platforms have been illegally engaged in foreign exchange margin transactions (also called foreign exchange security deposit, generally referring to such circumstance where customers invest in a certain amount of funds as deposit and conduct foreign exchange transactions within expanded investment amount at a certain leverage multiple), which has severely disrupted the financial order, resulted in property loss of the social public, causing adverse impacts and engendering serious potential risks: I. So far, the People's Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission as well as the State Administration of Foreign Exchange and its branches haven't approved any institution to engage in foreign exchange margin business either directly or on an agency basis. II. In accordance with the Circular on Sternly Investigating and Punishing Illegal Foreign Exchange Futures Transactions and Foreign Exchange Margin Trading Activities (Zhengjianfazi No. 165 [1994]), any unauthorized transaction of foreign exchange margin by an unapproved institution is illegal; it is also an offence for a client (organization or individual) to entrust an unapproved institution to conduct foreign exchange margin transactions (whether in foreign currency or renminbi as security deposit). III. The public should be fully aware of the risks involved in foreign exchange margin activities, improve risk prevention awareness and ability, and guard against property losses caused by illegal transactions. IV. The general public should actively report to the relevant authorities if they find clues of illegal and criminal activities. 2018-09-14/en/2018/0914/1464.html
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Since the beginning of 2018, the State Administration of Foreign Exchange (SAFE) has implemented the arrangements of the CPC Central Committee and the State Council on making breakthroughs in defending against and addressing financial risks. While deepening the reform and opening up of foreign exchange administration and supporting the development of the real economy, the SAFE has been dedicated to safeguarding the health and good order of the foreign exchange market. It has organized special inspections of key players and businesses such as banks, third-party payment institutions and entrepot trade, cracking down on behaviors violating the foreign exchange law and regulations. In the first half, it identified and dealt with 1,354 cases violating foreign exchange regulations, fined and confiscated RMB 345 million, up by 19.7% and 59.5% year on year respectively. To be specific, there were 455 cases on violating financial institutions, 340 on violating companies and 559 on violating individuals. Next the SAFE will continue to deepen the foreign exchange administration reform and boost the liberalization of the financial market to serve the new landscape of comprehensive opening up in China. It will endeavor to ensure the stability, continuity and consistency of cross-cycle foreign exchange administrative law enforcement. It will be committed to cracking down on false transactions, frauds, illegal arbitrages and other behaviors involving the departure of financial capital from the real economy into the virtual economy, as well as underground banks and illegal foreign exchange trading platforms, and other behaviors violating the law and regulations, in a bid to ensure the health and good order of the foreign exchange market and safeguard the economic and financial security in China. 2018-07-24/en/2018/0724/1447.html
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Taking a Sensible Approach to the Changes in China's Foreign Exchange Reserves By Pan Gongsheng, Deputy Governor of the People's Bank of China and Administrator of the State Administration of Foreign Exchange Foreign exchange reserve is an objective indicator of the achievements in China's reform and opening-up and its development of foreign economy, and also the result of the functioning of the balance of payments. Since the 18th CPC National Congress, China's economic development has stepped into a new normal, with the balance of payments finding an equilibrium amid fluctuations, and foreign exchange reserves registering slower growth rather than high-speed growth as it previously did, and even falling in a certain period, which should be looked at and analyzed objectively and sensibly, rather than fretfully. Foreign exchange authorities are required to refine the foreign exchange administration system, and make use of the positive roles foreign exchange reserves play in serving the real economy and maintaining China's economic and financial security, in a bid to embrace the 19th CPC National Congress with excellent performance. First, foreign exchange reserves change as a result of robust macroeconomic performance In 1992 the reform target of building a socialist market economy was set at the 14th CPC National Congress; in 2001 we joined the WTO, which injected strong impetus for the fast development of China's economy and society. Since the outbreak of the global financial crisis in 2008, China has entered into a new normal of economic development along with the changes in environment and conditions internally and externally, and its foreign exchange reserves have declined from a high level after the long-term growth. But overall, China's foreign exchange reserves remain adequate and within a reasonable range. China has taken the top spot worldwide for years for high foreign exchange reserves. Along with the establishment of the socialist market economic system and the deepening of the opening-up strategy, China has adapted to the holistic development trends of the world economy, and actively participated in the international division of labor and cooperation. In the midst of expanding opening-up, China has borne witness to rapid economic growth for consecutive years, fast expansion in foreign trade, use of foreign capital and outbound investments, and continued surpluses in the balance of payments. As a result, China's foreign exchange reserves hiked from USD 21.7 billion in the beginning of 1992 to a historical high of USD 3.99 trillion in June 2014. Statistics show that the top 10 countries/regions by foreign exchange reserves as at the end of March 2017 include China, Japan, Switzerland, Saudi Arabia, Taiwan, Hong Kong, Brazil, South Korea, India and Russia. To be specific, China's foreign exchange reserves accounted for 28% of the world's total, far higher than those of the rest of the world. China's foreign exchange reserves are characterized by cyclical changes. Since the advent of this century, China has seen two stages in the changes of its foreign exchange reserves. In the first stage, which began in 2000 and ended in 2013, a tremendous amount of global capital flew into emerging economies and sent China's foreign exchange reserves surging, from USD 154.7 billion at the beginning of 2000 to USD 3.82 trillion in 2013, representing an annual increase of more than 26%. In the second stage that began in 2014, along with the outflows of global capital from emerging economies, China's foreign exchange reserves peaked in June 2014 and dropped afterwards. China's foreign exchange reserves are adequate. However, there is no universal metric on how much foreign exchange reserve a country holds should be reasonable. In the 1950s to 1960s, the widest used metric for foreign exchange adequacy ratio was the import for 3-6 months. Later as the demand for foreign exchange reserves expanded to guarding against the inadequate debt servicing capability, the widest used metric for the adequacy ratio became the 100% short-term debt. Since 2011, the International Monetary Fund (IMF) proposed the comprehensive standard for foreign exchange adequacy ratio, based on the capital demand of every country for guarding against crises. Foreign exchange reserve is a continuous variable that dynamically changes under the impact of various factors, and therefore, in measuring whether foreign exchange reserves are at a reasonable level, the macroeconomic conditions, level of economic liberalization, capability of using foreign capital and international financing, and maturity of the economic and financial systems of a country should be taken into full consideration. In China, no matter which metric is adopted, its foreign exchange reserves are adequate and help satisfy the demand for economic and financial development. Second, foreign exchange reserves are crucial to promoting China's economic development Since the 18th CPC National Congress was held, Secretary-general Xi Jinping has proposed the thoughts of building a community of shared future for mankind, achieving mutual benefit and seeking common development in promoting opening up in all respects, based on his understanding of the current international trends of peace, development, cooperation and win win. Based on in-depth study and their understanding of Secretary-general Xi Jinping's new thoughts on opening up, foreign exchange authorities have been active in innovating and improving the foreign exchange reserve management system and utilization mechanism, and played a critical role in adjusting macro policy, serving the national strategy and maintaining financial security. Foreign exchange reserves are key to ensuring the robust performance of China's macro-economy. For the moment, China adopts the well-organized floating foreign exchange rate system that is adjusted based on the supply-demand in the market with reference to a basket of currencies. As an important stabilizer of macroeconomic performance, foreign exchange reserves play a key role in maintaining the capability of international payment, guarding against financial risks, and withstanding the impact of crises. When the global liquidity is adequate, market participants will sell the redundant foreign exchange funds to promote the growth of foreign exchange reserves. When the global liquidity tightens, market participants will hold more foreign exchange assets and reduce overseas debt, leading to lower foreign exchange reserves. Foreign exchange reserves actually function like a reservoir that avoids significant inflows and outflows of cross-border capital and resulting deviation from the economic fundamentals, and makes room for economic restructuring and industrial transformation and upgrading. The adequate foreign exchange reserves also help China withstand the significant external impact from the Asian Financial Crisis of 1997 and the global financial crisis of 2008, safeguarding China's economic and financial security. Foreign exchange reserves have effectively served the opening-up strategy. Secretary-general Xi Jinping stressed that opening up is a must at the new stage of development, with focus on cooperation and mutual benefit. Following the opening-up strategy, foreign exchange authorities have coordinated big pictures in China and the rest of the world, and expanded diversified use of foreign exchange reserves in the principle of "ensuring paid use of foreign exchange reserves with higher benefits and effective regulation in compliance with laws and regulations", providing significant amount of funds for the economic development of China and the world. In recent years, foreign exchange authorities have developed and expanded various channels such as entrusted loans and equity investment to provide foreign exchange funds to financial institutions and physical economic sectors such as commercial banks and policy banks, establishing the mechanism for use of foreign exchange reserves featuring clearly defined roles and responsibilities, definite goals, multiple tiers, and diverse products, with focus on supporting the Belt and Road Initiative, international production capacity and outfit manufacturing cooperation, enterprises going global, and imports and exports in key areas, so as to serve the development of the real economy. As the world economy is recovering slowly, and economic and trade globalization are faced with serious challenges, diversified use of foreign exchange reserves will be favorable for Chinese companies to effectively use the domestic and overseas markets and resources, facilitate the organic integration of China into the international community, and promote international cooperation in economic affairs. Reasonable utilization of foreign exchange reserves has helped achieve the goal of "letting the public hold more foreign exchange". In the face of the demand of market participants for purchasing foreign exchange and their willingness to hold foreign exchange, foreign exchange authorities have deepened the foreign exchange administration reform, yielded policy dividends, and made exchange easier, which have boosted the endeavor to let the public hold more foreign exchange. As for the holders, China has diverse forms of outbound investors such as foreign exchange reserves, China Investment Corporation, social insurance funds, financial institutions and enterprises, indicating remarkable progress has been achieved in the diversification of foreign exchange holders. From the second quarter of 2014 to the end of 2016, foreign exchange reserves in China's International Investment Position fell by around USD 1 trillion, matching with residents' net foreign assets that rose by USD 0.9 trillion, which is a direct testimony to "letting the public hold more foreign exchange". For the private sector, the foreign exchange they held in the period was to fund ODI, servicing of foreign debt, travelling and studying abroad by domestic residents. For the government sector, as foreign exchange reserves on the asset side of the central bank drop, those on the liability side will fall accordingly, showing "letting the public hold more foreign exchange" does not displace the balance in the central bank's balance sheet that adopts the double-entry bookkeeping system. Horizontally, by the third quarter of 2016, China's foreign exchange reserves as a percentage of external assets are at a reasonable and medium level among major developing countries. Vertically, as at the end of 2016, the share of the external assets held by the private sector surpassed 50% for the first time, the highest level since China began to disseminate the data on international investment position in 2004; foreign exchange reserve assets accounted for 48%, down by nearly 20 percentage points from the level of the end of 2009. This shows that China's external economic and financial exchanges are shifting from the dominance of government investments to equal investments by the public and the private sectors. It should be emphasized that China is not interested in strengthening competitiveness through currency depreciation, and does not need to do so. The central bank provides the market with foreign exchange liquidity, avoiding exchange rate overshooting and the herd effect, and safeguarding stability in the market. China's endeavor to strike a balance between enhancing exchange rate flexibility and maintaining exchange rate stability will be favorable for the international community, effectively avoiding the negative spillover effect due to the disorderly adjustment of the RMB exchange rate and the competitive depreciation among major currencies. Third, effectively use foreign exchange reserves to serve the reform and opening up, and international cooperation in economic affairs Reform and opening up is the necessary path towards national prosperity. Carrying out opening up in all respects is a key strategic step proposed by Secretary-general Xi Jinping at the new historical starting point. Foreign exchange authorities must develop the concepts of development that stress innovation, coordination, green, opening-up and sharing, with focus on accelerating the building of the new open economic system, and making full use of foreign exchange reserves' role in the construction of an open economy to make new contributions to realize the two centenary goals (namely, to complete the building of a moderately prosperous society in all respects when the Communist Party of China celebrates its centenary in 2021, and to turn China into a modern socialist country that is prosperous, strong, democratic, culturally advanced and harmonious when the People's Republic of China celebrates its centenary in 2049) and the Chinese dream of the great renewal of the Chinese nation and the prosperity and development of the world economy. Foreign exchange reserves will be stabilized amid volatility. The economic and financial variables often fluctuate and develop in cycles, rather than taking the form of linear transformation. This holds true for the changes in foreign exchange reserves. Despite many uncertainties in external environment, China's economic and financial fundamentals will remain stable with strong momentum for growth in the long term, and cross-border capital flows will evolve towards an equilibrium. First, China's economy remains in the mid and high-speed growth range, and as the supply-side structural reform advances, the quality and efficiency of its economic development will be enhanced in the future. China's economic fundamentals will continue to ensure the stable position of the RMB in the global currency system, and the RMB exchange rate will remain stable at a reasonable and even level. Second, the external debt deleveraging has been basically completed and Chinese enterprises' use of external debt has rebounded since the second quarter of 2016. Third, the surplus under the current account in China has remained at the reasonable level. As anticipated by the IMF, China will continue to post surpluses under the current account in the coming five years, which will ensure the stable supply of foreign exchange in China. Fourth, as the RMB joins the SDR basket and the reform, opening-up and development of China's financial market are deepened, the RMB assets will become an important part of the global allocation of financial assets and attract foreign investors to invest in the Chinese market, and the foreign exchange under the financial account will be stably supplied. Fifth, the complementarity of currencies and asset prices in the international financial market, coupled with the diversified layout of China's foreign exchange reserves, will ensure sound diversification and be favorable for the stability of China's foreign exchange reserves. Overall, China's foreign exchange reserves will be stabilized in the midst of volatility going ahead. Further efforts shall be made to optimize the role of foreign exchange reserves in stabilizing the balance of payments. The general work guideline of making progress while maintaining stability is an important principle of the CPC in state governance and a methodology for ensuring sound economic performance. Following the logic of stable macro policy, foreign exchange authorities shall go all out to ensure stable growth and provide a favorable external environment for the stable and healthy development of the economy, and for the stability and harmony of society. In the complex and changing economic and financial environments, internally or externally, foreign exchange reserves need to recover the basic feature of maintaining the stability of the balance of payments, which is a necessary requirement for settling major contradictions and problems in China's economic development and for ensuring robust macroeconomic performance. The purpose of foreign exchange administration and utilization is to serve the economic development in China and the world, and therefore foreign exchange reserve administration and utilization shall be integrated into the big picture of the CPC and the state to align domestic development with opening up, and the domestic development with the world development, in a bid to promote common development. Following the work plans of the CPC and the State Council and the general work guideline of making progress while maintaining stability, foreign exchange authorities shall take up responsibilities and forceful measures to coordinate the diversified use of foreign exchange reserves, and invest its funds in the strategic areas that ensure the Belt and Road Initiative, international production capacity and outfit manufacturing cooperation, and to promote common development and prosperity between China and the rest of the world. The operation and administration of China's foreign exchange reserves shall be enhanced. In the principle of safety, liquidity, value preservation and growth, efforts shall be made to conduct prudent, standardized and professional investment and operation with regard to foreign exchange reserves, optimize and dynamically adjust investment portfolios and strategies, and show respect for rules and practices in international markets so as to maintain and promote the stability and development of the international financial market. (The original text is available in the 13th issue of Qiushi Journal for 2017.) 2017-07-07/en/2017/0707/1288.html