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An outreach meeting on theoretical study by the central division of the leading Party group was recently convened by the State Administration of Foreign Exchange. Yi Gang, administrator and secretary of the leading Party group of the SAFE, presided over the meeting. The meeting was held to convey the spirit of the Central Economic Work Conference and the Central Conference on Urbanization and to make future plans for foreign exchange administration. It was agreed by the participants that the Central Work Economic Conference was held in the context that the Third Plenary Session of the Eighteenth Chinese Communist Party Congress established the overall planning regarding the deepening of the reform. The Conference was of great significance for pursuing sustainable and healthy development of the economy in 2014. The Conference comprehensively summarized the progress in economic development in 2013, conducted in-depth analysis into circumstances both at home and abroad, and proposed the essential requirements to make progress while maintaining stability and to implement the reform while make innovations in economic development in 2014. The Conference was of vital importance for us to consolidate our convictions, gather our strength, deepen reform in an all-round manner, and maintain a positive momentum for economic and social development. The Central Conference on Urbanization was the first of its kind since the launch of the reform and opening-up policy convened by the Party Central Committee, and it was an important move for deepening the reform in an all-round manner. It is of crucial strategic significance for the advancement of urbanization in the right direction. It was stressed at the meeting that 2014 will be the first year for the SAFE to comprehensively implement the spirit of the Third Plenary Session of the Eighteenth Chinese Communist Party Congress and to deepen the reform in an all-round manner. The SAFE should comprehensively carry out the spirit of the Eighteenth Chinese Communist Party Congress and its Second and Third Plenary Sessions, adhere to the keynote of making progress while maintaining stability, carry out reform and innovation in each area of social and economic development, maintain the continuity and stability of macro-economic policies, focus on stimulating the vitality of the market, accelerate transformation of the mode of economic restructuring, effectively improve the quality and benefits of economic development, and promote sustainable and healthy economic development as well as social harmony and stability. The Conferences mandated that all members of the SAFE should study and fully implement the spirit of the Conferences, adhere to the keynote and essential requirements of the Party Central Committee’s planning for economic work in 2014, and with concerted efforts, thoughts, and actions unite with respect to the decisions and arrangement of the Party Central Committee. All members of the SAFE should carry out the reform and make innovations in each area of foreign exchange administration, deepen the reform by giving play to the decisive role of the market in allocating resources, make endeavors to achieve breakthroughs in key areas of foreign exchange administration, and step up improvements in the market-oriented system and the mechanism that facilitates an equilibrium in the balance of payments. It is essential that the role of foreign exchange administration be enhanced to serve the real economy, the policies of foreign exchange administration be aligned with the deepening of the reform, foreign exchange administration improve the reform approaches and methodologies, major efforts be directed to transforming the concepts and approaches of foreign exchange administration, and routine administration and services be carried out. All members of the SAFE should promote the reform in compliance with the spirit of the Party Central Committee and in a correct, accurate, orderly, and harmonious manner, work conscientiously with solidarity, and strive to achieve the sustainable and healthy development of the economy and society. 2013-12-16/en/2013/1216/1095.html
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Beijing November 22, 2013 (Xinhua): Premier Li Keqiang recently signed the Decree of the State Council promulgating the revised Measures for the Collection of Statistics and the Declaration of the Balance of Payments, which will be implemented as of January 1, 2014. Statistical data on the balance of payments are are flection of the external economic position of a country and an important basis for macro-economic decision-making. In 1995, with the approval of the State Council, the People’s Bank of China promulgated the Measures for the Collection of Statistics and the Declaration of the Balance of Payments, providing a mechanism for fully grasping China's international balance-of-payments situation. During recent years, as the scale of balance-of-payments transactions has constantly expanded, the content, type, and modes of transactions have become increasingly diversified. In 2008the IMF released the sixth edition of itsBalance of Payments and International Investment Position Manualas the universal standard for the compilation of statistical statements on the balance of payments. The new edition instituted many revisions, including with respect to the statistical principles, the current account, and the financial account, and it adopted higher standards for the collection of the statistical data and the methods for declaring the balance of payments. In order to further increase the comparability of the relevant data across countries, the new edition prescribed that “all economic transactions between Chinese and non-Chinese residents and external financial assets and liabilities of Chinese residents shall be subject to the statistics and the declaration of the balance of payments.” As stipulated in the previous measures, all economic transactions (flows) between Chinese and non-Chinese residents shall be subject to the statistics and the declaration of the balance of payments, with the exclusion of the external financial assets and liabilities (stock) of Chinese residents. According to the previous measures, Chinese residents who carry out transactions with non-Chinese residents through domestic financial institutions shall declare the content of the transactions through the financial institutions to the State Administration of Foreign Exchange (SAFE) or its branches/sub-branches. Financial institutions within the territory of China shall declare their own external business directly to the SAFE or its branches/sub-branches (including their external assets, liabilities, and their variations), and shall fulfill the obligations in their role as an intermediary through which Chinese residents declare their statistics and the balance of payments to the relevant authorities. Given that the data on the external financial assets and liabilities of Chinese residents cannot be fully acquired through financial institutions, the stipulation that “Chinese residents who have external financial assets and liabilities shall declare the relevant information regarding their external financial assets and liabilities in accordance with the relevant regulations of the State Administration of Foreign Exchange” will supplement the new measures. Given that it has become common practice that non-residents are treated as the entity for the statistics and the declaration of the balance of payments, the new measures incorporate non-Chinese residents with economic transactions within the territory of China into the scope of the declaration entities, with the stipulation that “Chinese residents and non-Chinese residents carrying out economic transactions within the territory of China shall declare the information on the balance of payments in compliance with the relevant regulations in a timely, accurate, and complete manner.” 2013-11-22/en/2013/1122/1090.html
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The State Administration of Foreign Exchange (SAFE) recently promulgated the Notice of the State Administration of Foreign Exchange on Issues regarding Improving Foreign Exchange Administration for Trade Financing by Banks (Huifa No.44 [2013], hereinafter referred to as “the Notice”). The Notice was issued to facilitate business operations of law-abiding and compliant enterprises, to bring into better play the role of financial services in serving the real economy, to check against false trade financing activities without authentic transactional backgrounds, and to prevent cross-border flows of abnormal foreign exchange funds. The Notice includes the following three points. The first is to urge banks to improve verifications of the authenticity and compliance of trade financing. Banks should follow the principle of “understanding your client,” strengthen verifications of the authenticity and compliance of trade financing, especially long-term trade financing, actively support the authentic trade financing demands of the real economy, and prevent the defrauding of bank loans with false transactional backgrounds. Banks should enhance internal control and supervision, timely report suspicious transactions, and prevent non-compliance in implementation of the relevant rules or provision of assistance to evade the foreign exchange administration regulations. The SAFE should intensify verifications of the authenticity and compliance of bank trade financing, evaluate the due diligence of bank transactions, and implement on-site verifications or inspections when needed. The second is to strengthen the classified management of enterprises and to create an impartial and orderly market environment. Foreign exchange receipts and payments for trading activities by enterprises should provide authentic and legitimate transactional backgrounds. The SAFE should intensify the monitoring and verification of enterprises with abnormal trade balances, especially enterprises with abnormal growth of long-term trade financing and typical arbitrage characteristics, undertake classified administration of the relevant enterprises by complying with the relevant rules of foreign exchange administration for trade in goods, provide the strongest support to law-abiding and compliant enterprises, and pay special attention to enterprises that are categorized as Class-B or Class-C. The third is to impose tougher penalties on the non-compliant activities of banks and enterprises. Banks that fail to fully perform their verification duties shall be punished by the SAFE in compliance with the risk reminders and relevant regulations. With respect to enterprises that operate in violation of the regulations, the SAFE shall impose penalties on the enterprises concerned in accordance with the relevant regulations. The penalties shall be based on the various circumstances of the violations, i.e., illegal inflows of foreign exchange, illegal settlements of foreign exchange, illegal purchases of foreign exchange, or evasion of foreign exchange. If the relevant acts by the banks or enterprises constitute criminal offenses, the criminal responsibilities shall be investigated in accordance with the law. This Notice shall take effect as of the date of promulgation. 2013-12-07/en/2013/1207/1094.html
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The System for External Financial Assets, Liabilities, and Statistics on Transactions (Huifa No.43 [2013], hereinafter referred to as “the System”) was recently promulgated by the State Administration of Foreign Exchange (SAFE). With adoption of the newest international statistical standards the System represents a complete revision of the Operating Procedures of Financial Institutions for the Declaration of Overseas Assets, Liabilities, and Profits and Losses promulgated in 1996, and shall be implemented as of September 1, 2014. The System makes significant improvements to the entities, contents, and frequency of the declarations. According to the System, the entities for the declarations include corporate entities in the banking sector, the securities sector, the insurance sector, and other corporate entities engaging in financial intermediary businesses, the leading reporting branches/sub-branches of overseas financial institutions within the territory of China, and other designated institutions. The content of the declarations is extended from the stock of external financial assets and liabilities to the stock and flow of external financial assets and liabilities and other related balance-of-payments transactions. The frequency of the declarations is adjusted from a quarterly to a monthly basis. With implementation of the System on September 1, 2014, China will be able to meet the newest statistical standards of the IMF’s Balance of Payments and International Investment Position Manual in terms of data acquisition. In addition, it will meet the requirements for monitoring and statistics on cross-border capital flows, thus laying a foundation for supervision and risk-monitoring of foreign-related economic entities and satisfying the growing demand for macro-economic analysis and decision-making both at home and abroad. 2013-12-05/en/2013/1205/1093.html
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In order to further standardize foreign exchange administration for overseas portfolio investments by domestic institutions and to promote the facilitation of overseas portfolio investments, the State Administration of Foreign Exchange (SAFE) recently promulgated the Regulations on Foreign Exchange Administration for Overseas Portfolio Investments by Qualified Domestic Institutional Investors (Announcement No. 1 of the SAFE in 2013, hereinafter referred to as the “Regulations”). The Regulations cancel or streamline the relevant procedures for foreign exchange administration, and merge and integrate the foreign exchange administration policies for qualified domestic institutional investors (QDIIs). The main aspects of the Regulations include: (1) removal of the currency restrictions on fund remittances, and diversifying the fund sources of overseas portfolio investments by domestic institutions; (2) lifting the verifications for foreign exchange settlements and purchases, and simplifying the materials to apply for quotas; (3) unifying the requirements for quota management, i.e., implementing balanced management of overseas portfolio investments for various kinds of qualified institutions, that is, the net amount of remittances of the overseas portfolio investments shall not exceed the approved investment quota; (4) strengthening statistics and monitoring, intensifying efforts for statistical and ex-post monitoring of the inflow and outflow of cross-border funds under portfolio investments by making full use of IT approaches, with the aim of preventing the risks of cross-border fund flows. Implementation of the Regulations will play an active role in promoting the facilitation of overseas portfolio investments by qualified domestic institutions and will better meet the investment needs of domestic institutions and individuals for overseas portfolio investments. 2013-08-27/en/2013/0827/1087.html
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Q：What are the new changes to the external debt data for June 2016 that were just disseminated by the State Administration of Foreign Exchange (SAFE)? A: In general, China's outstanding full-scale external debt picked up by the end of June. Since the beginning of 2015, China has disseminated full-scale quarterly external debt data by the IMF's Special Data Dissemination Standard (SDDS). According to the changes to external debt for 2015, the outstanding external debt as at the end of September and December fell by 8.9% and 7.4% quarter-on-quarter respectively, except a marginal increase by the end of June. As at the end of March 2016, China's outstanding full-scale external debt fell by a smaller margin, say, 3.6% quarter-on-quarter. As of the end of June 2016, China's outstanding full-scale external debt went up by 2% quarter-on-quarter, preliminarily reversing the slump in total external debt since the second quarter of 2015, which somehow shows that China's deleveraging of external debt is coming to an end. Q: What are the measures to facilitate borrowing of external debt by domestic institutions? A: Since the beginning of this year, the People's Bank of China (PBC) and the SAFE have introduced a series of reformative measures to facilitate cross-border financing by domestic players. First, efforts have been made to promote macro-prudential management of full-scale cross-border financing. As at the end of April 2016, the SAFE and the PBC jointly published the Circular on Implementing Nationwide Macro-prudential Management of Full-scale Cross-border Financing, which stipulates that the integrated macro-prudential management of full-scale cross-border financing in domestic and foreign currencies will be implemented nationwide starting from May 3, 2016, allowing financial institutions and enterprises to independently conduct cross-border financing in both domestic and foreign currencies within the ceiling of cross-border financing that is linked with their capital or net assets. Second, the policies for managing settlement of foreign exchange under external debt for Chinese and foreign-funded enterprises have been unified. At the end of April 2016, the SAFE released the Circular of the State Administration of Foreign Exchange on Further Promoting Trade and Investment Facilitation and Improving Authenticity Reviews, to allow Chinese non-financial institutions to settle foreign exchange under their external debt in accordance with the existing regulations on managing external debt of foreign-funded enterprises, and provide equal treatment to Chinese and foreign-funded enterprises in the policies for managing foreign exchange settlement under external debt. Third, the policies for managing foreign exchange settlement under the capital account have been unified and simplified. Starting from June 2016, discretionary settlement of foreign exchange under external debt has been implemented, allowing enterprises to freely choose the time to settle foreign exchange under external debt, and a common negative list approach has been adopted with regard to use of receipts under the capital account, with relevant negative lists dramatically slashed. These reformative policies have facilitated cross-border investment and financing, further diversified the financing channels of domestic players, especially Chinese enterprises, lowered financing costs, and practically boosted the efforts to address the financing difficulties and cut heavy costs of financing to support the development of the real economy. Q: What would you say about the future situation of external debt? A: I expect that China's external debt will be further stabilized. Based on the changes in China's full-scale external debt since the beginning of this year, it is expected that China's external debt will be further stabilized along with the implementation of the reformative measures for external debt management. The PBC and the SAFE will continue to refine the external debt and capital flows management system under the macro-prudential management framework, and will strengthen ongoing and ex-post monitoring and analysis while further promoting cross-border investment and financing facilitation, so as to guard against external debt risks and safeguard China's economic and financial security. 2016-11-08/en/2016/1108/1225.html
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To further implement the gist of the "delegation, centralization and service" reform, advance the supply side structural reform, execute the policy measures of "stabilizing growth, promoting reform, adjusting structure and serving the common good" and effectively reduce costs incurred by enterprises in the real economy, the State Administration of Foreign Exchange (SAFE) keeps streamlining regulations, announcing nearly 900 foreign exchange regulatory documents abolished and nullified since 2009. The SAFE has recently released the Circular of the State Administration of Foreign Exchange on Announcing 27Foreign Exchange Regulatory Documents Abolished and Nullified (Huifa No. 29 [2016]), adding 27 documents that are abolished and nullified to the total. First, under the principle of refining system supply and streamlining administration, 18 foreign exchange regulatory documents whose contents have been substituted by new documents and that could not adapt to the status quo of administration are abolished, based on content analysis piece by piece. These documents involve trade in goods management, individual foreign exchange administration, and foreign exchange registration and administration for overseas investments. Businesses involved will be handled in accordance with existing provisions. For example, individual use of foreign exchange will be handled pursuant to the Measures for the Administration of Individual Foreign Exchange and the implementation details under the same regulatory requirements, as well as the same principle of supporting and facilitating normal and reasonable use of foreign exchange by market players. Second, under the principle of building a concise and clear policy framework with consistent logics, the SAFE has strengthened the "ledger-based" streamlining of regulations, and announced nullified a total of 9 foreign exchange regulatory documents whose application periods have expired, or adjustment targets have disappeared, and are actually invalid, such as the circulars on streamlining half-closed accounts of units directly under the Central Government at the end of 1998, on implementing a pilot program for foreign exchange accounts management reform in 2005, and on foreign exchange annual check for foreign-invested enterprises in 2010 and 2011. Announcing the above documents abolished and nullified can further enhance the level of convenience and is favorable for market players to understand and implement the foreign exchange administration policies. Next, the SAFE will continue to closely follow the deployments of the CPC Central Committee and the State Council, accelerate administration streamlining, power delegation and transformation of government functions, strive to make breakthroughs in reform, and implement the long-term mechanism for regulation streamlining, so as to reduce transaction costs from policy. Meanwhile, the SAFE will intensify monitoring and early warning of cross-border capital flows, support banks to refine the self-discipline mechanism and to strictly perform the requirements and responsibilities for authenticity and compliance reviews, and take a tough stance on foreign exchange irregularities to safeguard a healthy order in foreign exchange markets and serve the development of the real economy. 2016-12-19/en/2016/1219/1233.html
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The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on banks' sales and settlements of foreign exchange and their foreign-related receipts and payments for customers for November 2016. Its press spokesperson has thus answered media questions on the recent cross-border capital flows as follows: Q: Could you brief us on the changes to cross-border capital flows in China in November? A: Despite changing external environment, China's cross-border capital flows stayed within a stable range on the whole in November. Due to the heightened expectations of the Fed's interest rate hikes, the strengthening US foreign exchange rate, and the depreciation of non-USD currencies worldwide, China came under heavier pressure from cross-border capital outflows in November than in October, which, however, remained much lower than the level before the first interest rate hike by the Fed in the same period last year. In November, a deficit of USD 33.4 billion was registered under banks' sales and settlements of foreign exchange, down by 39% year-on-year, and higher than the deficit of USD 14.6 billion in October. A deficit of USD 24.6 billion was registered under the foreign-related receipts and payments of non-banking sectors including individuals and enterprises, down by 42% year-on-year, and higher than the deficit of USD 14.1 billion in October. The positive changes in the preliminary cross-border capital flows continued to take place in November. First, enterprises' demand for cross-border financing in foreign exchange was further strengthened. At end-November, the balance of cross-border financing denominated in foreign currencies by importers such as refinancing and forward L/C went up by USD 5.2 billion month-on-month, continuing to recover for nine straight months. Second, the pressure to repay foreign exchange loans made in the country in a centralized manner was significantly relieved. In the month, enterprises bought USD 5.1 billion in foreign exchange to repay domestic foreign exchange loans, which was consistent with that of October, and down by 57% year-on-year, reaching the three year low. Third, overseas institutions continued to buy domestic bonds. The statistics from China Central Depository & Clearing Co., Ltd. show that the balance of domestic bonds held by overseas institutions went up by RMB 15.8 billion month-on-month as at end-November, growing for nine consecutive months. Overall, the recently strengthening US dollars have had strong impact on global currencies and international capital flows, but the RMB exchange rate against the US dollars depreciated slightly, and remained stable against a backset of currencies. With the positive factors in its cross-border capital flows continuing to play their roles, China could better adapt to the changing external environment. 2016-12-16/en/2016/1216/1231.html
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To promote facilitation of receipts and payments under trade in goods and satisfy banks' and enterprises' demand for handling of foreign exchange through electronic data interchange (EDI), the State Administration of Foreign Exchange (SAFE) has recently released the Circular of the State Administration of Foreign Exchange on Standardizing Reviews of Electronic Documents for Receipts and Payments of Foreign Exchange under Trade in Goods (Huifa No. 25 [2016], the "Circular"). The highlights of the Circular include: First, allowing reviews of electronic documents when receipts and payments of foreign exchange under trade in goods are handled. While observing the existing regulations on the administration of foreign exchange under trade in goods and implementing the three principles of business operation, banks can choose to review paper or electronic documents at their discretion. Second, encouraging credible enterprises and banks doing business in compliance with regulations to handle receipts and payments of foreign exchange under trade in goods by using electronic documents. In particular, it is required that the handling bank should be class-B or above (excluding B-) in foreign exchange administration assessment over the past three years, and the enterprise should be class-A with regard to trade in goods. Third, defining the obligations of banks and enterprises. Banks shall make further efforts for authenticity reviews, independently and cautiously choose enterprises subjected to reviews of electronic documents and keep the documents for future reference. Enterprise shall work to ensure the authenticity and compliance of electronic documents presented, and cooperate with banks in authenticity reviews. Fourth, standardizing ex-post administration. The SAFE will verify or inspect reviews of electronic documents and punish irregularities in accordance with the law. This Circular shall come into force as of November 1, 2016. 2016-11-08/en/2016/1108/1226.html
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On December 11, 2016, the Bank for International Settlements (BIS) announced that China had officially started to report to the BIS locational banking statistics (LBS) under the international banking statistics (IBS) and released China's data on its website, which shows that the quality of China's balance of payments statistics has been internationally recognized again, thanks to continuous improvement on transparency. Joining LBS is another key progress China has made to achieve the targets of the G20 Data Gaps Initiative (DGI) since implementing the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) and participating in the IMF's Coordinated Portfolio Investment Survey (CPIS). Expanding the IBS-reporting population has been one of the targets of the G20 Data Gaps Initiative (DGI). China's joining takes the number of LBS-reporting countries to 46. A total of 12 EMEs now report to the LBS, along with 12 offshore financial centers and 22 advanced economies. At end-June 2016, banks in China reported outstanding cross-border claims of USD 778 billion and liabilities of USD 918 billion. This makes China the 10th largest cross-border creditor in the international banking market. Turning to the currency composition of the cross-border claims and liabilities, at end-June 2016 banks in China were net lenders of US dollars, with dollar claims of USD 549 billion and dollar liabilities of USD 274 billion, resulting in net claims of USD 275 billion. However, USD 358 billion of Chinese banks' cross-border liabilities were denominated in Renminbi, while Renminbi-denominated cross-border claims of banks in China stood at USD 73 billion, leading to USD 285 billion in net cross-border liabilities. The BIS text is available on its official website at www.bis.org/publ/qtrpdf/r_qt1612s.htm. 2016-12-13/en/2016/1213/1229.html