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Since 2012, in order to further promote reform and development of the domestic capital market, the foreign exchange authorities have accelerated the pace of approval of the investment quota for Qualified Foreign Institutional Investors (QFIIs). From January 1 to September 19 of 2012, the foreign exchange authorities approved a total investment quota of USD 9.178 billion (including additional investment quotas) for 72 QFIIs. As of September 19, 2012, the foreign exchange authorities approved a total investment quota of USD 30.818 billion for 157 QFIIs. During the next step, in light of the balance of payments situation, the foreign exchange authorities will continue to promote improvement in the QFII system and to support the reform and development of the domestic capital market. 2012-09-21/en/2012/0921/1071.html
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· Hu Kaihong: Good morning, ladies and gentlemen. Welcome to the press conference of the State Council Information Office. We are very pleased to have with us today Mr. Guan Tao, director from the Balance of Payments Department of the State Administration of Foreign Exchange(SAFE). He will first unveil the foreign exchange receipts and payments data for the first three quarters of 2014 and then will take your questions. Now let us welcome our old friend Mr. Guan to give the opening remarks. October 23, 2014, 09:43:08am · Guan Tao: Good morning, ladies and gentlemen. Welcome to today's conference. I am delighted to meet you again.This is the fourth time I have seen you this year.Today I am going to unveil the foreign exchange receipts and payments data for the first three quartersof this year and take your questions on behalf of the SAFE. In the first three quarters of this year, the global economy recovered slowly, but was imbalanced among countries, with different monetary policies in the major economies. Meanwhile, the domestic economy remained stable under the new normal, the marketization of the RMBexchange-rateformation achieved new progress and the foreign exchange administration reformsproceeded steadily. Overall, during this period China's cross-border capital flows were basically balanced amid oscillations. Banks settled foreign exchange totaling RMB 8.77 trillion (USD 1.43 trillion) and sold foreignexchange totaling RMB 7.71 trillion (USD 1.25trillion) in the first three quarters, with a surplus of RMB 1.05 trillion (USD 172.3 billion). Meanwhile, banks registered cumulative foreign-related income of RMB 15.10 trillion (USD 2.46 trillion) and made external payments of RMB 14.70 trillion (USD 2.39 trillion) on behalf of theirclients, with a surplus of RMB 405.5 billion (USD 66.2 billion). October 23, 2014, 10:00:15am · Guan Tao: China's foreign exchange receipts and payments are currently characterized by the following: First, China is witnessing net inflows of cross-border capital.Excluding the impact from foreign exchange rates (the same below), in the first three quarters the foreign exchange settled by banks was up 4 percent year on year and that sold by banks was up 4 percent year on year, representing an increase in the surplus of 3 percent. Meanwhile, the foreign-related income received via banks was up 14 percent year on year, and external payments made through banks were up 19 percent year on year, representing a decrease in the surplus of 52 percent. Second, the motivation of market players to settle foreign exchange was weakened while their willingness to buy foreign exchange was strengthened.Foreign exchange settled via banks as a percentage of total foreign-related foreign exchange income (or the foreign exchange settlement rate), which measures the willingness of companies and individuals to settle foreign exchange, was on thedecline, down from 77 percent in the first quarter to 68 percent in thesecond quarter and then 69 percent in the third quarter; foreign exchange sold via banks as a percentage of total foreign-related foreign exchange payments(or the foreign exchange selling rate), which measures the motivation to buy foreign exchange, was on the rise, up from 61 percent in the first quarter to 69 percent in thesecond quarter and 70 percent in the third quarter. Third, the supply and demand of foreign exchange has beenbasically balanced amid oscillations. The surplus in foreign exchange settled and sold by banks stood at USD 159.2 billion in the first quarter, decreasing to USD 29 billion in the second quarter, and becoming a deficit of USD 16 billion in the third quarter. The surplus in foreign-related receipts and payments via banks amounted to USD 45.5 billion in the first quarter, decreasing to USD 40.7 billion in thesecond quarterand becoming a deficit of USD 20 billion in the third quarter. Fourth, forward settlements and sales of foreign exchange by banks have changed from a significantsurplus to being basically balanced.Forward contracts for foreign exchange settlements and sales registered consecutive surpluses during the first five months of the year, but the monthly average surplus dropped from USD 24 billion in the first two months to USD 1.7 billion from March to May. Then, between June and September, the surpluses and deficits in the forward settlements and sales offoreign exchange alternated in a moderate absolute size, with a monthly average deficit of USD 600 million. October 23, 2014,10:00:39am · Guan Tao: Fifth, the foreign exchange market is voluntarily becomingbalanced. Excluding the performance of the forward contracts for foreign exchange settlements and sales, the undue net forwardforeign exchange settled increased by a cumulative USD 15.2 billion in January and February, and then underwent a correction during the seven months from March to September, dropping USD 50.6 billion on an cumulative basis, thus spurring banks to increase their foreign exchange position. The balance of spot and forward foreign exchange settled and sold by banks (or the balance of foreign exchange settled and sold by banks and the balance of the combined undue net forward settled foreign exchange), an indicator of the supply and demand for foreign exchange in the retail market, amounted to a surplus of USD164.9 billion in the first quarter, which dropped to USD 2.5 billion in the second quarter and then became a deficit of USD 30.5 billion in thethird quarter. These are the major statistics I want to disclose regarding the foreign exchange receipts and payments during the first three quarters of this year. You can also find the relevant data released on the SAFE's official Website. Now I would like to take any questions you might have. October 23, 2014, 10:00:52am · Hu Kaihong: Thank you, Mr. Guan. Now please raise your questions and remember to tell us where you are from before asking your questions. October 23, 2014,10:03:05am · Reporter from CCTV: China's foreign exchange reserves stood at USD 3.89 trillion at the end of the third quarter of this year, a decrease of nearly USD 100 billion from the end of the second quarter. Could you tell us the main reasons behind this significantdecrease? How should we regard this decrease? Thank you. October 23, 2014,10:03:33am · Guan Tao: Thank you for your questions. We also have noted thatthebalance of foreign exchange reserves as of the end of September, which was just released by the People's Bank of China, was about USD 100 billion less than that at the end of June. In our opinion, the main reason behind the decline was the change in the exchange-rate conversion due to the rise in the USD exchange rate in the international market. The US dollar index (USDX) picked up 7.7 percent in the third quarter. Of China's foreign exchange reserves, there are the US dollar-denominated assets and assets not denominated in the US dollarsthat have to be converted into US dollars before being announced, and anappreciation of the US dollar would lead to a decrease in the amount of those assets not denominated in US dollars when they are converted into US dollars. However, the change in thebalance due to such conversions is just a change in the valuation of the book value, not the actual loss, and it does not result in actual cross-border capital flows. Therefore, the change in the valuation of the book value is different from actual losses or profits. The fluctuations in the exchange rates of the major currencies in the international market will likely lead to changes in the balance of China's foreign exchange reserves, but the impact will be limited since China's foreign exchange reservesare nearing USD 4 trillion. It is commonplace that the exchange rates of the major currencies have ups and downs, and we do not need to overanalyze that. October 23, 2014,10:20:10am · Guan Tao: Regarding your second question, I'd like to make three points: First, the government has made it clear that it is not that the moreforeign exchange reserves, the better. The slowdown in the foreign exchange reserve growth during the first three quarters due to the fluctuations in the exchange rates in the international market also reflects that China's BOPis basically becomingmore balanced. The report on the work of the government unveiled at the beginning of this year states that one of our major tasks this year is to basically balance the BOP and we are now striving to achieve this goal. Second, new measures have been introduced in the reform of the RMB exchange-rate formation mechanism this year, expanding the bidirectional floating range of the RMB exchange rate, while the People's Bank of China has started to end normal interventions in the foreign exchange market. Under these circumstances, the self-balancing of the market and the slowdownin the growth of foreign exchange reserveswill become a new normal, which is in line with the goals of the reform.Third, China nowhas enormous foreign exchange reserves, which will enable it to experience a correction in its foreign exchange reserves sometime in the future due to the bidirectional fluctuations in cross-border capital flows. China can use this strong base to ward off external shocks. This is what I think about the decrease in foreign exchange reserves, and I want to stress that we need to look at the fluctuations in foreign exchange reservescalmly and rationally. October 23, 2014,10:27:16am · Reporter from the People's Daily: WhileChina's trade surplus has set new records and the RMB exchange rate has increased, the surplus between foreign exchangesettled and sold by banks has remained low since the beginning of the third quarter and even turned into a deficitduring some months. How do you look at this? Does this mean that China is at risk of capital flight? What are your ideasaboutfuture movements of the foreign exchange reserves? Thank you. October 23, 2014,10:43:16am · Guan Tao: Thank you for your questions. We have noted this as well. While the RMB exchange rate increased and the trade surplus was large, the foreign exchange market registered a slight shortfall in thethird quarter. Such a change in the supply and demand of foreign exchange is another result of the reform of the RMB exchange-rate formation mechanism that started in March. Since the bidirectional floating range of the RMB exchange rate against the US dollar was expanded in mid-February, or more accurately, on March 17, the unilateral movements of the RMB exchange rate have ended and there have been bidirectional fluctuations, with both ups and downs, which have somehow guided the market, making market players adjust their foreign exchange transaction strategies. The willingness of market players to buy foreign exchange has been strengthened and their motivation to settle foreign exchange has been weakened. Despite increases in the RMB exchange rate over the past several months, companies have been deeply impressed by the preliminary bidirectional fluctuations of the RMB exchange rate amidthe complex economic and financial environments in China and in the international markets, so they have continued the financial adjustments of increasing foreign exchange deposits and reducing foreign exchange loans and external liabilities. We have some data to explain this. October 23, 2014,10:44:59am · Guan Tao: First, foreign exchange settled by banks in the third quarter was up by 3 percent against the second quarter, while foreign exchange sold by banks was up by 14 percent. According to indicators that measure a company’s motivation to buy foreign exchange, the percentage of foreign exchange bought by companies to make payments reached 70 percent in the third quarter, up by 5 percentage points against the first half of the year, while the percentage of foreign exchange settled by companies as foreign exchange income was 69 percent, down by 3 percentage points from the first halfof the year. Second, companies' foreign exchange deposits rose by USD 3.8 billionin the third quarter, among which the combined increasein July and August amounted to USD 22.9 billion, while the growth was USD 38.7 billion in the first quarter and USD 65.2 billion in thesecondquarter. Foreign exchange loans dropped by USD 21.2 billion in the third quarter, compared with an increase of USD 62.6billion in the first quarter and a decrease of USD 2.3 billion in the second quarter. Thebalance of import trade financing fell by USD 36.5 billion in the third quarter, versus an increase of USD 24.1 billion and USD 18.7 billion respectively in the first and second quarters. These data show that companies were more willing to buy than to settle foreign exchange and in the third quarter they continued financialadjustments of increasing foreign exchange deposits and reducing foreign exchange loans and external liabilities. October 23, 2014, 10:50:40am · Guan Tao: As for how we look at this issue, we believe China is currently experiencing capital flight; however, this does not represent a risk or a problem. Customs statistics show China's trade surplus stood at USD 128.1 billion in the third quarter, up by 48 percent quarter on quarter and up 111 percent year on year. The short supply in the foreign exchange marketindicates net outflows under the capital account. However, this should not be regarded as a risk or a problem but rather it should be considered in the following three ways. First, in terms of the results of the adjustments, such a change is in line with the goal of the macro controls set at the beginning of this year that is, basically balancing the BOP. The current and capital BOP accounts both registered a surplus and foreign exchange reserves jumped by more than USD 100 billionin the first quarter,suggesting that balancing the BOP would be very challenging. But as the RMB exchange rate fluctuated bi-directionally amidincreased economic uncertainties both at home and abroad,companieshave made reverse financial adjustments since April. In thesecond quarter, although the trade surplus and the current account surplus increased, the capital account changed from a net inflow of USD 94 billion in the first quarter to a net outflow of USD 16.2 billion, and thegrowth of foreignexchange reserves in the BOP slowed down, dropping by 82 percent quarter on quarter from more than USD 100 billion in the previous quarter to more than USD 20 billion. Initial estimates indicate that Chinamaintainedan equilibrium in the BOP during the third quarter, that is, the current account was in surplus and the capital account was in deficit. This will be favorable for a voluntary balance in the BOP in China and for the People's Bank of China to improve macro controls and to expand the space for operation of its monetary policies. Second, from the perspective of the approach to the adjustment, the increase in companies’foreign exchange deposits, including their increase in external investments, has helped allocateforeign exchange to the marketinstead of to the government, which is in line with the reform goal of encouraging people to hold more foreignexchange. The reductionsin foreign exchange loans and external liabilities by companies are favorable for reducing the currency mismatch and exposure to external liabilities, thus cutting financial risks. During themarketization reform of the RMB exchange-rate formation mechanism, thecentral bank phased out its intervention in the foreign exchange market, which means that the trade surplus has a positive correlation with capital outflows, namely, the higher the trade surplus, the more capital outflows there are, which is also a goal of the reform. Our reform has delivered fruits and has achieved theexpected goals, which should not be regarded as a problem, but it still requires careful consideration. Third, in terms of the adjustment process, China witnessed a round of massive net capital inflows between the end of 2012 and the beginning of this year, but due to the bidirectional fluctuations of the RMB exchange rate and the complex domestic and international environments, capital inflows have recently been replaced bycapital outflows, suggesting a relativelyobvious pendulum effect, which is considered normal. A shortage ofUSD 20–30 billionin foreign exchange is not very serious and it is something that China can withstand. Moreover, the percentage of foreign exchange settled by companies as foreign exchange income was 69 percent in the third quarter, up by 1 percentage point from the second quarter.In particular, the percentage was 74 percent in September, 6 percentage points higher than that in August. All these indicate that at present the willingness of market playersto hold foreign exchange is stable and there is no reason to panic about speculation in foreign exchange. October 23, 2014, 10:59:23am · Guan Tao: China's cross-border capital flows will be basically balanced amid oscillations in the future. Currently receipts and payments under the current account are basically balanced and the RMB exchange rate is rationally balanced. Butdue to increased uncertainties both at home and abroad, bidirectional fluctuations in cross-border capital flows may become a new normal, which is also the case of the BOP under the economic new normal. There are stillfactors that may lead to inflows or outflows of China's cross-border capital. For example, stable economic growth, will increase demand for the allocation of RMB assets in theinternational market, and thepositive spread both at home and abroad and during thepeak season for consumption at the year-endtraditionalWestern holidayseason are all favorable for cross-border capital inflows. On the other hand, given the complex economic and financialenvironments both at home and abroad, the many uncertainties may increase the volatility of China's cross-border capital flows. But by deepening efforts on all fronts, promoting economic upgrading and transformation, and maintaining stable economic growth based on the plans of the Central Committee and the State Council, coupled with the high trade surplus and enormous foreign exchange reserves, China will be able to withstand such volatilities. October 23, 2014, 11:23:08am · Reporter from the Economic Daily News: Although the RMB exchange rate experienced obvious bidirectional fluctuations and the SAFE introduced relevant policies to develop foreign exchange derivatives since thebeginning of this year, we have learned that some companies have reduced their foreign exchange hedging businesses. What would you say about this? October 23, 2014, 11:37:33am · Guan Tao: The foreign exchange market has responded positively to the bidirectional fluctuations of the RMB exchange rate, but some issues still require our attention. First, significant changes have taken place in foreign exchange derivative transactions. On the one hand, the bidirectional fluctuations of the RMB exchange rate have endedthe single expectations of the RMB, making companies change their unilateral transaction strategies that only focus onforward settlements of foreignexchange and excludeforward purchases of foreign exchange. The monthly average of forward settlements of foreign exchange from March to September dropped by 48 percent from those of January to February, while the monthly average forwardsales of foreign exchange were up by 18 percent. On the other hand, derivative transactions have been more active since the end of June when the SAFE introduced foreign exchange market development measures that focus on foreign exchangeoptions with simplified market access. The number of foreign exchange option transactions set a record in August and was 1.8 times that in the previous month;the percentage of forward transactions during the same periodwas up from 8 percent in July to 21 percent. All these changes reveal the voluntary adjustments of the market and the effects of policy support. Second, providing risk education to companies is still a pressing issue. We have noted that some companies have not yet adapted to the bidirectional fluctuations of the RMB exchange rate. Due to the unilateral appreciation of the RMB, the RMB exchange rate seldom fluctuated sharply in the past, and the forward settlement price of foreign exchange was even higher than thespot settlement price of foreign exchange for a certain period of time. Given this, some companieshave used forward settlements offoreign exchange as a tool to make money, and some even believethat it is not necessary to hedge risks if forward transactions or other derivative transactions prove not to be profitable. On the other hand, some companies have formeda stereotypical routine in derivative transactions, that is, they only settle forward foreign exchange income and they do not hedge risks arising from foreign exchange spending or external liabilities. In other words, despite foreign exchange exposure arising from foreign exchange loans, they do not hedge foreign exchange- rate risks. Next, the SAFE will continue to promote the development of the foreignexchange market and support market players to use derivatives to manage exchange-rate risks so as to better serve the real economy. Banks should provide companies with hedging services in line with the principle of merchantability, improve the provision of risk education, and guide market players to build a proper sense of hedging. Meanwhile, under the new normal of bidirectional fluctuations of the RMB exchange rate, companies should have a correct sense of risks, create strict financial discipline,manage exchange-rate risks properly by using derivatives, and replace subjective judgments with market operations. October 23, 2014, 1:06:32pm · Reporter from NHK, Japan: What do you think of the impacton China's economy of the US withdrawalfrom its third round of quantitative easing?It is said that theprevious “hot money”inflowswere one of the reasons behind the increase in property prices and the year-on-year increase in real estate investments in China. What would you say about this and what areyour ideasabout the recent changes? Since most of China's foreign exchange reserves are used to buy US bonds, will the US withdrawal fromthe QE lead to a reduction in China’s holding of US bonds? October 23, 2014, 1:10:04pm · Guan Tao: We have already conducted interviews on investments in foreign exchange reserves, and you can review the relevant reports if you are interested. By the way, this issue is irrelevantto today's conference. Now I'd like to talk about the impact of the US withdrawal from the QE. The direction of US monetary policy has always been an important factor that has an impact on China's cross-border capital flows, and it is a variant we have closely watched since the beginning of this year. So far, the USwithdrawalfrom the QE, coupled with many other factors in China and the international market, has hada certain impact on China's cross-border capital flows. Companies have adjusted theirfinancialstrategies, not merely due to the US withdrawal from theQE but also due to factors such as the bidirectional fluctuations in the RMB exchange rate, domestic economic conditions, and differentiated exchange-rate expectations. As I have mentioned, the results of such impactsare beneficial and in line with the direction of the reform and the goal of macro control. We will continue to pay attention to the direction of US monetary policy in the future and make plans to respond. The market should watch out for the effects in the domestic and international markets and use proper tools and approaches to manage the cross-border capital flows and the risks arising from bidirectional fluctuations in the RMB exchange rate. Regarding the property market, the indicators we monitor show that there are no strong signs of outflows of foreign capital from China's property market. On the whole, we have witnessed more net inflows of foreign capital into China's property market. The inflows of capital from non-residents to buy housing in China stood at USD 520 million in the first three quarters, which was not huge but several ten times that during the same period from 2009 to 2013. Capital inflows of foreign-funded companies inthe property industry remain high, with the net amount totaling USD 20.1 billion in the first three quarters, the highest for the same period since 2009. October 23, 2014, 1:10:44pm · Reporter from CRI: The exchange rate of the RMB against the US dollar has been on the decline since the beginning of this year. Reportedly, companies such as those in the aviation, iron and steel, and property industries have reported significant exchange losses in the first half of the year. How would you look at this? October 23, 2014, 1:12:33pm · Guan Tao: First, we have noted this as well. It has been recently reported that the exchange losses that listed Chinese companiesdisclosed during the first half of this year amounted to RMB 11.7 billion. That is true. As the RMB exchange rate is on the decline, companies that have foreign-denominatedliabilities will suffer exchange losses. But this is a book loss in an accounting sense, not a real loss, provided that real liabilities arising from purchases of foreign exchange using RMBdo not occur. As the RMB exchange rate fluctuates bi-directionally, losses may be incurred as the RMB depreciates, but they will decrease as the RMB appreciates, just as what has been occurring recently, so such changes are dynamic rather than static. Second, many companies have foreign-denominatedboth liabilities and assets. Exchange-rate fluctuationsare a double-edged sword. When the exchange rate is declining, companies' foreign-denominatedliabilities will rise, but the returns fromtheir foreign-denominated assets will rise.Therefore, losses or gains should be analyzed based on the real situation. Given that the beneficiaries of the exchange-rate fluctuations constitute the silent majority, while the losers will be reported or be hyped by the media, the negative impact of the exchange-rate fluctuations may be exaggerated. Third, companies may have become used to the unilateral rises and low fluctuations of the RMB exchange rate. It is attractive in terms of accounting to have foreign-denominatedliabilities when the RMB interest rate is high. But this will not always be profitable after the RMB exchange rate begins to fluctuate bi-directionally. It is therefore suggested that companies adapt to the bidirectional fluctuations of the RMB exchange rate, reduce currency mismatches, and adopt the strategy of borrowing, collecting, and repaying foreign exchange. Moreover, companies should borrow foreign money based on their real needsand should not artificially magnify the lever and take this as a financing tool to make money. Therecently unveiled financing risks that are associated with commodity trading may entail a high leverage transaction ratio and companies using this financing tool to make moneywill face risks as the RMB exchange rate fluctuates bi-directionally. In addition, companies should properly hedge the risks associated with exposure to foreign-denominated liabilities and actively use tools such as foreign exchange derivatives to manage the exchange-rate risks. October 23, 2014, 1:13:11pm · Reporter from Global Times (English edition): Officials from the People's Bank of Chinasaid in September that the PBC will promote the building of a QualifiedDomestic Institutional Investormechanism, or the new QDII mechanism, to allow individuals to invest in overseas markets. What measures will the SAFE taketo support overseas investments by individuals?Will it further ease the limit of USD 50,000per person per yearfor foreign exchange purchases by individuals? October 23, 2014,1:16:24pm · Guan Tao: The relevant QDII policy has been developed by the People's Bank of China, so I recommend that you make enquiries of the relevant departments. The question regarding the limit of USD 50,000per person per year for individual foreign exchange purchases was raised at the SAFE press conference on September 25. To save your time, I will not repeat the answer. October 23, 2014,1:17:03pm · Hu Kaihong: This is the end of today's conference. Thank you for coming. October 23, 2014, 1:17:57pm The original text is available at www.china.com.cn 2014-11-26/en/2014/1126/1134.html
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Gain a Deep Understanding of the New Economic Trends in China —Learning and Implementing Xi Jinping's Ideas on the Economic New Normal Yi Gang, SAFE Administrator Since the 18th National Congress of the Communist Party of China, President Xi Jinping has summarized the success stories of China's reform and development, shared many of his thoughts and ideas, and made constructive statements and proposed new requirements, thus enriching and developing the theoretical system of socialism with Chinese characteristics. As we are entering a critical period for economic construction and development in terms of the pace of growth, the structural readjustments, and the stimulus policies, Xi proposed that we should adapt to the new normal state featuring the characteristics of the current development stage of the Chinese economy and remain calm while implementing the new strategies. This idea is of great theoretical value and of guiding significance to deepen the economic institutional reform, promote sustainable and healthy economic development, and achieve the two centennial goals (namely, to complete the building of a moderately prosperous society in all respects when the Communist Party of China celebrates its centennial 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 centennial in 2049) and achieves the Chinese dream of the great renewal of the Chinese nation. Fully understand the grounds for the statement that China's economy is entering a critical period of slower growth, deepening structural readjustments, and absorption of the stimulus policies With an accurate understanding of the overall picture of China's economic growth, the CPC Central Committee led by Secretary General Xi Jinping has stated that in the long term China will see sound fundamentals in its economic and social development, but it is now facing a critical period as its economy is shifting from high-speed growth to mid-to-high-speed growth, its structural readjustments are under great pressures, and the preliminary stimulus policies are being absorbed. This statement shows that the CPC Central Committee is willing to face up to the reform and development challenges and is able to identify the principal contradictions and key links in economic development. Fully understanding the grounds for this statement is a prerequisite for delivering good performance in our economic work. The economic laws determine China's shift to slower economic growth. China's GDP has sustained an astonishing annual average growth rate of nearly 10 percent for more than thirty years since implementation of the reform and opening up, and our economic aggregates reached RMB 56.88 trillion in 2013. As the world's second-largest economy with huge economic aggregates, China is finding that it is difficult to maintain high-speed growth due to the constraints of production factors. Take labor factors as an example. China's population structure and supply and demand for labor have fundamentally changed. The number and share of the labor force dropped for the first time in 2012, and the aging population will continue to grow, making it difficult for China to achieve two-digit growth. International experience shows that economies decelerate to varying extents after reaching a certain stage. Japan and South Korea, for example, witnessed 23 and 36 years of high-rate growth after World War II, with their GDPs growing at an annual average rate of 9.7 percent and 8.02 percent respectively, but then their economies slowed down by nearly one-half. Facing an economic slowdown, we must thoroughly study and follow the economic laws and ensure that the range of adjustments is appropriate for improving the quality and efficiency of economic development. Accelerating the strategic readjustments of the economic structure is a very necessary approach to respond to the profound changes in the economic conditions. The manufacturing industry has long been the engine of China's economic growth and has played an important role in China's economic miracle. But the development model of China's manufacturing industry is relatively extensive, leading to many problems, such as a serious overcapacity. The capacity utilization of manufacturing companies in the first three quarters of 2013 was at the lowest level since 2006 and lower than the internationally recognized normal level. In particular, the capacity utilization of the main products in the iron and steel, cement, electrolytic aluminum, coke, shipping, photovoltaic, and so forth industries was lower than 50 percent. The overcapacity in the manufacturing industry led to decreases in the returns on capital and the marginal output. Moreover, the extensive development of the manufacturing industry has also caused many resource, ecological, and environmental problems, such as high energy consumption per unit of GDP, serious water, air, and soil pollution, and deteriorations in the ecological environment. If we are not determined and courageous today, we will pay a bigger price tomorrow. Given the profound changes in the development conditions, we must accelerate the strategic readjustments in the economic structure and combine economic growth with structural readjustments, improvements in the people's lives, and the construction of an ecological civilization to achieve sustainable development. Absorbing the preliminary stimulus policies is a prerequisite for safeguarding China's economic and financial security. To respond to the global financial crisis, China introduced a package of stimulus policies during the past few years, which contributed greatly to China's sound economic growth and the recovery of the world economy. However, these policies also had some negative effects, such as financial capital being off to a virtual reality, too many company debts, and the accumulation of potential risks in some areas and links, such as local financing platforms. Developing a high liability ratio and a high leverage ratio will compromise our future and may potentially endanger sustainable economic development. Therefore, we must take the initiative in economic development and properly handle the relationship between ensuring growth and guarding against risks to improve the efficiency and quality of economic development. Accurately understand the meaning of the economic new normal in China "China's development is entering a period of strategic importance. We must consolidate confidence to adapt to the new normal state featuring the characteristics of the current development stage of the Chinese economy and remain calm while making strategies," said Xi. This is a scientific analysis of the long-term economic trends in China, based on, among other things, a comprehensive analysis of China's economy during a period when economic growth is slowing down, structural readjustments are under great pressures, and the preliminary stimulus policies are being absorbed. We should accurately understand the meaning of the economic new normal, acquire good knowledge about the new economic trends, and promote the economy, reform, and development well to make sure that we will complete the building of a moderately prosperous society in all respects by 2020 and go on to fulfill further goals. China's economy is shifting from high-speed growth to mid-to-high-speed growth. After undergoing two-digit growth over the past thirty-plus years, China's economy is now gradually slowing down to mid-to-high-speed growth, which is an important sign of the new normal economic state. Such a speed is sustainable. "We must understand the relationship between sustainable and healthy development and GDP growth in an all-round way," stressed Xi. Ending the blind pursuit of high-speed economic growth is favorable for the optimization of resource allocations and for full utilization of resources, and for improvements in the quality and efficiency of economic development to ensure that the people can share in the fruits of the economic development. An economic slowdown means relatively slow economic growth compared with the previous high-speed growth, but this speed is still much higher than that in the developed economies and many emerging markets and this growth is more comprehensive, coordinated, and sustainable, featuring a more stable and rational structure. It is foreseeable that China's economic growth will contribute even more to global economic growth in the coming decade. The leading position of the manufacturing industry in the industrial structure is being shifted to the services industry. With its level being a key sign that measures the level of economic development in a modern society, the services industry is an important sector of the Chinese economy. But China's services industry was relatively immature in the past. The added value of this industry accounted for 46 percent of China's GDP in 2013, which outperformed that of the manufacturing industry for the first time, but it was still far behind the 70 percent which is the typical percentage of the services industry in GDP in the developed countries, indicating the boosting of the services industry on China's economic growth has yet to be unleashed. Under the new normal economic state, the position of the services industry in the industrial structure will further pick up. Since what we need is an economic growth speed that ensures improvements in the people's lives and full employment, the development of the services industry that can provide more job opportunities than the manufacturing industry is conducive to achieving the goal of full employment, enriching the provision of daily necessities, improving the people's lives, and achieving the growth of humanity. The development concept is being transformed from one-sided pursuit of GDP growth to humanitarian and environmental protection. Under the new normal economic state, efforts will be made to expand the reforms and to promote development based on the people-first philosophy and the principle of serving the fundamental interests of the overwhelming majority of the people rather than to seek GDP growth as the ultimate goal. "A good ecological environment is the fairest public good that is most beneficial to general well-being," Xi pointed out. The central government has been implementing an innovation-driven development strategy in recent years and regards energy-savings and emissions reductions as restrictive indicators for economic and social development to promote green, circular, and low-carbon development. People-first economic development means equal access to basic public services in urban and rural areas will be promoted at a faster pace, with an elimination of the urban-rural dual economic structure. China's urbanization has been accelerated in recent years. Its urban population exceeded its rural population for the first time at the end of 2011, accounting for 53.7 percent of the total population at the end of 2013, nearly equal to the world’s average. More and more migrant workers have access to basic urban public services. Meanwhile, new rural areas are being built, urban and rural development is becoming more balanced, and gaps between the rural and urban areas are being narrowed, indicating the fruits of development are being shared by more people in a more equitable way. Promote stable economic growth under the new normal state by deepening the reforms The critical period featuring slower economic growth, deepened structural readjustments and absorption of the stimulus policies, and the economic new normal are both an opportunity and a challenge. "To meet the people's new expectations, we must consolidate confidence in the reforms and promote the reform and opening up with more political courage and wisdom and more effective measures and methods," Xi stressed. During this critical period of strategic importance, we should remove the institutional and structural contradictions in economic development by deepening the reforms, give the market a decisive role in allocating resources by promoting the reforms in key areas and links, and allow the government to play a better role in the promotion of the sustainable and healthy development of the Chinese economy. Carrying out market-oriented reforms. First, streamline administration and delegate power to lower levels. Efforts should be made to minimize permissions, approvals, and qualification evaluations and to motivate market players to start businesses so as to continuously vitalize economic transformation. Second, accelerate improvements in the modern market system. We should develop open and transparent market rules and unified market access rules by formulating a negative list. We should deepen the reform of the factors market and establish a price system that can reflect scarcities and the supply-demand relationship to combine improving the efficiency of resource allocations and promoting economic growth. Third, energize micro units. We should ensure that diverse forms of ownership participate in competition in an open, fair, and just way and we should encourage non-public ownership to move into the services sector and high-technology areas. Fourth, expand internal and external opening up. We should promote bidirectional opening up of the capital market to increase the convertibility of cross-border capital and financial trade in good order. We should combine "inviting in" and "going out" to encourage foreign capital to participate in domestic M&As and integration, ease restrictions on domestic residents' overseas investments and establish the principal positions of companies and individuals in overseas investments. Carrying out innovation-oriented reforms. First, deepen the education reform to accelerate accumulation of human resources. We should make full use of the role of human resources as a source of innovations to a lay a solid foundation for the upgrading of the traditional industries and the development of industries such as new generation IT, new energy, and high-end equipment manufacturing and then to improve labor productivity and total factor productivity. Second, improve the systems and mechanisms of technology innovation. We should deepen the reform of technology systems and establish an open and transparent evaluation mechanism for national technological resource management and projects. We should uphold market-oriented technology innovations, strengthen the principal position of companies in technology innovations, and improve venture capital investment mechanisms and business models to promote the transformation of technology innovations into the dynamism of economic development. Third, promote the integration of technology and finance. We should increase the use and protection of intellectual property rights to make full use of the capital market to support innovations and the starting of businesses. Carrying out sustainability-oriented reforms. First, accelerate the building of mechanisms and systems for sustainable economic development. We should build a scientific indicator system, an assessment system, and a monitoring system for energy savings and emissions reductions, implement a target responsibility system regarding energy savings and emissions reductions and stress the restrictive roles of the indicators. Second, develop a green and circular economy. We should promote low-carbon technology, develop new and renewable energies, and enhance prevention and control of water, air, and solid waste pollution and traffic congestion. Third, protect the ecological environment. We should actively respond to global warming and continue to push ahead with ecological projects, such as natural forest protection, conversion of farmland to forests, and conversion of farmland to pastures, to promote coordinated development of the economy and the environment. Carrying out reforms that benefit all. First, build a reasonable and orderly income allocation pattern. We should adjust the distribution pattern of the national income by further increasing the proportion of labor remuneration in the initial distribution to synchronously enhance labor remuneration and labor productivity. We should improve the minimum wage and wage payment guarantee systems to bridge the income gaps between the rural and urban areas, between regions, and between industries. Second, establish a fair and sustainable social security system. We should integrate the basic pension and medical insurance systems for rural and urban residents, coordinate the minimum standard of living scheme for rural and urban residents, and accelerate the building of a basic public services system for all people. We should learn lessons from other countries regarding welfare policies and build a social security system that is appropriate for the level and stage of social and economic development in China, while avoiding welfare problems caused by overly high welfare or a failure to guarantee a minimum standard of living due to excessively low welfare. (The original text was released on page 7 of the People's Daily, dated November 3, 2014) 2014-11-26/en/2014/1126/1135.html
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To deepen the reform of the foreign exchange administration system, standardize receipts and payments under cross-border guarantees, and promote investment and financing facilitation for enterprises and the convertibility of the capital account in an orderly manner, the State Administration of Foreign Exchange (SAFE) recently issued the Regulations on Foreign Exchange Administration for Cross-border Guarantees (Huifa No. 29 [2014], hereafter referred to as the “Regulations”). Guo Song, director of the SAFE's Capital Account Management Department, provided an interview on the relevant issues. Q: What is the background for introducing the reform of foreign exchange administration for cross-border guarantees at this time? A: The major regulations on foreign exchange administration for cross-border guarantees prior to the reform were developed in the 1990s and they played a positive role in promoting China’s economic and technological cooperation with other countries, supporting the development of foreign trade, facilitating labor service exports, introducing advanced technology, equipment, and funds from other countries, and smoothly conducting external financial activities based on the historical conditions during that time. With the rapid development of China’s foreign-related economy and the expansion in the size of transactions in the balance of payments, cross-border guarantee activities have become increasingly diversified and complex. The previous regulations, which covered external guarantees and domestic loans with only overseas guarantees, are no longer able to satisfy the development requirements of the market. The relevant policies on guarantee management require redundant approval and verification procedures, and this management approach lags behind market demand. Further, these policies impose many limits on the qualifications for cross-border guarantees involved in domestic and overseas financing by enterprises, resulting in high operating costs for enterprises. Therefore, against the macro backdrop of promoting the streamlining of administration and decentralization and the liberalization of the capital account, the SAFE has adjusted the management concept under the guidance of the "five changes” and has introduced the Regulations at a proper time based on an adequate survey and solicitation of opinions during the preliminary phase. In the Regulations, the scope of foreign exchange administration for cross-border guarantees is rationally defined based on the objectives and duties of foreign exchange administration, and all types of cross-border guarantees whose form conforms to the legal requirements, use payments as an approach for performance, and may have a significant influence on the BOP are included in the scope of the policy adjustment, thus significantly liberalizing foreign exchange administration for cross-border guarantees, thus addressing the challenges confronted by domestic enterprises, such as the difficult and costly financing, and promoting the general process of the capital account. Q: What measures have been taken in this reform for streamlining administration and decentralization? A: The Regulations aim to vigorously promote the streamlining of administration and decentralization to significantly improve the investment and financing policy environment for domestic enterprises. All ex-ante approvals related to cross-border guarantees as well as ex-ante verifications for the performance of guarantees and most restrictions on business qualifications are eliminated and replaced by self-discipline and registration management; only “some cross-border guarantees for liabilities or claims of residents to non-residents newly added after the performance of the guarantees” are integrated into the scope of the deal-by-deal registration. Meanwhile, the relevant laws and regulations are streamlined and integrated and 12 normative documents related to foreign exchange administration for cross-border guarantees are abolished, thus improving the transparency of foreign exchange administration policies. Q: How will this reform address the problems of difficult and costly financing of domestic enterprises？ A: The reform will unify treatment for domestic and overseas enterprises, providing more financing facilitation for domestic enterprises. Among the external loans with domestic guarantees, the qualification restrictions on the trading players will be abolished and the differences in management policies between the financing guarantees and the non-financing guarantees, and between the banking institutions and the non-banking institutions, will be removed. Further, under the premise of meeting the relevant restrictions, the practice of ex-ante application to the SAFE for the relevant quota will be abolished and Chinese and foreign-funded enterprises will be allowed to sign contracts without submitting an application. Guarantees can be performed within the amount of one time of the net assets so as to unify and significantly improve the policy on domestic loans with overseas guarantees for Chinese and foreign enterprises in China. With guarantees from overseas institutions, domestic enterprises can raise funds from domestic financial institutions more conveniently and at a relatively low cost, which will reduce their financing difficulties and costs. Q: With the introduction of the Regulations, domestic institutions and individuals will no longer be required to obtain ex-ante approvals when providing external loans with domestic guarantees, and ex-ante verifications will no longer be required when the performance of the guarantee occurs. Will this provide conveniences for domestic institutions and individuals to transfer assets overseas? A: The Regulations abolish or significantly streamline the ex-ante approval and registration procedures for external loans with domestic guarantees, which is conducive to improving the policy environment for overseas investments and financing by Chinese enterprises and facilitating Chinese institutions and individuals to carry out investment and financing activities reasonably and legitimately in other countries. Therefore, the Regulations are aligned with the general requirement of serving the real economy through financial services. Meanwhile, to prevent domestic institutions and individuals from maliciously leveraging the channels for external loans with domestic guarantees to transfer assets overseas, the Regulations make sure that the potential reputational and financial costs of the guarantors due to malicious defaults will be raised substantially by taking an array of measures, such as disclosures of guarantee information, due diligence investigations by banks, verification of trends in the guarantor’s performance, control over new contracts after default, and off-site verifications and foreign exchange inspections, so as to encourage the guarantor to operate with integrity and in compliance with the laws and regulations. According to the Regulations, where the guarantor under external loans with domestic guarantees is a non-banking institution, the guarantor is not allowed to sign new contracts for external loans with a domestic guarantee without the approval of the SAFE before the overseas debtor pays off the debts to the domestic guarantor due to the guarantor's performance of the guarantee. To a certain extent, this will prevent domestic institutions and individuals from transferring assets overseas via the performance of the guarantee. Q: Are domestic organizations allowed to freely sign “other forms of cross-border guarantee” contracts other than those on external loans with domestic guarantees and domestic loans with overseas guarantees? A: According to the Regulations, with the exception that necessary foreign exchange registration formalities must be carried out and some restrictions on the qualifications must be followed for external loans with domestic guarantees and for domestic loans with overseas guarantees, domestic institutions can freely execute other forms of cross-border guarantee contracts. However, it should be noted that the Regulations only cancel the foreign exchange administration restrictions for the signing of the guarantee, which does not mean there are no restrictions on other fields closely related to the content of the guarantee contracts or that the restrictions have been abolished. For example, there are still necessary restrictive stipulations on foreign debt management, cross-border investments, and security interest. Therefore, although compliance situations in foreign exchange administration will not affect the effectiveness of the guarantee contracts, if conflicts occur between the contents of the contracts and the regulations on foreign exchange administration or the restrictive stipulations in other fields, the guarantee contracts may cease to be executable. To make sure the creditor under the guarantee can successfully claim guarantee rights and the guarantor can smoothly perform the guarantee performance obligations, the signing of the guarantee contracts must conform to “the principle of no potential conflict." In other words, unless otherwise expressly stipulated under the Regulations, the signing of cross-border guarantee contracts and possible new cross-border claims and debts relationships and the asset ownership relationship established after the performance of the guarantee contract shall not create potential conflicts with the existing stipulations for the capital account or other restrictive stipulations of the relevant departments. The guarantee contract cannot be performed if there is such a conflict and can only be performed if there is no such conflict. Therefore, this will effectively guard against the signing of cross-border guarantee contracts in violation of the relevant stipulations. Q: How will this reform guard against the risks associated with abnormal fund flows while facilitating cross-border guarantee activities? A: To address the risks incurred by the drastic increase in external claims and debts arising from the concentrated performance of large-amount guarantees and threatening the BOP, the Regulations take the following risk control measures: first, acquiring guarantee contract signing and performance data which may add to the external claims and debts on a deal-by-deal basis; second, restraining cross-border guarantee transactions among all parties involved via self-disciplinary requirements, such as a review of trends in guarantee performance (a due diligence investigation), temporary suspension of new contract signings after a default and a negative list for fund use; third, reinforcing monitoring and disposal of violations of guarantee activities via claims and debt registration, off-site verifications, and foreign exchange inspections; fourth, retaining the SAFE's power to make timely adjustments to the cross-border guarantee management approaches in accordance with the BOP guarantee clauses. With these arrangements, the risks of cross-border fund flows under guarantees will generally remain under control. Q: How can one make sure that all parties involved in the guarantee will earnestly perform their self-disciplinary obligations under the Regulations after the ex-ante approvals and verifications are abolished in an all-round way? A: On the one hand, this reform cancels all restrictive stipulations on foreign exchange administration and ex-ante approvals for contract signing; on the other hand, in order to retain “teeth” and satisfy the risk prevention requirements, a number of self-disciplinary restrictive stipulations which may lead to administrative penalties in cases of violations are retained. The above management approach features both delegation of powers and self-discipline and comes closer to the management concept under a market economy. It has clear self-disciplinary stipulations for relevant entities of cross-border guarantees, such as temporary suspension after defaults, verification of performance trends, restrictions on the use of funds, due diligence investigations, obligations of truthful statements and moral restrictions, and it sets out corresponding penalties so as to achieve the purpose of “ex-ante measures against gentlemen and ex-post measures against villains." Q: Currently, China’s foreign exchange receipts and payments are still under pressure from net inflows. Do the Regulations make any policy arrangements for this? A: With regard to the net inflow pressures on China’s foreign exchange receipts and payments, this reform has adopted differentiated institutional arrangements for different types of cross-border guarantees: the complex management formalities for external loans with domestic guarantees (creating external claims after performance of the guarantee) will be cancelled; proper standards and restrictions will be retained for domestic loans with overseas guarantees (generating external debts after the performance of guarantees) which may cause fund inflows. Q: We have noticed that in 2009 the SAFE put forward the “Five Changes" with respect to the concept of and approaches to foreign exchange administration, and has taken the “Five Changes” as its work priority since the very beginning of this year. How is this effort reflected in this reform? A: The introduction of the Regulations represents a crucial step in implementing the “Five Changes” in capital account management. Specifically, this reform has abolished the approval and verification of cross-border guarantees and has shifted work priority to the monitoring and analysis of cross-border capital flows, thus achieving the change from focusing on “approvals” to focusing on “monitoring and analysis.” While abolishing the quota verifications and approvals on a deal-by-deal basis, ex-post verifications of cross-border guarantee entities and behavior have been strengthened to realize the change from focusing on "ex-ante monitoring" to focusing on "ex-post management." The Regulations have weakened deal-by-deal compliance management for guarantee transaction behavior and have put more emphasis on management of domestic entities for guarantee transactions. While simplifying the standards for classifying the transaction entities, differentiated classified management is conducted for different types of entities. For example, management of banks is more liberalized than that of non-banking institutions, and management of large institutions is more lenient than that of small- and medium-sized institutions, thus achieving the transition from "behavior management" to "entity management." The qualification limitations in the ex-ante verifications for cross-border guarantees are canceled, the registration steps for certain types of guarantees are defined as a “procedural review,” and investigations of the violations are shifted to ex-post off-site verifications and foreign exchange inspections, thus achieving a change from “guilty until proven innocent” to “innocent until proven guilty.” Under the premise of significantly liberalizing cross-border guarantees, a “negative list” is proposed for fund use under the cross-border guarantees, thus achieving the change from a “positive list” to a “negative list.” Q: The Regulations have been officially implemented for over two months; could you please tell us something about their implementation? A: Since the official implementation of the Regulations on June 1, banks and enterprises have embraced this reform. Banks report the reform offers both challenges and opportunities, and Chinese enterprises have seen a remarkably shorter time for the handling of business with the local foreign exchange bureaus. Given the growth in business volume, the cross-border guarantee business has been operating smoothly. Among the external loans with domestic guarantees and domestic loans with overseas guarantees, the two types of cross-border guarantees that have been integrated into the registration management, the guarantee balance of the former is growing faster, with no abnormal growth in the performance of the cross-border guarantees. Q: What measures will the SAFE take to deepen this reform during the next step? A: During the next step, the SAFE will continue to pay close attention to market feedback and further satisfy policy appeals, promote investment and financing facilitation, and earnestly service the real economy. Meanwhile, cross-border guarantee statistical monitoring will be strengthened and off-site inspections and risk management will also be enhanced to lay a solid foundation for further deepening the reform of the foreign exchange administration system and for accelerating the convertibility of the RMB under the capital account. (Reporter: Xu Zhiping) (August 20, Financial News) 2014-10-21/en/2014/1021/1127.html
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Historical Transformations in the Foreign Exchange Administration Model Yi Gang, PBC Deputy Governor and SAFE Administrator It was made clear at the 18th CPC National Congress and the Third Plenary Session of the 18th CPC Central Committee that the core issue in the economic institutional reform is to handle well government-market relations by allowing the market to play a decisive role in allocating resources, significantly reducing the direct allocation of resources by the government and focusing on addressing the issues of excessive government intervention and weak regulation. In 2009 the State Administration of Foreign Exchange (SAFE) proposed the "five shifts" in foreign exchange administration, including a shift from approval to monitoring and analysis; a shift from ex-ante oversight to ex-post administration; a shift from behavioral management to management of market players; a shift from a presumption of guilt to a presumption of innocence; and a shift from a "positive list" to a "negative list." Over the past five years, under the guidance of the "five shifts," the SAFE has accumulated experience by prompting reform on all fronts, starting out by streamlining administration and delegating powers to lower levels. Further streamlining administration and delegating powers to lower levels. Streamlining administration and delegating powers to lower levels and combining delegation and regulation are the first steps in the self-targeted revolution in government and macro controls. To facilitate trade and investments, the SAFE in recent years has delved deeper to tap the potential, streamline administration, and delegate powers to lower levels, thus providing more opportunities for starting and expanding businesses, easing burdens on enterprises as they develop, helping to increase employment, and creating a new dynamism for social and economic development, and enabling the market players to share the fruits of the reform. Substantially slashing administrative approval items to improve the efficiency of market players in allocating foreign exchange resources. Since 2009, the SAFE has canceled 27 administrative approval items, noticeably reducing ex-ante oversight. In the foreign exchange administration of trade in goods under management of the current account, aggregate verifications have replaced the previous case-by-case cancellations upon verification of the receipts and payments of the foreign exchange for imports and exports, which have reached an annual average of 45 million transactions. Administrative approval items have been reduced to two major items and four sub-items, which are retained primarily to manage class-B and class-C enterprises. Approvals are no longer needed to manage purchases and payments of foreign exchange under trade in services, which now can be handled directly at financial institutions, and examinations of documents for nearly 15 million receipt and payment transactions of foreign exchange under trade in services, with a value of less than USD 50,000 each, have been removed. Cross-border receipts and payments of foreign exchange under trade in goods and trade in services account for 96 percent of the aggregate receipts and payments under the current account, indicating that the absolute majority of current account transactions have enjoyed the dividends of the reform unleashed by the streamlining of administration and the delegation of powers to lower levels. In terms of capital account management, to accelerate the building of a registration-based management framework, unnecessary administrative approval items under direct investments, external debts, and cross-border guarantees have been removed, saving enterprises from going to the SAFE for administrative approvals on some 50,000 occasions. The number of administrative approval items under the capital account has been reduced by nearly 70 percent, from 59 sub-items in 2009 to 20 sub-items this year. These measures have greatly energized the market and have significantly benefited market players, thus they are a great boost to the growth of the Chinese economy and to an increase in the global competitiveness of Chinese businesses. With the reform of foreign exchange administration for trade in goods, the need for enterprises to go to the SAFE for approvals of purchases and payments of foreign exchange has been reduced by about 5,000 times, the average time for each case of receipts and payments of foreign exchange has been cut by 70 percent and 85 percent respectively, human resource inputs by enterprises have been saved by one-third, and annual transportation and labor costs of enterprises have been reduced by nearly RMB 4.8 billion. With the reform of foreign exchange administration for trade in services, the time enterprises spend on processing such businesses has been reduced from more than 20 minutes to five minutes. The measures to streamline administration and to delegate powers to lower levels with respect to direct investments have helped to reduce the time required for foreign exchange registration of foreign-invested enterprises and for registration of the confirmation of the foreign investors' contributions by 16.7 percent and 66.7 percent respectively. The removal of the approvals with respect to external debts, external guarantees, and sub-loans of external debts has increased the independence of enterprises in terms of cross-border investments and financing and has been favorable for enterprises to rationally utilize both domestic and international markets and resources, and therefore has been conducive to overcoming financing difficulties and to lowering the costs of financing. Streamlining regulatory documents on a broad scale to provide transparent and concise market rules for market players. The tedious and complex regulatory documents confuse market players, making it difficult for them to understand and execute the rules, thus they represent yet another obstacle to the development of market players. Therefore the SAFE has regarded the removal of the administrative approval items and the transformation of the management models as an opportunity and in recent years it has accelerated the streamlining and integration of its management regulations with those of its branches and business lines. For example, it annulled 123 regulatory documents regarding the reform of foreign exchange administration for trade in goods and built a regulatory system for the administration of foreign exchange under trade in goods, which consists of guidelines, rules, and regulations. Another example is the recently released Management Measures for Banks Handling Foreign Exchange Sales and Settlements, which establishes a regulatory system for foreign exchange sales and settlements via banks, consisting of one departmental regulation plus five regulatory documents. The SAFE has annulled and declared invalid more than 700 regulatory documents, accounting for 60 percent of the total, and its branches have annulled or declared invalid more than 20,000 regulatory documents, with only over 180 regulatory documents currently remaining in force. Exploring an innovative functional transformation. Streamlining administration, delegating powers to lower levels, and canceling approvals do not indicate a laissez-faire foreign exchange administration but rather a shift to more flexible and more restrictive ongoing and ex-post oversight. Over the past five years, under the guidance of the "five shifts," the SAFE has carried out audacious explorations and has achieved enormous results from the reforms that have stood the test of time. Stressing monitoring and analysis as a foundation for decision making in ongoing and ex-post oversight Enhancing integration between the business system and data to provide a data foundation for monitoring and analysis. Before 2009, there were 31 business systems for foreign exchange administration, including seven systems for banks and companies respectively, but these systems were not compatible with one another and could not share information, resulting in repeated data acquisition and mixed standards. Through years of hard work, the situation of multiple and scattered business systems for foreign exchange administration has changed. The systems have been integrated into multiple applications on three platforms and the number of systems for banks and companies has been reduced to four and three, respectively. With uniform standards established for data acquisition and BOP data, current account and capital account management can now be realized at one time. The integration of the application portals enables companies and banks to access the same portal and enjoy one-stop services, thus dramatically increasing the level of convenience. During the past year, nearly 40 percent of the declarations for corporate and individual foreign-related income and domestic income were completed online, significantly relaxing the burden on the declarers to go to the banks to make a declaration. Meanwhile, the SAFE can quickly identify abnormal transactions through monitoring and analyzing several hundred thousand foreign-related companies using Big Data and cloud computing technology that provide data and clues for on-site verifications and inspections. Improving monitoring and analysis methods to monitor cross-border capital flows in all respects. The SAFE has introduced new monitoring tools, such as the Sensitive Sample Enterprise Library and the Company Financial Data Analysis Method, for trade in goods and has explored an off-site monitoring management system connecting the macro, meso, and micro levels, in order to achieve the results of judging the situation at a macro level, ensuring the structure at the medium level, and focusing on violations at the micro level. The SAFE also optimized monitoring and analysis of foreign exchange administration for the capital account in three respects, i.e. monitoring real transactions, identifying clues of violations and abnormalities, and laying a solid foundation for subsequent off-site verifications or handovers to the inspection departments. To facilitate foreign exchange inspections, the SAFE has established an off-site indicator system for receipts and payments of foreign exchange for banks and MNCs, enabling the inspection departments to conduct cross-regional, cross-subject, and cross-business monitoring via cross analysis and in-depth data mining, thus increasing the precision of crackdowns. Enriching the monitoring and analysis products to make monitoring and analysis regular tasks. While increasing the authority and relevance of the China BOP Report, since 2010 the SAFE has produced a series of monitoring and analysis products, including the Monitoring Report on Cross-border Capital Flows in China, the Operational Report on Regional Receipts and Payments of Foreign Exchange in China, the Monthly Monitoring and Analysis Report on Cross-border Capital Flows, and the Analysis Report on Foreign Exchange Inspections. These products serve the needs of both situational analysis and of monitoring and thus are key tools for the normalization of monitoring and analysis. Exploring macro-prudential regulatory approaches to foreign exchange administration based on monitoring and analysis. By monitoring and analyzing the reasons for and the channels of significant inflows of foreign exchange funds across the board in May 2013, the SAFE introduced a counter-cyclical response measure focused on managing macro-level issues, such as enhancing management of the overall position of foreign exchange settlement and sales via banks. By aligning the position floor with the loan-to-deposit ratio of foreign exchange in banks to adjust the banks' behavior via economic levers, banks are encouraged to seek a new balance between foreign exchange deposits, foreign exchange loans, and their overall positions for foreign exchange settlement and sales and to gradually adjust their operating models to adapt to the macro controls, thus producing positive results. Innovating ongoing and ex-post administration tools to benefit "law-abiding companies." Introducing a company owner conversation system. As part of the reform of foreign exchange administration for trade in goods, the SAFE has built a company owner conversation system for suspected situations, which is favorable for verifying the situation of the companies that it has been watching. This system plays a guiding role, raising company managers' awareness of running their businesses in compliance with the laws. Issuing risk warning letters. For example, the SAFE issues risk warning letters to import and export companies whose goods flows do not match their cash flows and requests an explanation. If the company does not respond or fails to make a convincing explanation within ten days, the SAFE will rate it as a class-B or class-C company in accordance with the laws. This has enhanced the seriousness of compliance with foreign exchange administration, embodying the characteristics of administration by law. Promoting classified management. Based on monitoring and analysis, the SAFE has dynamically adjusted the classification of companies specializing in trade in goods, fundamentally changing the previous undifferentiated management model and shifting the focus of regulation to class-B and class-C companies, which has effectively helped encourage law-abiding companies, and has constrained suspects and punished violators. After the reform for trade in goods, the SAFE has shifted its focus of regulation from the original 500,000-plus import and export companies to 80,000–90,000 companies, particularly the more than 4,000 class-B and class-C companies, and has written off 3,793 shell corporations. Building a rational management "gate." After the reform of foreign exchange administration for trade in services, the SAFE will no longer examine documents on the receipt and payment of foreign exchange below the equivalent of USD 50,000, but will continue to require that the banks keep these documents for five years in case of requiring an inspection, thus setting up a management gate while increasing conveniences. Optimizing and upgrading the cross-departmental regulatory mechanism. With the information exchange mechanism, the SAFE will take into full consideration the company classification by the tax and customs authorities to support its regulation, and vice versa. The increasingly close cooperation among departments with respect to regulation provides an additional tool for the SAFE to conduct ongoing and ex-post administration. Stepping up monitoring and inspection. Based on the changes in the situation, the SAFE has conducted special foreign exchange inspections of key channels and entities, such as entrept trade and banks, cracked down upon underground money shops, online foreign exchange margin trading, and other law- and regulation-violating behaviors. The SAFE dealt with 9,617 criminal cases and issued fines in the amount of RMB 1.35 billion between 2011 and 2013, more than doubling that between 2008 and 2010. The ex-post intimidating effect of foreign exchange inspections and the effectiveness of foreign exchange administration have thus been consolidated and improved. Exploring approaches to regulation to urge market players to reduce costs and improve efficiency. Shifting from behavioral regulation to regulation of market players is a systematic project that involves the adjustment and reengineering of the business and institutional functions, thus a multifaceted approach is required. In terms of business regulation, the SAFE has begun to explore a market players targeted administration reform for the business lines of the current account and the capital account. It takes into full consideration the cross-border receipts and payments, foreign exchange, assets, and liabilities of the market players by integrating business, data, and systems for focused administration. For example, the foreign exchange administration reform for trade in goods breaks through the constraints of separate regulation of imports and exports and builds a new model for market-player regulation. As part of the reform, the SAFE has verified the correspondence between goods flows and capital flows for imports and exports by market players, canceled the trade credit registration system and replaced it with monitoring of the match between trade credits and the volume of imports and exports so as to comprehensively assess and judge the authenticity of a company's trade balance. In the pilots for the centralized operation and management of the foreign exchange of the MNCs, companies are allowed to centrally use current and capital account funds under the same account, thus members of an MNC can share the limits of the external debts and facilitate exchanges for investments and financing. These measures have significantly reduced the costs of trade and financing among members of MNCs, making a growing number of MNCs elevate the position of China from being a global manufacturing and R&D center to being a profit and fortune center. In terms of institutions and functions, many branches and sub-branches of the SAFE have explored position restructuring, process reengineering, and personnel transition. For example, optimizing responsibilities and re-planning institution and position-setting based on the type of market player; conducting full-scale classified management of the current account and the capital account for banks, companies, and individuals; providing one-stop services at the front office, and conducting full-scale monitoring and inspections and comprehensive assessments and classified management in the middle and back offices. These measures have promoted a shift in the focus of regulation from all market players to some players and have helped to build a regulation service model that integrates analysis, regulation, and services. Leading the reform with the "presumption of innocence" and a "negative list" to further facilitate trade and investment. A “negative list" and the "presumption of innocence" require the adoption of a more open and more inclusive administrative model and an adjustment in the regulatory pattern and the legal and regulatory systems. With years of hard work by the SAFE, the "negative list" and the "presumption of innocence" have become concrete policies rather than mere concepts. The design of the reform reflects the concept of the "presumption of innocence." The reform of foreign exchange administration under the current account that has been carried out in recent years basically reflects this concept, as does the liberalized capital account. For example, as part of the foreign exchange administration reform for trade in goods, the SAFE will no longer verify in advance the authenticity of the receipts and payments of foreign exchange under trade in goods of class-A companies and will give adequate ex-ante conveniences to those that have signed the Business Handling Confirmation as a commitment of operational compliance. During the trials of the centralized operation and management of the foreign exchange of MNCs, relevant pilot businesses can be handled after the bank and the company sign a compliance confirmation and the companies will be regulated through ex-post verification, risk warnings, and inspections, which are focused on identifying law breakers and violators of the regulations. Exploring a "negative list" approach to foreign exchange administration. In terms of current account management, the concept of administration based on a "negative list" is reflected in the administration of foreign exchange receipts and payments for class-B and class-C companies engaged in trade in goods and individual spin-offs of foreign exchange settlements and sales. This concept has also been followed in the capital account reform. For example, in terms of direct investment management, the SAFE has implemented a pilot program to reform the management model for the settlement foreign exchange capital of foreign-invested companies in 12 areas, such as the China (Shanghai) Pilot Free Trade Zone, prescribing that foreign exchange capital settlements may be handled directly if the foreign exchange is not used to invest in equities or to extend entrusted loans, and foreign exchange can be settled directly for non–real estate companies if the foreign exchange is not used to buy non-freehold real estate. Foreign exchange under the external debts can be settled with the presentation of valid evidence that it is not used for purposes that are clearly forbidden. Foreign exchange under cross-border guarantees can be directly settled if there is no conflict with the existing regulations during signing of the contract and during its performance. The pilot program for the reform of centralized operations and management of the foreign exchange of MNCs is aimed at achieving willingness settlement of foreign exchange under the capital account by using the "negative list" approach. This approach has further deepened the concept that items not found on the list will be deemed permissible, thus providing valuable experience to continue to upgrade the foreign exchange administration reform. Continue to promote the foreign exchange administration reform to tackle the challenges ahead. Over the past five years, the SAFE has continued to deepen the foreign exchange administration reform based on the "five shifts," which has produced positive results, and therefore has promoted foreign exchange administration to a new high. But we should also be aware that the achievements are not the end of the reform but a new starting point of continuing to deepen the reform, and there are still big challenges that lie ahead for the reform. Continuing to promote the foreign exchange administration reform is a necessary requirement to implement the country's overall reform plan. Since it took office in 2013, the new government has promoted the economic institutional reform on all fronts, driven by the streamlining of administration and the delegation of powers to lower levels. In this new situation, the foreign exchange administration reform is like a boat sailing against the current and we must forge ahead. Take FDI management as an example. Prior approval for industrial and commercial registration has long been one of the foreign exchange administration documents under FDI, based on which the SAFE handles investigations of registered capital verifications, foreign exchange capital settlements, and annual checks of foreign exchange. But as the industrial and commercial registration system was reformed this February, with the registration of paid-in capital changed to registration of subscribed capital, the registration and confirmation by investors in foreign-invested enterprises based on the capital verification system lost ground. Moreover, it will become more difficult to manage foreign exchange settlements for capital payments based on the business scope as administration of the scope of the company business has now liberalized. All these require us to keep up with the times, adapt to the new changes, and accelerate innovations in the foreign exchange administration reform. Continuing to promote the foreign exchange administration reform is a necessary requirement for a BOP equilibrium. The imbalanced situation of the BOP in China has obviously improved in recent years, but the equilibrium is fragile and the institutional and structural problems that have long constrained the BOP equilibrium have not been completely resolved. Moreover, the capability to achieve an active BOP equilibrium is not sufficiently strong and a long-term mechanism that promotes a BOP equilibrium has yet to be established. Meanwhile, there are not many foreign exchange administration tools are marketized, and macro-prudential and administrative management tools alone can no longer satisfy the dual policy objectives of facilitation and risk prevention. All these have raised the need to accelerate innovations in the mechanisms and systems of financial and foreign exchange administration. Continuing to promote the foreign exchange administration reform is a necessary requirement to enhance the global competitiveness of the Chinese economy and of Chinese companies. Deepening the reform as China's reform and opening up expands will be conducive to working out the connections between domestic and overseas markets to guide the rational allocation of capital on a larger scale and to take fuller advantage of both domestic and international markets and resources to improve the efficiency of resource allocations, and to promote the reform and innovation of the financing and investment systems to sharpen the competitive edge of Chinese companies in the global market. We should look at the situation and the environment for foreign exchange administration from a global and holistic perspective and continue to tackle the challenges as the foreign exchange administration reform enters a deep-water zone, while implementing the strategic reform plans of the CPC Central Committee and the State Council. First, we will develop and implement an overall plan and a top-down design with a distinct logic and clearly defined measures, beginning by addressing the deep-seated problems in systems and mechanisms to gradually promote the overall reform while making breakthroughs in key areas based on the BOP situation, thus releasing the dividends of the system. Second, by combining regulation and delegation based on the market, we will enhance statistical monitoring and ongoing and ex-post oversight to improve the effectiveness of foreign exchange administration. Third, we will systematically streamline and summarize the lessons from the previous reforms to identify a reform model that can be reproduced and be promoted. To further deepen the reform in the future, we should work around the "five shifts" to fundamentally change our concepts, working processes, and work methods, as well as the quality and skills of our people. Meanwhile, we should focus on improving our capabilities in foreign exchange administration: building a strong database and information system based on statistical monitoring; improving our analysis capability and strengthening collaboration between business lines involving the current account, the capital account, the BOP, and foreign exchange inspections; improving the early-warning threshold and the kick-off mechanism; and providing regulation-based services to serve the development of the real economy and to safeguard China's foreign-related economic security. First, promoting the reform. Deepening the reform will be the top priority of foreign exchange administration. We will continue to streamline administration and delegate powers to lower levels and streamline items that require administrative approval. We will change our administrative model and make innovations in our administration thinking to improve the systems and mechanisms for ongoing and ex-post administration, to promote regulation of market players across the board, and to break through the constraints of current account and capital account management. We will step up efforts to develop the foreign exchange market and further improve it in terms of both breadth and depth with advances in the reform of the RMB exchange rate formation mechanism. We will also shift the focus of market regulation from approving entry and promoting new products to safeguarding fair play to prevent market failure and systemic management risks. Second, guarding against risks. Preventing the impact from cross-border capital flows will be the primary task of foreign exchange administration. We will build a new early-warning indicator system for monitoring risks associated with the BOP and cross-border capital flows and will make improvement in order to explore new risk emergency-management approaches and policy tools for new situations. We will establish and improve a management system for external debts and cross-border capital flows under the macro-prudential framework. Based on the situation of foreign exchange receipts and payments, we will enhance the relevance and effectiveness of foreign exchange inspections. Efforts will also be made to crack down on illegal trade and transfers of foreign exchange, such as underground banks, to guard against large-scale inflows of international speculative capital and to ensure China's economic and financial security. Third, strengthening the foundation. Data and the system will provide an underpinning for foreign exchange administration. To improve data acquisition, we will integrate and design a rule for interfaces of bank data acquisition and a uniform scheme for bank data acquisition to avoid duplicate and repeated data acquisition. We will enhance system construction, providing quality information services, enabling banks and companies to handle foreign exchange issues in the same system, and providing Internet access interfaces to facilitate information interaction and sharing. We will increase our administrative tools, gradually completing the integration of data on cross-border capital flows and the building of a database and further studying and enriching the monitoring and analysis indicators to effectively assist in oversight. Efforts will also be made to improve data standards by enhancing the building of statistical and coding standards based on the BOP and external debt statistics. Fourth, improving management. Strengthening team and system construction will be the foundation of foreign exchange administration. Administration by law will be practiced by standardizing administrative decision making and administrative enforcement. Administrative transparency will be further promoted by increasing policy and data transparency. Working rules on monitoring and analysis, off-site verifications and on-site inspections will be developed and improved, and the construction of internal controls will be improved to enhance mitigation and control of internal risks. More efforts will be made to strengthen cadres training, including promoting personnel restructuring and raising their service consciousness, thus combining management and service. We will further implement the gist of the eight-point guideline of the CPC Central Committee, clean up our work style, and actively implement a long-term mechanism for independent risk control and to further regulate our exercise of power. (The original text was published in issue no 19 of China Finance in 2014.) 2014-11-26/en/2014/1126/1133.html
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The SAFE has recently released the Circular of the SAFE Announcing that Thirty-four Regulatory Foreign Exchange Administration Documents shall be abolished and declared invalid (Huifa No. 44 [2014], hereafter referred to as the “Circular”). According to the Circular, thirty-four regulatory documents on foreign exchange administration will be abolished or will expire, among whicheighteen will be abolished and sixteen will expire. A relevant responsible person from the SAFE answered questions from reporters on related issues. I. What is the background for streamlining the laws and regulations? What are the implications? To implement the requirements of the CPC Central Committee and the State Council to streamline administration and decentralization as well as administration by law, we have streamlined the effective foreign exchange administration regulations in a centralized manner in accordance with the Opinions of the State Council on Strengthening Construction of Government by Law (Guofa No. 33 [2010]). According to the Opinions, the regulatory documents will be streamlined biennially and the results shall be announced to the public. In recent years, the SAFE has announced that more than 700 regulatory documents have been annulled or declared invalid, reducing the number of regulatory documents by over 60 percent. First, regularly streamlining the laws and regulations is conducive to improving the transparency of the foreign exchange administration policies, making it easier for the public to understand the foreign exchange administration regulations and promoting trade and investment facilitation. Second, it is favorable for establishing a clear and concise legal framework for foreign exchange administration and for promoting the transformation of government functions to carry out their regulatory responsibilities according to the law. II. What is the priority in the streamlining efforts this time? The streamlining efforts this time focus on solving problems such as the mismatch between the regulatory documents and the difficulties in applying them accurately.To be specific, such problems include inconsistencies between previous and existing regulations due to the replacement of the relevant management content with subsequent regulations; the inability to adapt to new trends and developments and the inappropriatenessof the relevant management contentfor the transformation of government functions; the expiration of the application period forthe relevant regulations or the disappearance of the objects to be adjusted. III. What laws and regulations are being streamlined at this time? The regulatory documents repealed or declared invalid this time are divided into seven major groups categorized by business type: First, five comprehensive regulatory documents. They involve off-site supervision of foreign exchange receipts and payments, declaration and cancellation after verification of the BOP for cash settlements, strengthening foreign exchange emergency management, as well as foreign exchange administration regulations for rescue-and-relief operations in Ya’an, Sichuan, and so forth. Second, two regulatory documents on foreign exchange administration under the current account. These regulations involve foreign exchange administration for foreign trade denominated in RMB by domestic institutions and the reimbursed expenses of insurance companies. Third, nine regulatory documents on foreign exchange administration under the capital account. They cover operational processes of foreign exchange administration for processing and assembly projects with overseas-supplied materials and foreign aid projects, foreign exchange administration for projects ensuring fixed returns for foreign investors, external debt management for foreign-invested banks in China, external debt registration for foreign-funded real estate enterprises, overseas funding by foreign-funded MNCs in Pudong New Area, overseas financing of the security balance quota, and outward remittances of foreign exchange profits by foreign-invested enterprises. Fourth, ten regulatory documents on the supervision of the foreign exchange of financial institutions. These documents involve supplementingcapital for foreign exchange purchases by trust companies, remittances for personal advances for foreign exchange settlements, statistics on the use of Chinese mainland RMB cards in Hong Kong, management of special stamps for foreign exchange settlements and sales by banks, limits on cash withdrawals using UnionPay Cards at overseas ATMs, content and scoring standards for the assessment of banks in implementing the provisions of foreign exchange administration, and so forth. Fifth, three regulatory documents on the RMB exchange rate and the foreign exchange market. These documents involve the exchange of the Russian Ruble, the listed exchange of the KRW, the submission of daily reports on the listed exchange rate, and so forth. Six, two regulatory documents on the BOP and foreign exchange statistics. These documents involve BOP declarationsonthe transformation of foreign-invested banks, trade credit surveys, and so forth. Seventh, three regulatory documents on foreign exchange inspections and applicable laws and regulations. These documents involve the handling of illegitimate foreign exchange futures trading institutions, restituting settlement of the capital in the qualitativeirregularities in the RNB loans through the revised Regulations on Foreign Exchange Administration, and so forth. IV. How will the businesses involved in this clean-up be handled in the future? As the eighteen repealed laws and regulations have mainly been replaced by subsequent regulations, the relevant regulations currently in force will prevail. As for the sixteen laws and regulations that have been declared invalid, no further implementation is needed since they have expired or the objects of adjustment have disappeared. In particular, after the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Some Bank Pilots to Handle Remittancesby Individuals with Pre-settled Foreign Exchange (Huifa No. 48 [2003] and the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Further Improving the Bank Pilots to Handle Remittances by Individuals Pre-settled Foreign (Huifa No. 51 [2009]) are repealed, administrative approvals for market access for remittancesby individuals with pre-settled foreign exchange are cancelled. But the pre-settled foreign exchange format can remain, and the banks can decide at their own discretion whether to offer this business in accordance with the relevant regulations on personal foreign exchange administration based on the market situation. V. What arrangements will the SAFE make to further streamline the laws and regulations during the next step? Next, the SAFE will further implement a long-term mechanism for streamliningthe laws and regulations to facilitate understanding by banks, companies, and individuals to apply the laws and regulations for foreign exchange administration, to promote foreign exchange administration according to the law, and to promote trade and investment facilitation. First, we will continue to thoroughly streamline the foreign exchange administration regulations to achieve new results in the clean-up as soon as possible. Second, we will promote reform of the foreign exchange administration and transformation of the administrative patterns. By combining overall promotion and making breakthroughs in key respects, we will strengthen the top-down design of the overall plan for the reform of foreign exchange administrationand will build a new foreign exchange administration framework based on streamlining administration and decentralization to satisfy the requirements for trade and investment facilitation. Third, we will update the Catalogue of Effective Laws and Regulations on Foreign Exchange Administration The SAFE will update the catalogue by the end of 2014 in accordance with the laws and regulations that have beenrepealed or declared invalid at this time. Fourth, we will compile and publish a Collection of Laws and Regulations on Foreign Exchange Administration of the People’s Republic of China (2014 version). The Collection will include the regulations on foreign exchange administration in effect and will provide explanations about thosethat have expired. 2014-11-26/en/2014/1126/1129.html
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FILE: No. 1 of the Publicity Material Series on the Balance of Payments and International Investment Position Manual (Sixth Edition)——Overview of the Balance-of-Payments Statistics and the Revision of the Manual 2014-12-04/en/2014/1204/1136.html
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To implement the requirements of the CPC Central Committee and the State Council to streamline administration and decentralization, and the administration by law, to further improve the transparency of the foreign exchange administration policies, and to promote trade and investment facilitation, the State Administration of Foreign Exchange (SAFE) has recently released the Circular of the SAFE Announcing Thirty-four Repealed and Expired Regulatory Documents on Foreign Exchange Administration (Huifa No. 44 [2014]), based on ongoing efforts to streamline effective foreign exchange administration regulations in a centralized manner. According to the Circular, thirty-four regulatory documents on foreign exchange administration will be abolished or will expire, among whicheighteen will be abolished and sixteen will expire. Such documents include five comprehensive regulations, two regulations on foreign exchange administration under the current account, nine regulations on foreign exchange administration under the capital account, ten regulations on supervision of the foreign exchange business of financial institutions, three regulations on the RMB exchange rate and the foreign exchange market, two regulations on the balance of payments and foreign exchange statistics, and three regulations on foreign exchange inspections and application of the laws and regulations. The SAFE will next continue to engage in a long-term mechanism to clear up the laws and regulations, carry out such work on a regular basis so as to provide facilitation to banks, enterprises, and individuals to understand and utilize the laws and regulations on foreign exchange administration, carry forward foreign exchange administration according to law, and promote the facilitation of trade and investment. 2014-11-26/en/2014/1126/1128.html
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FILE: No. 2 of the Publicity Material Series on the Balance of Payments and International Investment Position Manual ( Sixth Edition)--Interpretation of the Changes in Balance of Payments Forms and Statistics 2014-12-04/en/2014/1204/1137.html
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Since the beginning of 2014, the SAFE has further intensified efforts to sort out the laws and regulations, based on which the directory of major laws and regulations on foreign exchange administration currently in effect was updated. The updated Directory of Major Laws and Regulations on Foreign Exchange Administration Currently in Effect (as of July 31, 2014, hereinafter referred to as “Directory”) has been posted on the official Web site of the SAFE. The Directory includes a total of 297 laws and regulations on foreign exchange administration. Grouped into eight major items, including general foreign exchange administration, foreign exchange administration under the current account, foreign exchange administration under the capital account, regulation of the foreign exchange business of financial institutions, the RMB exchange rate and the foreign exchange market, balance-of-payments statistics, foreign exchange administration statistics, foreign exchange inspections and application of the laws and regulations, and the scientific administration of foreign exchange, the policies and regulations are further divided into some sub-items based on the their specific types of business in order to facilitate public inquiries. The State Administration of Foreign Exchange will further establish and refine the long-term mechanism for sorting out the laws and regulations and will regularly update the Directory so as to increase knowledge and its use by banks, enterprises, and individuals in an effort to promote law-based foreign exchange administration. 2014-11-26/en/2014/1126/1130.html