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In order to implement the spirit of the Third Plenary Session of the 18th CPC Central Committee, further streamline administration and delegate power to lower levels, diversify market players, and promote the development of the foreign exchange market, the Circular of the State Administration of Foreign Exchange on Adjusting the Relevant Management Policies Regarding Entry into Inter-bank Foreign Exchange Market by Financial Institutions (Huifa No. 48 [2014], "the Circular”) was recently released by the State Administration of Foreign Exchange (SAFE). The major contents of the Circular include: First, to promote the streamlining of administration and the delegation of power to lower levels, to cancel ex-ante approvals for financial institutions to enter the inter-bank foreign exchange market, and to give further play to the regulatory functions of market mechanisms. Second, to improve market supervision, to define the basic transaction rules for financial institutions in the inter-bank foreign exchange market, and to continue to facilitate the establishment of a new foreign exchange market management framework that focuses on both government supervision and market discipline. Third, to clean up and consolidate the laws and regulations, to repeal four foreign exchange management documents involving the entry of financial institutions into the inter-bank foreign exchange market, and to enhance the transparency of foreign exchange management policies. This Circular shall take effect as of January 1, 2015. 2014-12-17/en/2014/1217/1140.html
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To standardize and improve foreign exchange administration for the overseas listed domestic companies, and facilitate market operations, the State Administration of Foreign Exchange (SAFE) has recently released the Circular on Foreign Exchange Administration for Overseas Listings (Huifa No. 54 [2014], “Circular”), cancelling the approval for settlement of foreign exchange under repatriated funds raised overseas, in an effort to simplify registration and data submission. The Circular stresses administration streamlining, power delegation and simplified management to further facilitate domestic companies in foreign exchange operation for overseas listing. It is highlighted as follows: First, cancel approval for settlement of foreign exchange under repatriated funds raised overseas under overseas-listed foreign-invested shares, and allow overseas listed companies to directly settle foreign exchange with banks. Second, integrate foreign exchange accounts. Domestic companies and their domestic shareholders can open their own foreign exchange accounts for centralized funds remittance and transfer if necessary. Third, allow the repatriation, unrestricted foreign exchange settlement and transfer of remaining funds after outward remittance through activities including repurchase by domestic companies and share increase by their domestic shareholders. Last but not least, abolish printed statements to simplify registration and data submission. The circular shall come into force as of the date of release. 2015-01-28/en/2015/0128/1145.html
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For the purpose of further improving RMB exchange rate mechanism, the People’s Bank of China recently released the Circular of the People’s Bank of China on Relevant Matters Concerning the Management of Exchange Rates for Transactions in Interbank Foreign Exchange Markets and the Listed Exchange Rate of Banks (Yinfa [2014] No. 188, hereinafter referred to as “the Circular”). The major contents of the Circular include: Firstly, the management of the banks over the spread of the listed USD trading of clients is cancelled, and the banks can make independent pricing based on market supply and demand so as to promote the independent pricing of foreign exchange market; Secondly, based on the new development of management of central parity formation approach of RMB against certain currencies and the floating band of transaction price since 2011, transparency of policies have been further improved. The Circular shall take effect as of the date of promulgation.(End.) 2014-07-03/en/2014/0703/1115.html
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· Hu Kaihong: Good morning, ladies and gentlemen. Welcome to the press conference of the State Council Information Office. Mr. Guan Tao, director of the Balance of Payments Department in the State Administration of Foreign Exchange (SAFE), has been invited to unveil data on foreign exchange receipts and payments for the first quarter of 2015 and to answer your questions. Now, let us welcome Director Guan. April 23, 2015 09:27:53 · Guan Tao: Good morning, ladies and gentlemen. Welcome to the press conference this morning. Today I am going to unveil the foreign exchange receipts and payments data for the first quarter of 2015 and take your questions on behalf of the SAFE. The economic and financial environment both at home and abroad have maintained complex since the beginning of 2015. The global economy sustains mild and unbalanced recovery, with major economies continuing to follow divergent monetary policies, and the global financial market keeps fluctuating. Domestically, China's economy is entering a new normal, featuring a slower but stable and progressive growth, and the bidirectional fluctuations of the RMB exchange rate are becoming more evident. Under such circumstances, China's cross-border capital flows are fluctuating more markedly, recently putting China under pressure from capital outflows, as a result of the domestic market players' efforts to optimize their structures of assets and liabilities denominated in the RMB and foreign currencies. April 23, 2015 09:57:39 · Guan Tao: In the first quarter of 2015, Banks settled foreign exchange of RMB 2.53 trillion (USD 412.0 billion) and sold foreign exchange of RMB 3.09 trillion (USD 503.5 billion) in 2015, with a deficit of RMB 561.9 billion (USD91.4 billion). Meanwhile, according to the data on foreign-related receipts and payments via banks, in the first quarter of 2015, banks registered cumulative foreign-related income of RMB 4.95 trillion (USD 806.8 billion) and made external payments of RMB 4.76 trillion (USD 775. 5 billion) on behalf of clients, with a surplus of RMB 190.9 billion (USD 31.2 billion) April 23, 2015 09:58:53 · Guan Tao: China’s foreign exchange receipts and payments for the first quarter show the following characteristics: First, foreign exchange settlement and sales via banks and the balance of foreign-related receipts and payments via banks on behalf of clients presented divergent trends. Excluding the impact from foreign exchange rates (the same below), in the first quarter, the foreign exchange settled by banks was down 20 percent year on year and that sold by banks was up 41 percent year on year, with a deficit of USD91.4 billion, up 97 percent from that of the fourth quarter 2014; The foreign-related receipt via banks on behalf of clients was consistent with the figure for the same period of the previous year and the external payment was up by 1 percent year on year, thus achieving a surplus of USD 31.2 billion, down by 29 percent year on year, and reversing the persistent deficits in the past two quarters. April 23, 2015 10:00:01 · Guan Tao: Second, cross-border capital flows fluctuated more markedly. The foreign exchange settled and sold via banks recorded a deficit of USD 8.2 billion in January, which rose to USD 17.2 billion in February and further to USD 66 billion in March. The foreign-related receipts and payments via banks on behalf of clients recorded a surplus of USD 36.7 billion in January, which dropped to USD 18.3 billion in February and turned into a deficit of USD 23.8 billion in March. It should be noted that cross-border capital flows fluctuated sharply in March, due to the slump of the import and export surplus in the month against the previous two months. April 23, 2015 10:01:28 · Guan Tao: Third, letting the general public hold foreign exchange continues to take effect. As a measure of the foreign exchange settlement willingness of businesses and individuals, foreign exchange settlement via banks on behalf of clients as a percentage of foreign-related foreign exchange receipts (i.e., foreign exchange settlement rate) was 69 percent, down by 3 percentage points quarter on quarter and 8 percentage points year on year. As a result, the domestic foreign exchange deposits rose by USD 78.3 billion in the same period, a year-on-year increase of USD 39.4 billion. April 23, 2015 10:02:43 · Guan Tao: Fourth, companies accelerated repayment of foreign exchange loans and external debts. In the first quarter, foreign exchange sales via banks on behalf of clients as a percentage of foreign-related foreign exchange payments (i.e., foreign exchange sales rate) that measures the motivation to buy foreign exchange registered a quarter-on-quarter increase of 6 percentage points, and the foreign exchange sales rate gained 18 percentage points year on year. The domestic foreign exchange loans rose by USD 500 million only in the same period, representing a decrease in year-on-year growth by USD 62.4 billion. The balance of cross-border financing for imports such as import bill advance by overseas institution and forward letter of credit this year was down by USD 22.7 billion, compared with an increase of USD 24.1 billion for the same period of the previous year, but the monthly average decline rate was down by 48% from the figure for the second half of 2014. Fifth, the forward settlement and sales of foreign exchange was in deficit, versus a surplus in the previous quarter. In the first quarter, the number of contracts signed between banks and clients for forward settlement of foreign exchange was down by 65 percent year on year, while the number of contracts signed for forward sales of foreign exchange was up by 34 percent, recording a deficit of USD 47 billion, compared with a surplus of USD 5.3 billion in the fourth quarter of 2014. To be specific, the forward settlement and sales of foreign exchange posted deficits of USD 5.9 billion, USD 15.4 billion and USD 25.8 billion respectively in January to March. As at the end of March, the outstanding net forward sales of foreign exchange was USD 16.1 billion, compared with net settlement of USD 12.5 billion as at the end of 2014, which suggested that banks purchased USD 28.6 billion in foreign exchange in advance from the interbank foreign exchange market in the period to hedge the exposure of forward settlement and sales of foreign exchange. In the first quarter, the spot and forward settlement and sales of foreign exchange by banks (or the total of the difference of foreign exchange settled and sold by banks and the changes in the balance of outstanding forward settlement and sales of foreign exchange), an indicator of the supply and demand for foreign exchange in the retail market, registered a deficit of USD 120 billion. April 23, 2015 10:04:17 · Guan Tao: These are the major statistical data I am going to disclose regarding foreign exchange receipts and payments during the first quarter of the year. You can also find the relevant data released on the SAFE's official website. Now I would like to take questions you might have on China’s foreign exchange receipts and payments. April 23, 2015 10:07:02 · Hu Kaihong: Thank you, Director Guan. Now please ask your questions. April 23, 2015 10:07:37 · Journalist from CCTV: Chinese banks' settlement and sales of foreign exchange has recorded persistent deficits since the second half of 2014, and increased further in the first quarter of this year. Does this mean that China is under pressure from cross-border capital outflows? What would you say about the current situation and future trends? April 23, 2015 10:09:23 · Guan Tao: Achieving basic equilibrium in our balance of payments is a key task in macro control. The SAFE has been closely watching the impact of cross-border capital flows on the balance of payments. I would like to answer your questions in three aspects: First, there are capital outflows at present. The Customs unveiled that the imports and exports recorded a surplus of USD 123.7 billion in the first quarter while the spot and forward settlement and sales of foreign exchange by banks posted a deficit of USD 120 billion, suggesting the full-scale balance of payments including those from banking and non-banking sectors must report "a surplus under the current account and a deficit under the capital account", which was consistent with what has been since the second quarter of 2014. April 23, 2015 10:11:40 · Guan Tao: Second, capital outflows are expected adjustments, which cannot be equated to illegal activities or secret capital flight. Firstly, such adjustments are expectable and show the pro-cyclical financial operation by market players. Given the greater downward pressure on the domestic economy, the global economy in profound adjustment, and the strengthening US dollar, domestic institutions and individuals continue to increase foreign currency assets and deleverage debts as they did last year, leading to the decreased spot and forward settlement of foreign exchange and increased purchases of foreign exchange. In March in particular, when the foreign trade surplus slumped, coupled with internal and external factors above-mentioned, the pressure from cross-border capital outflows for the period increased substantially. Moreover, the absolute majority of the transactions were in compliance with laws and regulations. In fact, the ratio of export income to export volume in China was 100% in the first quarter, 8 percentage points higher than the average rate of foreign exchange receipts in the previous two years, the peak season for capital inflows. April 23, 2015 10:14:46 · Guan Tao: Secondly, such adjustments can be explained and letting the general public hold foreign exchange and deleveraging debts remain the main channels for capital outflows. In the first quarter, after excluding the factor of the cross-border use of the RMB, foreign exchange receipts and payments by banks on behalf of institutions and individuals registered a deficit of USD 21.9 billion while the foreign exchange settlement and sales by banks on behalf of clients recorded a deficit of USD 79.5 billion, calculated on a comparable basis. The balance of USD 57.6 billion can be explained by the balance of USD 77.8 billion of the new foreign exchange deposits at bankshigher than the foreign exchange loans in the same period. This means that companies preferred depositing to selling foreign exchange they had, resulting in an increased deficit in foreign exchange settlement and sales. Meanwhile, companies accelerated payments for imports and repayments of debts. In the first quarter, the payments for imports both in RMB and other currencies as a percentage of the import value was 118 percent, 16 percentage points higher than the average rate for 2013 and 2014. In addition, the balance of cross-border trade finance for imports dropped by USD 22.7 billion, versus an increase of USD 24.1 billion in the same period last year. Further, as the forward settlement and sales of foreign exchange of companies changed from a surplus to a deficit, banks purchased USD 28.6 billion in foreign exchange in advance to hedge the exposure of forward settlement and sales of foreign exchange, thus further boosting the use of external assets by the banking sector for the period. April 23, 2015 10:25:15 · Guan Tao: Last but not least, such adjustments are tolerable. The foreign exchange market runs stably now and meets the control and reform targets. Equilibrium of the balance of payments, a target for macro control, does not mean balancing the budget or zero balance, but can be considered so even with some surplus or deficit. In fact, even if the preliminary transaction price of the RMB exchange rate was at or approaching the ceiling of the floating range, the supply of foreign exchange in the market would be sufficient, without triggering market panic. Although investments in funds outstanding for foreign exchange are on the decline, the central bank ensures the sufficient liquidity of the RMB through cutting interest rate and the reserve requirement, and targeted control, and therefore, the financing cost is declining. As the central bank drastically cut the required deposit reserve ratio on April 20, the interest rate has plummeted against the beginning of the year. Further, China has long been encouraging companies and individuals to hold and use foreign exchange as much as possible. Latest data show that official international reserve assets accounted for 61 percent of China's external financial assets by the end of 2014, down by 4 percentage points from the end of 2013, which also means that a growing amount of foreign exchange assets have been held by market players, an apparent shift from centralized holding by the state. April 23, 2015 10:36:02 · Guan Tao: Third, the cross-border capital flows in China will continue to fluctuate in the future. On the one hand, if the factors that led to capital outflows in the first quarter continue to take effect, this outflow trend will likely persist. On the other hand, as the reform and opening up policy pays more and more dividends and the national fine tuning measures take effect, China's economy will remain resilient, boasting strong potential and large room of maneuver, with no fundamental changes in the fundamentals to sustain a rational impetus for growth and big room for improvement in the overseas demand for the RMB assets allocation, which will be strong support to a stabilized RMB exchange rate and equilibrium of the balance of payments. Externally, although the US economy maintains a strong momentum for recovery, yet the recent uncertain performance of some economic indicators indicates that there will likely be large uncertainties in the monetary policy adjustment in the US and the trends in the USD exchange rate. Further, the recent rapid growth in the purchases of foreign exchange in China is a result of purchasing foreign exchange in advance to avert foreign exchange rate risks, or preventative purchases of foreign exchange, by some enterprises. Given their future demand for external payments, they unleashed it in advance and may not buy foreign exchange again in the future. To sum up, if positive changes occur to both domestic and international market environment, cross-border capital outflows will slow down, or even be replaced by net inflows. In fact, as the domestic and international environment have become more favorable since the end of March, the shortfall of foreign exchange between supply and demand in China has been made up quickly and the spread in the RMB exchange rate both at home and abroad has dropped significantly. April 23, 2015 10:50:21 · Guan Tao: Generally speaking, the key takeaways are as follows: first, there are capital outflows in China now; second the capital outflows are expected sequenced adjustments, which cannot be simply equated to illegal activities or secret capital flight; third, the future cross-border capital flows in China will continue to fluctuate. April 23, 2015 11:04:14 · Journalist from China News Service: The IMF pointed out at its recent annual spring meeting that the US dollar has grown dramatically recently, hitting a new high since 1981, and warned that the interest rate increase by the FED will likely trigger super taper tantrum. What's your idea of this? What impact will this have on China's cross-border capital flows? April 23, 2015 11:06:11 · Guan Tao: This spillover effect mentioned by the IMF does exist at present and is an alert to the emerging economies that have borrowed heavily in the global market, especially in US dollars. We have been closely watching, tracking and assessing the impact of this on China's cross-border capital flows, especially on the security of its external debts. So far we have concluded in three aspects as follows: April 23, 201511:09:43 · Guan Tao: First, the impact of the normalization of the US' monetary policy and the appreciation of the US dollar on China's cross-border capital flows is becoming more evident but limited on the whole. In the past, interest rate rise in the US and USD appreciation were the key causes of debt crisis and monetary crisis in emerging markets. In mid-2013, the FED aroused the expectations of QE tapering, triggering capital outflows and currency depreciation in emerging markets, while China witnessed massive capital inflows and significant growth in foreign exchange reserves. In 2014, the FED exited the QE policy and successfully stopped buying bonds by the end of the year, thus impacting the emerging markets again, including China where cross-border capital inflows at the beginning of the year were replaced by outflows but net inflows of capital and growth in foreign exchange reserves were sustained for the whole year. Since the beginning of this year, the interest rate rise by the FED and the accelerated USD appreciation, among other things, have somehow facilitated the cross-border capital outflows in China, but this is still the expected sequenced adjustment. April 23, 201511:13:23 · Guan Tao: Second, China is fully confident in and capable of resisting external impacts, but could not ignore related risks. Featuring a large economic size, a large surplus in trade in goods, sufficient foreign exchange reserves and increased elasticity of the RMB exchange rate, China has large room of maneuver. According to the indicators for risks associated with China's external debts in foreign currencies, all the external debt security indicators except the percentage of short-term external debts are below the international warning level, suggesting China's external debts are secure. Further, to adapt to the changes, domestic enterprises have recently begun actively adjusting their assets and liabilities structures to reduce external debts. The latest statistical data show that China's balance of external debts in foreign currencies amounted to USD 895.5 billion as at the end of 2014, down by USD 11.8 billion from the end of June 2014, or up by 2.5 percent year on year, which was down by more than 10 percentage points from the average growth rate for 2009-2013. This was positive adjustment by enterprises, with no widespread difficulty in solvency in the process. But it was true that some enterprises were heavily burdened with external debts and mismatch between durations and currencies, with their solvency highly related to their financial positions. We have reiterated that overall debt security does not mean zero debt risks to individuals and requires that enterprises should make external borrowings based on their needs and take appropriate measures to hedge exchange rate exposures. April 23, 201511:19:27 · Guan Tao: Third, China should work domestically and externally to actively respond to challenges. The impact of the FED's normalization of the monetary policy diverges by countries in the emerging markets, i.e., limited impact on those with good fundamentals while heavy impact on those with poor fundamentals. The reason why the impact of the adjustment is tolerable on the whole in China is that with stable economic growth and domestic prices, current account surplus, and sufficient foreign exchange reserves, China is regarded as an emerging market with good performance. The key to responding to the challenges from the likely interest rate rise and adjustment of the USD exchange rate is that China should focus on its domestic business by ensuring the economy runs stably within a rational range, and possible risks and problems arising from an economic downturn be properly addressed, so as to keep enhancing and strengthening the confidence in China's economy in the market. Foreign exchange authorities should focus on three aspects of work: First, promoting the reform by continuing to press ahead with trade and investment facilitation to accelerate the cultivation and development of external markets; second, guarding against risks by accelerating the building of an external debt and capital flow management system under the macro-prudential management framework and improving relevant plans to actively respond to the risks arising from cross-border capital flows; third, consolidating the foundation by improving the statistical monitoring of cross-border capital flows, keeping enhancing the data transparency and intensifying education to market players to guide them to control risks rationally. April 23, 201511:29:17 · Journalist from the Economic Daily: The foreign exchange settlement and sales in the first quarter of this year presented a deficit. In the context of cross-border capital outflows, will the SAFE take some measures to control the outflows? April 23, 201511:40:30 · Guan Tao: This is a question of wide concern. We introduced some temporary measures in face of the pressure from capital inflows but currently will not adopt new measures to control outflows, but actively respond to the challenges from abnormal fluctuations of cross-border capital flows in the following three aspects: First, enhancing monitoring and keen observation. The capital outflows, mainly through channels such as letting people hold foreign exchange and payments of external debts, are expected sequenced adjustments at present. As the balance of payments and the RMB exchange rate are balanced and rationalized, cross-border capital may sometimes flow out and sometimes flow in, which will be a new normal, with changes becoming more and more frequent. We should look at it in a rational way and not overanalyze it. Based on the real situation, foreign exchange authorities will further enhance monitoring and analysis of cross-border capital flows, streamline the new situation of and the new changes in cross-border capital flows to immediately assess the situation and provide warnings for reference by decision makers. Second, attaching equal importance to streamlining and controlling and promoting balanced management. On the one hand, by capturing the opportunity arising from the equilibrium of the balance of payments and the supply and demand of foreign exchange, the temporary measures preliminarily introduced to control inflows should be promptly adjusted and the foreign exchange system reform should be deepened further. Since the end of last year, the foreign exchange authorities have introduced a policy that decouples the foreign exchange loan-to-deposit ratio from the overall position of foreign exchange settlement and sales to expand the floor of the overall position of foreign exchange settlement and sales of banks, promoted across the country the reform on voluntary settlement of foreign exchange by foreign-invested enterprises and increased the overall scale of the quotas for outstanding short-term external debts of domestic financial institutions, among other things. These measures are objectively favorable for hedging the pressure from capital outflows. On the other hand, the current situation has triggered the regulatory policy for the direction of capital outflows, which is based on existing policies, not new measures. For example, the special inspection regarding export without receiving foreign exchange is conducted to intensify regulation of splitting purchases and payments of foreign exchange by individuals and crack down on foreign exchange irregularities like underground banks. April 23, 201511:41:44 · Guan Tao: Third, improving plans and increasing tools. Cross-border capital flows will possibly continue to fluctuate in the future due to many uncertainties and instabilities. Under such circumstances, scenario analysis and stress test should be conducted to design policies for different situations and to respond to various possibilities. Efforts should also be made to actively guard against the impact from cross-border capital flows, stick to the bottom line to ensure no systematic and regional financial risks occur, accelerate building the external debts and capital flow management system under the macro-prudential framework and keep increasing the policies and tools relating to counter-cyclical adjustment. Thank you. April 23, 201511:53:08 · Journalist from China Financial and Economic News: You said just now that the current changes in foreign exchange situation reflected the optimization of the assets and liabilities structures of market players. Could you recount what has been optimized? And what would you say about the commentary of the press that the "one belt one road" strategy may lead to changes in China's foreign exchange strategy? April 23, 201512:03:01 · Guan Tao: For your first question, the assets and liabilities structures of market players are optimized in the following two ways: First, letting people hold foreign exchange. Enterprises used to sell their foreign exchange to banks, which then sold the foreign exchange in the interbank foreign exchange market to increase foreign exchange reserves. Currently, however, market players hold and use foreign exchange themselves. For example, according to the international investment position data, the official international reserve assets as a percentage of external assets dropped last year, suggesting a growing proportion of foreign exchange assets is held by market players, not the central bank. Second, paying debts. In the past, as the RMB exchange rate appreciated unilaterally and the positive carries between the domestic currency and foreign currencies remained large, many enterprises borrowed heavily. But now as the situation changes, the bidirectional fluctuation of the RMB exchange rate has become more evident and the interest rate spread between the domestic currency and foreign currencies has been adjusted, many enterprises are accelerating payments of external debts. April 23, 201512:04:06 · Guan Tao: As for the second question, I would like to clarify that, first, the "one belt one road" strategy is not a one-way but a bidirectional opening up strategy, encouraging both "going global" and "bringing in". While supporting SOEs to expand overseas investments through the strategy, China encourages overseas capital to invest in China; and while encouraging driving exports of homemade products through overseas investments, China actively promotes imports from other countries, which are a key part of Chin's new open economy system. By capturing this opportunity, foreign exchange authorities should keep facilitating trade and investments. Second, foreign exchange reserve management should be aligned with the implementation of the "one belt one road" strategy. China has made some beneficial attempts in expanding the channels to use foreign exchange reserves. Of the USD 10 billion in initial capital for the Silk Road Fund, launched at the end of last year, foreign exchange reserves contributed 65%. In the future, new measures will be introduced for diversified use in foreign exchange reserve management to coordinate with the implementation of the national strategy and enhance the benefits from using foreign exchange reserves. April 23, 201512:18:27 · Journalist from NHK: In terms of the ownership of US treasury, Japan has recently surpassed China as the largest creditor of the US. What would you say about this? My second question is what's your view on the RMB internationalization according to the recent cross-border capital flows, such as the impact of cross-border capital outflows and the RMB depreciation against the USD? April 23, 201512:28:57 · Guan Tao: I would like to answer your first question in three aspects: First, the US treasury bonds held by foreign exchange reserves are just a part of the US treasury bonds held by China that have been released by the US Department of the Treasury. Since we don't know the statistical methods and coverage used by the US, we cannot comment on the data. Second, it is a normal investment behavior that the foreign exchange reserves operating organs buy or sell the US treasury bonds based on the market. Third, the US treasury bonds, the key investment and trading category in the global bonds market, feature a large market capacity, strong liquidity and high risk return, and therefore, the US treasury bonds market is a key investment destination for countries to operate and manage foreign exchange reserves. April 23, 201512:31:31 · Guan Tao: For your second question, I would like to say, first, the RMB exchange rate is fluctuating bidirectionally, with no tendency adjustment. Despite the bidirectional fluctuation of the RMB against the USD, the overall adjustment is limited and the RMB is appreciating against other currencies, so the RMB is still a strong currency. Second, based on the data we have monitored, the RMB has become China's top-2 settlement currency for cross-border trade over the euro since 2011, which will continue in the future. In 2014, the cross-border receipts and payments of the RMB in the non-banking sector accounted for 24 percent of cross-border capital flows, up by 7 percentage points from the previous year, and the figure was 27% in the first quarter of this year. A growing number of domestic enterprises are using the RMB for cross-border settlement. Therefore, the RMB internationalization has not slowed down, but is accelerating, in terms of either the market or the policies. April 23, 201512:36:04 · Reporter from Reuters What's your idea about trends in RMB exchange rate? China is facing the pressure from capital outflows while witnessing the constant appreciation of the RMB against non-USD currencies. Will this affect China's exports and macro economy? April 23, 201512:45:16 · Guan Tao: Thank you for your question. Premier Li Keqing talked about the RMB exchange rate in his interview with the British Financial Times on March 31, which was focused on three aspects: First, the bidirectional fluctuation of the RMB against the USD is a result of the strengthening USD; second, China does not want to see continued depreciation of the RMB, which may affect China's economic restructuring; third, China expects major economies to enhance the coordination of their macro policies to avoid depreciation of their currencies. April 23, 201512:46:51 · Hu Kaihong: This is the end of today's conference. Thank you for coming. April 23, 201512:52:05 (The original text is available at www.china.com.cn) 2015-06-17/en/2015/0617/1161.html
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The State Administration of Foreign Exchange (SAFE) recently released the data on foreign exchange settlement and sales by banks and foreign-related receipts and payments by banks for customers for December 2015. The spokesperson of the SAFE answered press questions on related issues. Q: What would you say about the cross-border capital flows in China in 2015? What are the characteristics? A: Overall, China witnessed net outflows of cross-border capital in 2015, but the pressure from outflows in the fourth quarter was lower than it was in the third quarter. Below are the major characteristics: First, foreign exchange settlement and sales by banks and foreign-related receipts and payments by banks for customers were both in deficit. In 2015, in dollar terms, foreign exchange settlement by banks was down by 9% from 2014, and foreign exchange sales by banks were up by 24%, indicating a deficit of USD 465.9 billion; foreign-related receipts by banks for customers were slightly down by 0.8%, and foreign-related payments by banks for customers were up by 6%, suggesting a deficit of USD 200.9 billion, including a deficit of USD 253.8 billion in foreign-related foreign exchange receipts and payments. Second, cross-border capital flows fluctuated drastically. For foreign exchange settlement and sales by banks, a deficit of USD 91.4 billion was recorded in the first quarter, which declined to USD 13.9 billion in the second quarter, expanded to USD 196.1 billion in the third quarter and then dropped to USD 164.4 billion in the fourth quarter. For foreign-related foreign exchange receipts and payments by banks for customers, deficits of USD 25.3 billion, USD 1.6 billion, USD 163.7 billion and USD 63.1 billion were posted in the first, second, third and fourth quarters respectively. Net foreign exchange outflows in the fourth quarter were down by 61% quarter-on-quarter. Third, companies actively repaid domestic foreign exchange loans and cross-border financing and released the risks of high-leverage operation and currency mismatch in an orderly way. The foreign exchange sales rate that measures the motivation for purchasing foreign exchange, or the ratio of foreign exchange sales by banks for customers to foreign-related foreign exchange payments, was 81% in 2015, 12 percentage points higher than it was in 2014, indicating an increasing part of foreign exchange payments by companies was made for foreign exchange purchases while a smaller part was for financing. Accordingly, the balance of domestic foreign exchange loans dropped by USD 100.6 billion in 2015, compared with an increase of USD 21.7 billion in 2014. The cross-border trade finance for imports such as refinancing and forward L/C fell by USD 115.1 billion in 2015, compared with a drop of USD 44.9 billion in 2014. Fourth, letting people hold more foreign exchange was pushed ahead with and outbound investments by companies for going global were accelerated. The foreign exchange settlement rate that measures the willingness to settle foreign exchange, or the ratio of foreign exchange settlement by banks for customers to foreign-related foreign exchange receipts, was 68% in 2015, 3 percentage points lower than 2014, suggesting companies and individuals were more willing to hold foreign exchange income. While more foreign exchange was used to repay domestic foreign exchange loans and cross-border financing, the balance of companies' foreign exchange deposits as a whole went up by USD 24.9 billion in 2015. The balance of individuals' domestic foreign exchange deposits climbed by USD 18.4 billion, up by USD 13.3 billion than 2014. Chinese companies made ODI of USD 161.4 billion in 2015, up by 90% from 2014. Fifth, banks posted a deficit in forward settlement and sales of foreign exchange, which dropped significantly in the fourth quarter. In 2015, the value of contracts signed between banks and customers in respect of forward settlement of foreign exchange dropped by 56% compared with that of 2014 and the value of contracts signed between banks and customers in respect of forward sales of foreign exchange went up by 33%, indicating a deficit of USD 194.2 billion. Specifically, the deficit was USD 47 billion in the first quarter, dropped to USD 21.5 billion in the second quarter, expanded to USD 99.3 billion in the third quarter and then fell by a staggering 73% quarter-on-quarter to USD 26.3 billion in the fourth quarter. Q: What is your view of the recent significant changes in Chinas' cross-border capital flows? A: The current cross-border capital flows are reflective of the adjustment of the structure of external assets and liabilities in China. According to the data in the International Investment Position, China's net external assets amounted to USD 1.54 trillion as at the end of September 2015. For statistical reasons, this figure is not comparable to that of the end of 2014, but is USD 136 billion higher than the comparable figure of the end of March 2015. Specifically, holders of external assets have shifted from the central bank to market players. As official reserve assets drop, the assets of Chinese market players, such as ODI, securities investments and overseas deposits and loans, have increased, with the figures of the end of September climbing by USD 52.5 billion, USD 8.8 billion, and USD 87.8 billion from the end of March respectively. As for external liabilities, foreign investments in securities and foreign loans in China are dropping, with the figures of the end of September decreasing by USD 180.4 billion and USD 71.5 billion from the end of March. Meanwhile, China's FDI has increased by USD 100.5 billion, indicating continuous inflows of funds for long-term investments. For the moment, China's balance of payments remains stable, suggesting the risk of cross-border capital flows is within control. First, China continues to post a current account surplus, with the causes and structure of the surplus being reasonable, and still ranks No. 1 worldwide by the size of foreign exchange reserves, which was USD 3.33 trillion as at the end of 2015, much higher than USD 1.2 trillion in Japan, the No. 2 country, and USD 600-odd billion in Saudi Arabia, the No. 3 country. This indicates that the usual payments of the balance of payments are fully ensured. Second, the external solvency risk is in good order and within control. Some companies have recently adjusted their structure of assets and liabilities, leading to a drop of USD 143.4 billion in the balance of external debt at the end of September 2015 from the figure with comparable coverage at the end of March 2015, which is conducive to reducing the risk of repaying external debts in the future. As for solvency, China's external debt critical indictors have been within the international safe standards over the years. For example, as at the end of September 2015, the ratio of full-scale outstanding short-term external debt in both domestic and foreign currencies to the balance of foreign exchange reserves was 29.1%, down by 2.5 percentage points from the end of March and much lower than the international safe standard of 100%. Last but not least, the impact of cross-border capital outflows on domestic liquidity and economic and financial operation is within control. Q: What's your view of the impact of the Fed's interest rate rise on China's cross-border capital flows? If the Fed continues to slowly raise interest rates in 2016, what changes will occur to China's cross-border capital flows? What will be the mid- and long-term impact? A: The Fed's interest rate rise will boost the cyclical adjustment of the relevant structure of assets and liabilities of Chinese market players, which is in line with the market law and a necessary phenomenon. Over the past years, as developed economies such as the US adopted QE, emerging economies witnessed large-scale cross-border capital inflows. During this period, Chinese market players also showed a preference for foreign exchange financing to holding foreign exchange assets, which was a reasonable choice in face of unilateral appreciation of the RMB and low cost of foreign exchange financing, but was at risk of excessive adjustment and increased cross-border capital inflows in China. As the Fed recently exited from QE and began raising interest rates, Chinese enterprises adapted to the changes in the environment, optimized the structure of assets and liabilities in domestic and foreign currencies and adjusted the behavior of holding assets in domestic currency and owing debt in foreign currencies that has continued for years. For example, the SAFE statistics show that companies' cross-border financing for imports such as refinancing and forward L/C dropped from the peak of USD 367.4 billion in June 2014 to USD 164.6 billion at the end of 2015, which was equal to the level prior to the Fed's exit from the second round of QE in 2011. This change helped release the external financing risk accumulated by Chinese enterprises as developed economies adopted QE. The Fed's interest rate rise will pose a challenge to most emerging economies, but China has relatively strong capability to resist the external impact. An analysis of the impact of the Fed's past and recent interest rate rises on emerging economies shows that hard-hit countries are usually those struggling with obviously deteriorated economic fundamentals, continued current account deficit, and heavy reliance on external financing. China's overall economic fundamentals are sound, its economic growth is at the forefront among major economies despite a large economic size, its industrial structure is diversified with great potential, strong resilience, and large leeway, and its financial system is robust. China's balance of payments is stable and healthy, trade in goods and current accounts continue to post a surplus, long-term capital continues to flow in, foreign exchange reserves are abundant, and the marketization of the foreign exchange rate formation mechanism is being deepened. The Fed's interest rate rise will not upset the basic equilibrium of China's balance of payments in the mid- and long-term. The purpose of this round of interest rate rise by the Fed is to normalize the monetary policy, not to cool the overheated economy, but its direct or indirect impact on the US economy and finance will be taken into consideration, including changes of other economies due to the spillover, which may impact the US instead. As a result, the Fed's interest rate rise may be a slow and cautious process as we expect, the US Dollar Index will fluctuate prior to and post the interest rate hike, and part of the market impact of the interest rate hike may be digested step by step. The normalization of the Fed's monetary policy somehow indicates the promising prospects of the US economic recovery, which will be favorable for stabilizing China's external demand. But it is sure that China's cross-border capital flows are essentially dependent on China's domestic economic fundamentals. In the coming years, as China's economic structure is optimized and upgraded, and the dividends of reform are yielded, China's domestic economy is expected to stabilize and grow after the adjustment is completed, which will strengthen the foundation for the basic equilibrium of China's balance of payments. Q: China's balance of foreign exchange reserves dropped by USD 512.7 billion year on year as at the end of 2015. Where have these foreign exchange reserves been used? A: As at the end of December 2015, the balance of China's foreign exchange reserves was USD 3.33 trillion, down by USD 512.7 billion year on year. Many factors have contributed to the changes in China's foreign exchange reserves, such as the Central Bank's operation in the foreign exchange market, the price fluctuations of foreign exchange reserves as investment assets, the changes in foreign exchange rate and support of the "going global" effort by foreign exchange reserves. Major factors are as follows: First, changes in non-trading value like foreign exchange rate and price led to a decrease of more than USD 100 billion in the book value of foreign exchange reserves, which is different from outflows of foreign exchange from foreign exchange reserves. According to the balance of payments data, in the first three quarters of 2015, foreign exchange reserves obtained from the trading of foreign exchange dropped by USD 227.2 billion accumulatively, while the balance of the book value of foreign exchange reserves fell by USD 328.9 billion, indicating the book value of foreign exchange reserves was down by USD 101.7 billion due to the valuation factors such as conversion of foreign exchange rates. As foreign exchange reserves are denominated in the US dollar, changes in the exchange rates of other currencies against the US dollar will lead to changes in the size of foreign exchange reserves. For example, as the US Dollar Index went up by 9% in 2015, foreign exchange reserves denominated in the US dollar will shrink when non-US dollar assets like the euro in foreign exchange reserves are converted into the dollar. Second, Chinese market players including companies optimized the structure of domestic assets and liabilities in domestic and foreign currencies, increased foreign exchange deposits and repaid foreign exchange loans. In 2015, corporate and individual foreign exchange deposits in China increased by USD 24.9 billion and USD 18.4 billion respectively, and domestic banks increased USD 102.4 billion in foreign exchange position to satisfy companies' demand for the maintenance of value in the long term. Meanwhile, the balance of domestic foreign exchange loans of companies fell by USD 100.6 billion. Third, companies and individuals made net payments in foreign exchange such as overseas investments, consumption and repayment of debt. In 2015, non-banking sectors such as domestic companies and individuals made net cross-border payments of USD 253.8 billion in foreign exchange, for ODI, securities investments under QDII, repayment of overseas financing, studying abroad and travel. But huge net inflows of foreign exchange were registered under FDI and overseas securities financing by Chinese companies. Fourth, as defined by the IMF on foreign exchange reserves, foreign exchange reserves used to support the "going global" effort would be deducted from total foreign exchange reserves when being calculated. As the economic and financial environments both at home and abroad are still complex and changing, it is normal to see foreign exchange reserves fluctuating. As the formation mechanism for the marketization of the RMB exchange rate is improved, the balance of payments will achieve basic equilibrium and fluctuations of foreign exchange reserves may become a new normal. Q: China's foreign exchange reserves have been shrinking recently, which have sparked concerns that the liquidity of foreign exchange reserves may be exhausted. What would you say about this? A: The increase and decrease in foreign exchange reserves are the results of macroeconomic operation. The recent changes in the size of foreign exchange reserves are reflective of the adaptive adjustments of assets and liabilities in domestic and foreign currencies by domestic market players, which send some positive signals, and future changes need to be viewed in a sensible way. As far as liabilities are concerned, China's external liquidity risk is in a good order and within control. Of the outstanding external debt of USD 1.53 trillion as at the end of September 2015, USD 506.3 billion was mid- and long-term external debt and half of the short-term external debt was trade-related credit. 47% of external debt was denominated in the RMB. Moreover, companies are actively pushing forward deleveraging of external debt. After their balance sheets are recovered, the financial situation will become healthy, which will be more favorable for structural adjustment. The amount of external debt is within the bearable range of foreign exchange reserves, which are more than USD 3 trillion at the moment. As for assets, companies are the key holders of foreign exchange in the effort of letting people hold more foreign exchange, and they focus on ODI, which has produced significant results in recent years. The International Investment Position data show that the ODI assets of Chinese market players went up by USD 52.5 billion as at the end of September 2015 from the end of March. Individuals purchase foreign exchange mainly for two purposes: first, traveling, shopping and studying abroad, which are the objective results of Chinese economic growth. Second, individuals' wealth management demand to allocate foreign currency assets. Given the real interest differentials between domestic currency and foreign currencies, the benchmark yields of RMB financial products in China still can reach 4%, much higher than the US dollar deposit interest rates and the yields of financial products in other currencies in China, indicating foreign currency assets are not the ideal wealth management channels for Chinese individuals. As for individual use of foreign exchange, no changes have occurred to the policies for purchases of foreign exchange within the quota of USD 50,000 or for purchases of foreign exchange of over USD 50,000 under the current account based on the transaction certificates. Therefore, individuals need to purchase and hold foreign exchange in a sensible way. Overall, measured by the absolute amount of foreign exchange reserves or by other adequacy indicators such as the shares of foreign exchange reserves in GDP, imports and external debt, China's foreign exchange reserves are abundant, which lays a strong foundation for the state to withstand external impact. Q: Will the SAFE introduce new management measures in respect of cross-border capital flows? Will measures be taken to restrict purchases of foreign exchange and capital outflows? A: Given the current situation of cross-border capital flows, the logic that the risk bottom line should be safeguarded while the overall principle of supporting reform and opening up should be followed in foreign exchange administration will remain unchanged. In recent years, under the uniform arrangements of the CPC Central Committee and the State Council, efforts have been made to support the development of the real economy, promote administration streamlining and power delegation, and facilitate trade and investment activities in foreign exchange administration. At the same time, further efforts have been made to strengthen monitoring and early warning of the balance of payments statistics, improve ongoing, ex-ante and macro-prudential management, and enhance offsite verification and onsite inspections so as to guard against unusual cross-border capital flows. This is the direction that has been followed in foreign exchange administration as boosting reform while guarding against risks have been the responsibilities and primary tasks of foreign exchange authorities. As a result, the principle of supporting and facilitating normal and reasonable use of foreign exchange by market players has not been changed. To prevent drastic fluctuations of cross-border capital, the SAFE has taken some measures, particularly heightened monitoring, standardization of business, crackdown of speculations and irregularities, but no new regulations on restricting purchases and payments of foreign exchange have been introduced. For example, the policy for individual purchases and payments of foreign exchange remains unchanged. The annual quota for individual purchases of foreign exchange of USD 50,000 per person or the equivalent has not been restricted or slashed and such purchases can be done through multiple channels including bank counters, online banking, self-service terminals, telephone banking and mobile banking. Purchases of foreign exchange under the current account of more than USD 50,000 or the equivalent can be handled at bank counters by presenting transaction certificates provided that the transaction background is authentic. Meanwhile, the requirements for heightening regulation of the authenticity and compliance of foreign exchange receipts and payments have not been changed either. The prerequisites for the facilitation and liberalization of foreign exchange administration remain to be authenticity and compliance. The requirements for authenticity and compliance do not conflict with facilitation. As the demand of the real economy is satisfied and the normal order of the foreign exchange market is maintained, trade and investment facilitation could obtain real and effective guarantee, and benefit the absolute majority of market players. Going forward, foreign exchange authorities will supervise the implementation of the regulatory requirements for authenticity and compliance through offsite monitoring and onsite inspections. Foreign exchange authorities will focus their monitoring and verification on foreign exchange receipts and payments by banks and companies, guide banks to handle foreign exchange business under the principles of "knowing you customer", "understanding your business" and "due diligence" to perform their responsibilities for authenticity and compliance reviews. Moreover, foreign exchange authorities will continue to conduct related inspections of foreign exchange business, crack down on regulatory and legal offences such as fabricated foreign exchange transactions without an authentic transaction background and underground banks. 2016-02-14/en/2016/0214/1186.html
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On December 31, 2015, governor of the People's Bank of China (PBC), Zhou Xiaochuan, accompanied by Yi Gang and Pan Gongsheng, deputy governors of the PBC, and Yin Yong, assistant governor of the PBC, paid a visit to the SAFE Investment Center to call on officials devoted to administering foreign exchange reserves. On behalf of the PBC's CPC Committee, Zhou Xiaochuan showed his concerns and care for all the officials devoted to administering foreign exchange reserves and confirmed the achievements they made. The year 2015 was the closing year of the 12th Five-Year Plan period, said Zhou Xiaochuan. A review of the past five years shows that profound changes have taken place in China's foreign exchange situation. In face of complex economic and financial environments both at home and abroad, the SAFE Investment Center followed the leadership of the CPC Central Committee and the State Council, and conducted the Mass Line campaign and the special educational campaign of "Three Stricts and Three Earnests", adapted to the new normal, and pushed forward the operational and management work, thus ensuring the security, flows, and value maintenance and increase of foreign exchange reserve assets and making significant contributions to the deepening of the national reforms and the achieving of the development goals. Zhou also pointed out that the SAFE Investment Center made risk prevention its top priority in respect of foreign exchange reserves in 2015. To serve the national development strategy, the SAFE Investment Center overcame the challenge of drastic fluctuations in international financial markets and successfully completed its operational and management tasks, taking a new step toward building a world-class asset management institution and playing active roles in supporting the development of the real economy and the national key strategies. Zhou stressed that the year 2016 is the first year when China enters the crucial period to build a moderately well-off society in an all-round way. While implementing the spirit of the 18th CPC National Congress, the Third, Fourth and Fifth Plenary Sessions of the 18th CPC Central Committee and the Central Economic Work Conference, people engaging in the operation and management of foreign exchange reserves are required to seek progress while maintaining stability, make innovations, improve the bottom line thinking, and deliver a good performance in the operation and management of foreign exchange reserves in a strict and down-to-earth manner, so as to better serve the national development and ensure a good start of the 13th Five-Year Plan period. 2016-01-13/en/2016/0113/1183.html
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The People's Bank of China (PBC) and the State Administration of Foreign Exchange (SAFE) recently announced that the foreign exchange trading time would be extended and qualified foreign players would be introduced. An official from the PBC answered press questions on relevant issues. Q: What are your major considerations in extending the foreign exchange trading time and introducing qualified foreign players? A: As the RMB exchange rate liberalization, convertibility and internationalization accelerate, there is a growing demand for speeding up the development of the domestic foreign exchange market, especially boosting the opening up of the market. This move is aimed at diversifying the players in the domestic foreign exchange market, expanding their trading channels and boosting the formation of consistent RMB exchange rate both at home and abroad. This is a reformative measure to deepen the development of the foreign exchange market. Q: What adjustments will be made to the operating time of the trading system of China Foreign Exchange Trade System (CFETS)? A: The foreign exchange trading hours will be adjusted from 9:30-16:30 to 9:30-23:30, Beijing time (the regional trading hours will remain unchanged at the moment). The operating time of the foreign currency pair and foreign currency lending system will be changed from 7:00-19:00 to 7:00-23:30, Beijing time. The market will not be closed in between. Q: Why will the strike price of spot inquiry about the exchange rate of the RMB against the USD at 16:30 Beijing time be regarded as the closing price of the day after the extension? A: After the extension, the market liquidity may still chiefly come from day trading in a fairly long time to come and will reflect to the largest extent the real supply-demand situation in China's foreign exchange market. But the liquidity in night trading will be poor and may heighten volatility in the market, making it easy for the exchange rate to be misstated and even be manipulated. If the exchange rate at 23:30 is regarded as the closing price, market makers may refer to this price to quote the central parity rate for the second day, thereby weakening the representativeness of the central parity rate as a benchmark. But if the market markers quote the central parity rate for the second day without referring to the closing price due to its lack of representativeness, the authoritativeness of the central parity rate quotation mechanism will be impacted, leading to a structural deviation of the closing price from the second-day central parity rate. As a result, the strike price at 16:30 will continue to be the closing price of the interbank foreign exchange market. Q: Will the CFETS publish more reference rates for different time after the extension? A: To facilitate foreign exchange pricing and trading and provide more reference rates for market players, the CFETS will publish reference rates for 17:00, 18:00, 19:00, 20:00, 21:00, 22:00 and 23:00 respectively on chinamoney.com.cn, in addition to those for 10:00, 11:00, 14:00, 15:00 and 16:00 as it currently does. The calculation method will remain unchanged. Q: What will be the way of trading and trading categories allowed for qualified foreign players after their entry into the interbank foreign exchange market? A: After entry into the interbank foreign exchange market, qualified foreign players will be allowed to participate through bidding and inquiry as provided by the CFETS trading system in the trading of all listed trading categories, including spot, forward, foreign exchange swap, currency swap and options transactions. Q: Do qualified foreign players have to meet some qualifications for becoming members of the interbank foreign exchange market? Q: Currently, qualified foreign players to access the interbank foreign exchange market are primarily the foreign participating banks boasting a large scale of the RMB purchase and sales business, an international reputation and regional representativeness. They will be allowed to access the market by the CFETS based on their willingness and in accordance with the laws. The application procedures, technical standards and charging for qualified foreign players to become members of the interbank foreign exchange market are the same as those for existing members. Q: Will qualified foreign players be required to sign a master agreement with their counterparties to participate in the trading activities in the interbank foreign exchange market? A: It is a universal practice in both domestic and foreign financial markets to sign a master agreement. To trade derivatives in China's interbank foreign exchange market, foreign players need to sign the master agreement of NAFMII or ISDA with their counterparties through their independent negotiations. Q: Can qualified foreign players become market makers given that a market maker system is currently adopted in the interbank foreign exchange market? A: As it takes time for qualified foreign players to adapt at the early stage after entering the interbank foreign exchange market, they will be allowed to participate in the trading activities in the market as a general member only and cannot become market markers at the moment. Q: What adjustments will be made to the existing model of the RMB purchases and sales business after foreign participating banks access the interbank foreign exchange market? Q: There are two business models for the foreign participating banks approved to conduct the RMB purchases and sales business to select in China's interbank foreign exchange market: First, continuing to conduct the RMB purchases and sales business directly with their domestic correspondent banks; second, applying to the CFETS for becoming a member of the interbank foreign exchange market and conducting foreign exchange trading in the market through the CFETS trading system. Foreign participating banks are allowed to choose one model only, based on their wish. Q: Is it still necessary for a domestic bank to report through RMB Cross-Border Payment & Receipt Management Information System (RCPMIS) the information on trading with a foreign participating bank allowed to conduct the RMB purchases and sales business in the interbank foreign exchange market? A: A foreign participating bank choosing to become a member in the interbank foreign exchange market is required to report to the CFETS at the close of the trading day the information relating the RMB purchases and sales it conducts in the interbank foreign exchange market through the CFETS trading system, and its counterparty does not need to report relevant information through RCPMIS. 2015-12-30/en/2015/1230/1179.html
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To further enhance the transparency of foreign exchange administration policies, the State Administration of Foreign Exchange (SAFE) has stepped up efforts to introduce legislations and streamline regulations in key areas since the very beginning of 2015. Legislations introduced involve centralized operation and management of foreign exchange funds by MNCs, administration of individuals' foreign exchange, receipts and payments of foreign currency banknotes by domestic institutions, funds management in cross-border issuance and sales of mainland and Hong Kong securities investment funds, engagement in the trading of domestic specified futures products by overseas trading participants and overseas brokers, exchange business by franchised institutions of domestic and foreign currency exchange for individuals through the internet, and foreign exchange account management for foreign central banks and similar institutions investing in inter-bank markets. Regulation streamlining is focused on nullifying or announcing ineffective some foreign exchange administration regulations that cannot adapt to the requirements for business development and reforms. To facilitate public enquiry and application, the SAFE then upgraded the Catalogue of Major Existing Laws and Regulations in Effect on Foreign Exchange Administration (Catalogue) and released it at its official website. The upgraded Catalogue contains 222 policies and regulations on foreign exchange administration released as of December 31, 2015, which fall into 8 categories including general foreign exchange administration, foreign exchange administration under the current account, foreign exchange administration under the capital account, regulation of the foreign exchange business of financial institutions, the RMB exchange rate and the foreign exchange market, balance-of-payments and foreign exchange statistics, foreign exchange inspections and application of the laws and regulations, and the scientific administration of foreign exchange, and several sub-categories by specific business type. This is the sixth straight year that the SAFE has regularly updated and published the list of currently effective regulations. The SAFE will make further efforts to build and improve a long-term mechanism for streamlining regulations, and sort out and update the Catalogue regularly to enhance policy transparency, facilitate banks, companies, and individuals to understand and apply foreign exchange administration regulations, promote law-based foreign exchange administration and support development of the real economy. 2016-02-02/en/2016/0202/1185.html
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To standardize and facilitate operation by banks and individuals in respect of foreign exchange business, the State Administration of Foreign Exchange (SAFE) recently issued the Circular of the State Administration of Foreign Exchange on Further Improving the Administration of Individual Foreign Exchange (Huifa No. 49 [2015], the Circular). The Circular is highlighted as follows: First, the individual foreign exchange business monitoring system will be launched nationwide on January 1, 2016 and at the same time, the management information system for foreign exchange settlement and sales for individuals will be no longer in use. Second, the watch list management for individual foreign exchange business will be improved. An individual who borrows another individual's quota to handle foreign exchange settlement and sales will be put on a watch list; a risk reminder will be first issued to individuals who lend their quotas to help another individual for split settlement and sales of foreign exchange and then these individuals will be put on a watch list if they lend their quotas again. Third, regulations will be streamlined. Five foreign exchange administration regulations involving settlement and sales of foreign exchange for individuals will be nullified for deepening the understanding of and facilitating the execution by market players. Launched as the Circular is issued, the individual foreign exchange business monitoring system is designed to further facilitate foreign exchange handling by banks and individuals and improve the monitoring efficiency in respect of individual foreign exchange business, under the existing framework for the administration of individual foreign exchange. To acquire full-scale data, this system supports over-the-counter individual foreign exchange business as well as individual foreign exchange business through other channels and will run more stably. Moreover, the system, interfaced with the operating systems of banks, can effectively reduce repeated inputting by operators at banks. With this system, foreign exchange authorities will strengthen the watch list management and offsite monitoring, by acquiring, analyzing, and disseminating relevant data in a centralized manner and sharing the watch list across the country. The Circular shall come into force on January 1, 2016. 2016-01-13/en/2016/0113/1182.html
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To facilitate domestic and foreign currency exchange franchised business for individuals and diversify domestic supply of foreign currency banknotes, the State Administration of Foreign Exchange (SAFE) has recently issued the Reply of the State Administration of Foreign Exchange to Franchised Institutions Providing Domestic and Foreign Currency Exchange for Individuals to Engage in Transport of Foreign Currency Banknotes into or out of the Territory and Foreign Currency Wholesale Business (Huifu No.169 [2015], hereinafter referred to as the “Reply“), approving TransForex (Tianjin) Currency Exchange Co., Ltd, Travelex Currency Exchange (China) Co., Ltd and Beijing United Money Exchange Co., Ltd ( “Three Franchised Institutions”) to engage in transport of foreign currency banknotes into or out of the territory and foreign currency wholesale business (“banknote transport and wholesale business”). The Reply is highlighted as follows: I. specifying the scope of the banknote transport and wholesale business, and permitting the Three Franchised Institutions to determine in their sole discretion the currency for transport and which bank or franchised institutionacross the country for sales and purchases offoreign currency banknotes. II. requiring the Three Franchised Institutions to manage the operating and accounting of the banknote transport and wholesale businessand the retail businessseparately, and handle theclearing through special accounts for the banknote transport and wholesale business of a franchised institution. III. regulating other obligations of the Three Franchised Institutions, such as statistics and reporting, as well as anti-money laundering. 2015-07-01/en/2015/0701/1162.html