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Since the Outline of the Plan for Social Credit System Construction (2014-2020) (Guofa No. 21 [2014], the “Outline”) was promulgated in June 2014, the State Administration of Foreign Exchange (SAFE) has conscientiously implemented the strategic plan of the CPC Central Committee and the State Council on the construction of the social credit system and vigorously pressed ahead with the credit system construction in the foreign exchange area, based on the situations of foreign exchange administration, so as to promote the healthy and orderly operation of the foreign exchange market. The major work is highlighted as follows: First, improving the work mechanism. The Plan Promotion Team was established, with administrator of the SAFE as head, and deputy administrator of the SAFE as deputy head, to take full charge of the organization, advancement and coordination regarding the credit system construction in the foreign exchange area. Second, strengthening top-down design. The Opinions on Credit System Construction in Foreign Exchange Area was introduced, expressly setting forth the general ideas and major tasks of the credit system construction in the foreign exchange area, and defining the top priorities and divisions of responsibilities for 2015, in a bid to lay a solid foundation for pressing ahead with the credit system construction in the foreign exchange area in an orderly manner. Third, conducting more promotion and education activities. The SAFE has actively carried out activities such as the “Promotion Month for Running Businesses with Integrity”, and published a byline story entitled Actively Pressing Ahead with Credit System Construction in Foreign Exchange Area to make a profound interpretation of the credit system construction in the foreign exchange area. Fourth, stepping up efforts to disclose violations of foreign exchange laws and regulations. The SAFE discloses violations of foreign exchange laws and regulations via inquires on a quarterly basis, and actively cooperates with relevant departments to integrate foreign exchange violations into the basic database of the People’s Bank of China on financial credit information and the comprehensive credit database of China E-Port Committee for importers and exporters. Fifth, investigating into and rigorously rectifying violations of foreign exchange regulations. In 2014, the SAFE investigated into and rectified 1903 foreign exchange cases, imposing administrative penalties of RMB 450 million; and cooperated with public security authorities to detect 32 foreign exchange illegal cases such as underground banks, involving RMB 222.4 billion. Next, the SAFE will continue to conscientiously implement of the plans of the CPC Central Committee and the State Council, further press ahead with the credit system construction in the foreign exchange area by strengthening top-down design, improving institutional arrangements, standardizing credit information records and use and improving classified management, so as to create a sound foreign exchange credit environment highlighting “incentivizing the creditable and punishing the discredited". (The end) Relevant links: 1. The Circular of the State Administration of Foreign Exchange on Issuing the Opinions on Credit System Construction in Foreign Exchange Area (Huifa No. 16 [2015], see Appendix 1) 2. Actively Pressing Ahead with Credit System Construction in Foreign Exchange Area (See Appendix 2) FILE: Opinions on Credit System Construction in Foreign Exchange Area FILE: Actively Pressing Ahead with Credit System Construction in Foreign Exchange Area 2015-07-24/en/2015/0724/1164.html
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The State Administration of Foreign Exchange (SAFE) has recently held the 2015 Advanced Workshop for Branch Directors in Zhengzhou, Henan. Following the plans of the CPC Central Committee and the State Council and the spirit of the Workshop of the People's Bank of China with Branch and Sub-branch presidents, participants at this workshop studied and analyzed both domestic and overseas financial and foreign exchange positions, with training and discussions conducted based on the priorities of foreign exchange administration. Based on the current foreign exchange position, panel discussions on monitoring and analysis of trade in goods, ongoing and ex-post regulation of the capital account, monitoring and warning of cross-border capital flows, and new framework for foreign exchange regulation were held and experts and scholars were invited to give lectures at this workshop. Due to complex and changing economic conditions both at home and abroad, China has witnessed sharper short-term fluctuation of cross-border capital flows but basic equilibrium of supply of and demand for foreign exchange since the beginning of this year, said Yi Gang at the workshop. Foreign exchange authorities have been persistent in pressing ahead with reforms while guarding against risks. To be specific, they deepened the reform of capital account convertibility, further promoted trade and investment facilitation, paid close attention to ongoing and ex-post regulation, and guarded against impacts from cross-border capital flows, thereby improving their capabilities to support economic restructuring, transformation and upgrading. It was unanimously agreed that since the SAFE proposed the "five shifts" in concepts and approaches of foreign exchange administration in 2009, foreign exchange authorities have achieved tremendous fruits in administration streamlining and power delegation, management transformation, monitoring and warning, and system integration, thereby laying a solid foundation for giving the market a decisive role in allocation of foreign exchange resources. To deliver a good performance in the subsequent reform of foreign exchange administration, Yi Gang stressed that foreign exchange authorities need to adapt to the changes in the foreign exchange position, identify the breakthrough point of the foreign exchange administration reform and continue to enhance the management and service quality based on administration streamlining and power delegation, so as to speed up building a macro-prudential policy framework for foreign exchange administration. In the next step, Yi Gang proposed that foreign exchange authorities should implement the plans of the CPC Central Committee, the State Council and the CPC Committee of the People's Bank of China, taking a holistic approach to reform and innovation, proactively adapting to the new normal of economic development, pressing ahead with the reforms of administration streamlining and power delegation, combination of deregulation and regulation, and service optimization, and innovating ongoing and ex-post regulation, so as to fully discharge the responsibilities granted by the state. First, continuing to streamline administration and delegate power, deepening the reform in the key areas of foreign exchange administration, and pressing ahead with capital account convertibility to support the development of the real economy. Second, improving monitoring, analysis and warning of cross-border capital flows and reinforcing the basis of data system, while cracking down on foreign exchange irregularities and intensifying risk prevention. Third, further strengthening operation and management of foreign exchange reserves to ensure the security, liquidity and value preservation and growth of foreign exchange reserves. Fourth, intensifying analysis and study, and further enhancing party building in the SAFE offices, cleaning up work styles and upholding integrity, teambuilding and internal management, so as to support the work priorities of foreign exchange administration. 2015-09-16/en/2015/0916/1170.html
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The State Administration of Foreign Exchange (SAFE) recently issued the Circular of the State Administration of Foreign Exchange Concerning Foreign Exchange Administration for Domestic Residents Conducting Overseas Financing and Round-trip Investments via Special Purpose Companies (Huifa No. 37 [2014], hereinafter referred to as the “Circular”) so as to support implementation of the “going-global” strategy, to fully utilize international and domestic resources and markets, to promote the facilitation of cross-border investments and finance, practically serve development of the real economy, and to increase the convertibility of cross-border capital and financial transactions in an orderly manner. The Circular mainly includes the following: First, optimizing the administration process: Rationally defining the scope of foreign exchange administration for round-trip investments based on the role and objectives of foreign exchange administration. Transforming foreign exchange administration of round-trip investments and optimizing the relevant administration process based on the concept of “administering cross-border outflows against overseas direct investments (ODI) and cross-border inflows against foreign direct investments (FDI).” Second, streamlining the administration processes: Adjusting the scope of registration of overseas special purpose companies and only registering those companies directly set up or controlled by domestic residents (first level). Abolishing the established procedures, such as the set-up registration, financing registration, registration for changes in financing of foreign special purpose companies, and simplifying changes in the content of the registration. Third, simplifying the business materials. Domestic residents carrying out foreign exchange registration for outward investments in person are only required to submit a standard application form in a fixed format, a commitment regarding the legitimacy of the funds, and identification and relevant supporting authenticity evidence. Fourth, expanding the channels for capital: Allowing purchases and payments in foreign exchange by domestic residents to be used to establish overseas special purpose companies and overseas working capital and, at the same time, eliminating the restrictions on domestic companies’ overseas lending to special purpose companies. Fifth, relaxing restrictions on the utilization of funds from overseas financing, abolishing the mandatory rules on the repatriation of funds, i.e., “profits, dividends, and foreign exchange earnings brought about by capital changes derived from special purpose companies by domestic residents shall be repatriated within 180 days from the day of receipt,” and allowing funds from overseas financing and other related funds to be retained for overseas use. Sixth, clearly incorporating incentive plans for employee rights and benefits in non-listed special purpose companies into the scope of registration to better satisfy the reasonable individual demands of domestic residents. Seventh, strengthening the idea of risk prevention and control. Intensifying responsibility investigations of violations by putting more efforts into statistics and monitoring and focusing on regulation during the course and ex-post regulation as well as decentralizing to promote the facilitation of cross-border investments and financing. This Circular will be implemented as of the date of issuance. 2014-08-01/en/2014/0801/1123.html
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To further deepen the foreign exchange administration system reform, and better satisfy the requirements for and facilitate operations and capital operations of foreign-invested enterprises, the State Administration of Foreign Exchange (SAFE) recently issued the Circular of the State Administration of Foreign Exchange Concerning Reform of the Administrative Approaches to Settlement of Foreign Exchange Capital of Foreign-invested Enterprises (Huifa No. 19 [2015], “the Circular”). The Circular is highlighted as follows: firstly, the settlement of foreign exchange capital of a foreign-invested enterprise is conducted on a voluntary basis, allowing enterprises to freely choose the timing for settlement of foreign exchange capital; secondly, the use of capital and funds from foreign exchange settlement of foreign-invested enterprises shall conform to relevant regulations on foreign exchange administration, with a negative list approach adopted for the use of capital; thirdly, efforts shall be made to facilitate domestic equity investment with RMB funds acquired from exchange settlement by foreign-invested enterprises; fourthly, the management of the payments with funds from foreign exchange settlement will be further standardized to make sure banks conduct authenticity review in line with the three principles of business development; fifthly, management of the settlement and utilization of funds in the foreign exchange accounts under other direct investments are clarified and streamlined; sixthly, the SAFE shall strengthen ongoing and ex-post administration to further reinforce ex-post monitoring and investigation and punishment of violating activities. The release of the Circular is a key move by the SAFE to implement the relevant requirements of the State Council on promoting the replicable pilot reform experience of China (Shanghai) Pilot Free Trade Zone and to transform foreign exchange administration concepts and approaches. The implementation of the Circular will give the full decision-making power and the right of choice on foreign exchange capital settlement to enterprises, thus providing policy spaces for enterprises to avoid the risk of exchange rate fluctuations and helping reduce social costs to further facilitate trade and investment and serve the development of the real economy. The Circular shall come into force on June 1, 2015. (The End) 2015-06-11/en/2015/0611/1160.html
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To further promote the smooth assessment of the performance of banks in implementing the regulations on foreign exchange administration, and to make sure the performance assessment is more scientific and equitable, the State Administration of Foreign Exchange (SAFE) has recently released the Circular of the State Administration of Foreign Exchange on the Amendment to the Measures for Assessment of Banks' Implementation of Regulations on Foreign Exchange Administration (Huifa No. 26 [2015], "The Circular"). The amendment is highlighted as follows: first, refining assessment items. Based on the streamlining and adjustment of the original assessment indicators, efforts have been made to further refine the assessment criteria and scoring methods, making sure relevant requirements are more concise and easier to understand and implement. Second, stressing advancement with the times. The assessment items are updated based on the foreign exchange situations and the developments of regulatory requirements, with the assessment mechanism for bidirectional adjustment of cross-border capital flows introduced to enhance the effectiveness of foreign exchange regulation and control. Third, optimizing assessment process. The impact of differences in business category and size between banks on assessment outcomes has been fully considered to make sure the assessment and rating are more equitable and reasonable. Fourth, highlighting assessment of internal control management in banks. The specific requirements have been proposed to assess head offices' and branches' internal control of foreign exchange business, forcing banks to better implement the principles of "knowing your customers, understanding your business and exercising due diligence". Fifth, improving implementation mechanism of violation rectification. A bank feedback and rectification reporting system is built to urge banks timely implement the violation rectification measures and give feedback on rectification results while subsequent tracking is enhanced to effectively improve the effectiveness of the assessment. The Circular shall come into force as of the date of release. 2015-08-18/en/2015/0818/1166.html
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To further enhance the transparency of foreign exchange administration policies, the State Administration of Foreign Exchange (SAFE) has reinforced legislations in key areas and streamlined regulations since the beginning of 2015, involving cross-border foreign exchange payment business through payment institutions, direct investment, settlement of foreign exchange capital, overseas loans under domestic guarantees for non-bank institutions, foreign exchange administration for insurance business, overseas disposal of non-performing assets by financial asset management companies, franchise domestic and foreign currency exchange business for individuals and foreign currency exchange business. Meanwhile, the SAFE has rescinded and announced invalid some foreign exchange administrative regulations that do not adapt to the requirements of the reform. 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 231 policies, laws and regulations on foreign exchange administration released as of June 30, 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. The SAFE will make further efforts to build and improve a long-term mechanism for sorting out laws and regulations, and streamline and upgrade the Catalogue regularly to enhance policy transparency, facilitate banks, companies, and individuals to understand and apply foreign exchange administrative regulations and promote law-based foreign exchange administration. 2015-09-01/en/2015/0901/1167.html
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The Interim Management Measures for Overseas Traders and Brokers Engaging in Futures Trading under Specific Domestic Categories (China Securities Regulatory Commission Order No. 116, "Measures") were recently promulgated, allowing overseas traders and brokers to engage in futures trading under specific domestic categories and determining crude oil futures as the first specific domestic category in China. To support the implementation of the Measures, the State Administration of Foreign Exchange (SAFE) recently published the Circular of the State Administration of Foreign Exchange on Foreign Exchange Administration for Overseas Traders and Brokers Engaging in Futures Trading under Specific Domestic Categories (HuifaNo. 35 [2015], "Circular"), clarifying the foreign exchange administration policy for overseas investors engaging in domestic commodity futures trading, and simplifying requirements on account opening, exchanges of funds and data reporting, which are involved in such trading, so as to facilitate market operations. The Circular is highlighted as follows:First, clarifying the requirements on managing foreign exchange accounts of trading entities, highlighting that special accounts shall be opened for closed operation of funds, so as to reduce trading risk. Second, specifying that the funds for futures trading by an overseas investor shall not be included in the quota for short-term external debt of a bank, in order to facilitate use of relevant funds. Third, to facilitate exchanges of funds, overseas investors are allowed to purchase and settle foreign exchange directly with their opening banks based on the real demands such as futures margin, and settlement of profits and losses, and funds can be transferred directly after the purchase and settlement of foreign exchange. Fourth, simplifying data reporting. The data on foreign-related receipts and payments involved in futures trading and related trading data shall be uniformly reported by the opening banks and exchanges through their systems. The Circular shall come into force as of August 1. 2015-10-29/en/2015/1029/1173.html
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To ensure fair competition and a good order in the foreign exchange market, and enhance the transparency and credibility of administrative law enforcement regarding foreign exchange, the State Administration of Foreign Exchange (SAFE) has recently improved the disclosure system of administrative punishment information in accordance with the Regulations of the People’s Republic of China on the Disclosure of Government Information, and the Interim Regulation on Enterprise Information Disclosure, so as to enhance the timeliness of the disclosure of administrative punishment regarding foreign exchange and provide more access for public enquiry. Starting from January 1, 2016, the SAFE will follow the general procedures to disclose the information on administrative punishment of public institutions, enterprises and other institutions (excluding banks) for their violations of foreign exchange administration, and provide fuzzy inquiry by name of institution in addition to inquiry by organizational code. The general public will be allowed to input the name of institution or the organizational code at the official website of the SAFE to search for the administrative punishment information of relevant market players. 2015-09-16/en/2015/0916/1169.html
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The national foreign exchange administration work conference has been recently held in Beijing. By following the spirit of 18th CPC National Congress, the Third, Fourth, Fifth and Sixth Plenums of the 18th CPC Central Committee, and the Central Economic Work Conference, the conference reviewed foreign exchange administration in 2016, deeply analyzed the current state of the economy, finance and balance of payments, and discussed and made plans for foreign exchange administration for 2017. Pan Gongsheng, administrator and secretary of the Party Leadership Group of the State Administration of Foreign Exchange (SAFE), delivered a work report at the conference, with deputy administrators, and heads of the SAFE branches (including foreign exchange administration departments), and departments of the SAFE present. The meeting pointed out that, by following the work plans of the CPC Central Committee and the State Council, and the guidance of the CPC Committee of the People's Bank of China, foreign exchange authorities stuck to problem orientation and bottom-line thinking, coordinated the relationship between promoting trade and investment facilitation and guarding against cross-border capital flow risks, and deepened the reform of "delegation, centralization and services" in 2016. To be specific, foreign exchange authorities rolled out nationwide the macro-prudential management policy for full-scale cross-border financing, further liberalized interbank bond markets, and carried out the QFII foreign exchange administration reforms. Under the existing policy framework, foreign exchange authorities strengthened management and execution, worked with other departments for joint regulation, intensified authenticity and compliance reviews, and cracked down on foreign exchange irregularities, in a bid to safeguard the stability of foreign exchange markets. Foreign exchange authorities also enhanced operation and management of foreign exchange reserves, and improved diversified utilization of foreign exchange reserves to safeguard the equilibrium of balance of payments and the national economic and financial security. The meeting emphasized that the year 2017 is key to the implementation of the 13th Five-year Plan and to the deepening of the supply-side structural reform. In the year, foreign exchange authorities are required to implement the spirit of the Central Economic Work Conference and the work plans of the CPC Central Committee and the State Council, adhere to the general work guideline of making progress while maintaining stability and follow the guidance of the CPC Committee of the People's Bank of China to take bold steps to effectively enhance trade and investment facilitation, serve the development of the real economy, intensify authenticity and compliance reviews, and crack down on foreign exchange irregularities, and guard against risks arising from cross-border capital flows, so as to embrace the 19th CPC National Congress with excellent performance. The meeting made plans for the priorities of foreign exchange administration for 2017: first, continue to press ahead with administration streamlining and power delegation and reform in key areas, and further boost trade and investment facilitation to support the development of the real economy. Second, enhance authenticity and compliance reviews, intensify inspections and punishment with regard to foreign exchange irregularities, and maintain a tough stance on crimes such as underground banks and evasion and cheated purchases of foreign exchange, in a bid to safeguard the health and stability of foreign exchange markets. Third, strengthen ongoing and ex-post management, enhance the level of offsite monitoring, analysis and early warning in relation to cross-border capital flows, and refine the management framework for macro-prudential cross-border capital flows. Fourth, improve the operation and management of foreign exchange reserves, to safeguard the security, flows, value growth and maintenance of foreign exchange reserves. Fifth, implement the requirements for strengthening the Party's self-discipline, and continue to step up efforts to build the CPC, clean up undesirable work styles and uphold integrity, and enhance teambuilding and internal management. 2017-01-06/en/2017/0106/1241.html
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The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on banks' foreign exchange sales and settlements, and their foreign-related receipts and payments for customers. Its press spokesperson has answered media questions on recent cross-border capital flows. Q: Could you brief us on cross-border capital flows for October? A: In October, China was faced with less pressure from cross-border capital outflows. First, a narrower deficit was registered under banks' sales and settlements of foreign exchange. The deficit for October was USD 14.6 billion, down by 49% month-on-month. Of note is that a deficit of USD 10.2 billion was recorded under non-banking sectors like enterprises and individuals, down by 62% month-on-month. Second, a lower deficit was posted under foreign-related receipts and payments by non-banking sectors. The deficit for October was USD 14.1 billion, a month-on-month decrease of 69%. To be specific, a surplus of USD 14.8 billion was registered under foreign exchange receipts and payments, versus a deficit of USD 800 million for the previous month; and a deficit of USD 29 billion was posted under RMB receipts and payments, down by 35% month-on-month. Some factors that help find an equilibrium between supply and demand of foreign exchange have played their roles. First, market players' willingness to settle foreign exchange remained stable, and the proportion of foreign exchange purchases represented a month-on-month decrease. In October, the ratio of banks' settlement of foreign exchange for customers to foreign-related foreign exchange receipts was 58%, which was stable on the whole; but the ratio of the bank's sales of foreign change to customers to foreign-related foreign exchange payments was 69%, down by 3 percentage points from September. Second, market players' foreign exchange financing rose steadily, and deleveraging slowed down further. At the end of October, the balance of cross-border foreign exchange financing for imports such as refinancing and forward L/C picked up by USD 1 billion month-on-month, representing the eighth consecutive month of growth. In the month, market players' purchases of foreign exchange to repay domestic foreign exchange loans were down by 34% month-on-month. Third, overseas institutions continued to increase their investments in the domestic bond markets. As at the end of October, the balance of domestic bonds held by overseas institutions rose by USD 20.7 billion against September, the eighth consecutive month of growth. Fourth, the seasonal efforts to purchase foreign exchange under ROI and travel declined. In the month, foreign exchange purchases under ROI slumped by 56% month-on-month, and those under travel dropped by a slight 5%. Fifth, Customs foreign trade surplus went up, driving up the surplus in foreign exchange sales and settlement under trade. In October, Customs reported a foreign trade surplus of USD 49.1 billion, up by 17% month-on-month, and the surplus in banks' foreign exchange sales and settlements for customers under trade in goods rose by 46% month-on-month. The domestic economic growth has become more stable recently, which is favorable for consolidating the foundation for the overall stableness in China's cross-border capital flows. In October, China's official manufacturing PMI hit 51.2%, the highest within more than 2 years; the non-manufacturing PMI was 54.0%, the highest since the beginning of this year; the PPI was up by 1.2% year-on-year, which was higher than before; China's fixed asset investment for the first 10 months grew by 8.3%, up by 0.1 percentage point than the first 9 months. Overall, as China's economy operates more stably, its economic structure are being optimized, and the internal impetus for economic growth becomes stronger, the advantages of its economic fundamentals will be more evident, which will be favorable for withstanding external impact and ensuring the stability of China's cross-border capital flows in the mid and long term. 2016-12-19/en/2016/1219/1236.html