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In 2011, in the face of the complicated economic and financial situations both at home and abroad, the State Administration of Foreign Exchange (SAFE) actively implemented the decisions and arrangements of the CPC Central Committee and the State Council, emphasizing priorities, improving methods, and rigorously cracking down on cross-border flows of hot money. In 2011 the results of the phase of cracking down on hot money were achieved, with a total of 3,488 cases of activities in violation of the regulations on foreign exchange administration handled and investigated, with the amount of penalties and confiscations reaching RMB 503 million, more than twice the amount of the last year. In 2011 the SAFE’s main tasks in cracking down on hot money included: First, striking a heavy blow, investigating, and handling major cases of activities in violation of the laws on foreign exchange administration in key areas. In 2011, seventeen major typical case involving a huge amount of money were investigated and punished; and cross-regional operations and irregular capital inflows to the real estate and financial markets, involving RMB 19.3 billion, and administrative penalties were imposed in eight such cases and fines were collected in the amount of RMB 187 million. Second, jointly handling and investigating the cases, rigorously cracking down on illegal and criminal activities with respect to foreign exchange, such as illegal banks. As of the end of November 2011, the SAFE and the public security departments had jointly exposed eighteen cases involving illegal banks, twenty cases involving the illegal sale and purchase of foreign exchange, and one case involving online foreign exchange speculation in the amount of RMB 71.7 billion, with 198 suspects caught red-handed and64 suspects thereof being prosecuted. The number of cases exposed and the number of suspects apprehended hit a record high. Third, emphasizing priorities. The SAFE, with a focus on financial institutions and large-scale enterprises, carried out special inspections in the areas of foreign exchange settlement of capital and short-term external debt, and rigorously punished enterprises, financial institutions, and individuals that borrowed external debt and carried out foreign exchange settlement in violation of the regulations on foreign exchange administration. In 2012 the SAFE will abide by the risk limits, construct a system and mechanism for protection against the impact of cross-border capital flows, strictly implement law-based administration, further improve the methods and means of foreign exchange inspections, rigorously crack down on various activities in violation of the foreign exchange laws and regulations, guard against the risks of unusual flows of foreign exchange funds, and safeguard the economic and financial security of China. 2012-03-26/en/2012/0326/1036.html
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Yi Gang, administrator of the State Administration of Foreign Exchange (SAFE), and his group recently visited Hubei for investigation and research on the pilot reform on the foreign exchange administration system for trade in goods. During the investigation and research, Administrator Yi Gang listened to the work report of the Hubei branch, visited and conveyed greetings to the first-line staff of the branch, conducted a field study on the integration of the foreign exchange business system portal at the bank end, held informal discussions with representatives of some banks and enterprises, and heard comments and suggestions on the pilot reform on the foreign exchange administration system for trade in goods. The comrades participating at the meeting unanimously confirmed that the reform of the foreign exchange administration system for trade in goods simplified business handling procedures, significantly reduced operation costs, enhanced the banks’ sense of responsibility to conduct examinations on the authenticity and awareness of enterprises to strengthen internal management, and established a new administrative mode combining trade facilitation and risk management. Administrator Yi Gang pointed out that the reform of the foreign exchange administration system for trade in goods is a major move on the part of the foreign exchange authorities to proactively adapt to developments and changes in the situation, to accelerate the transformation of foreign exchange administration concepts and methods, and to timely adjust management methods, and it is an important embodiment of the implementation of the concept of putting people first and running government for the people. The branches carrying out the pilot reform should earnestly study and solve the problems and suggestions put forward by the enterprises and banks in order to lay a foundation for comprehensively promoting the reform of the foreign exchange administration system for trade in goods. The foreign exchange administration should serve the market players, such as the financial institutions and the enterprises and safeguard the financial security of China . The foreign exchange authorities should further accelerate the transformation of administration methods, gradually transfer from focusing on ex-ante supervision to emphasizing ex-post management and from supervision based on trading activities and the nature of the business to management based on the individual economic entity, in order to effectively guard against the impact of cross-border capital flows and to realize the organic unity of serving the development of the foreign economy and improving supervisory efficiency, while also facilitating to the utmost foreign trade and overseas investments by the market players. 2012-02-15/en/2012/0215/1031.html
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The SAFE recently released China ’s Balance of Payments Statements for the third quarter and the first three quarters of 2011. In Q3 of 2011 the current account and the capital and financial account continued to post a “twin surplus” and international reserves maintained a growing momentum. The surplus under the current account totaled USD53.4 billion. Specifically, according to the statistical coverage of the balance of payments, the surpluses in goods and current transfers reached USD85.3 billion and USD4.9 billion, respectively, whereas the deficit in trade in services and income amounted to USD20.3 billion and USD16.4 billion, respectively. Meanwhile, China ’s surplus under the capital and financial account (excluding net errors and omissions) totaled USD66.2 billion. In particular, net inflows of direct investments, portfolio investments, and other investments amounted to USD28.7 billion, USD9.9 billion, and USD26.2 billion, respectively. International reserves registered an increase of USD91.7 billion (exclusive of changes in the value of non-transaction factors such as exchange rates and prices). Specifically, foreign exchange reserve assets posted an increase of USD92.1 billion. In the first three quarters of 2011, the surplus under the current account was USD141.2 billion and that under the capital and financial account (excluding net errors and omissions) was USD250.1 billion. China ’s international reserve assets posted an increase of USD375.4 billion. FILE: attachment 1：Balance of Payments, Third Quarter of 2011 FILE: attachment2：Balance of Payments, First Three Quarters of 2011 2012-03-26/en/2012/0326/1033.html
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Recently, in order to actively carry out the work related to the pilot program of domestic securities investments by RMB qualified foreign institutional investors (hereinafter referred to as the “RQFII”), in accordance with the Measures for the Pilot Program of Domestic Securities Investments by Fund Management Companies and Securities Companies as RMB Qualified Foreign Institutional Investors (Decree No. 76 of the China Securities Regulatory Commission, the People’s Bank of China, and the State Administration of Foreign Exchange) and the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning the Pilot Program of Domestic Securities Investments by Fund Management Companies and Securities Companies as RMB Qualified Foreign Institutional Investors (HuiFa No.50 [2011]), the State Administration of Foreign Exchange (SAFE) convened a meeting on the investment quota of qualified institutional investors in order to review such matters as the allocation of the quota of domestic securities investments by RQFII. The meeting discussed and adopted the basic principles for the allocation of the quota for domestic securities investments by RQFIIs, i.e., approximately equal allocations between fund-based and securities-based RQFIIs, and relative control of the scale of private equity products. This time, a total investment quota of RMB 10.7 billion for the RQFIIs (see the Annex) was approved for 10 RQFIIs that had submitted their complete application materials through the trustee banks. The SAFE will continue, in a timely manner, accepting applications for investment quotas submitted by qualified RQFIIs, and will examine and approve the applications in accordance with uniform rules and procedures. FILE: attachment：download 2012-03-26/en/2012/0326/1034.html
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The State Administration of Foreign Exchange (SAFE) recently issued the Circular Concerning the Issuance of Provisions on Foreign Exchange Management for Cross-border Guarantees (HuiFa [2014] No. 29) and a person-in-charge at the SAFE accepted an interview with the media on the Provisions on Foreign Exchange Management for Cross-border Guarantees (hereafter referred to as the “Provisions”). I. What is the background to the promulgation of the Provisions? The previous regulations regarding foreign exchange management pf cross-border guarantees included: the Administrative Measures on External Guarantees by Domestic Institutions (YinFa [1996] No. 302), the Rules for Implementation of the Administrative Measures on External Guarantees by Domestic Institutions ([97] HuiZhengFaZi No. 10), the Circular Concerning Issues related to the Management of External Guarantees by Domestic Institutions (HuiFa [2010] No. 39), and the Circular of the State Administration of Foreign Exchange on the Issuance of Administrative Measures for Registration of Foreign Debt (HuiFa [2010] No. 19). During the initial stage after the release of these regulations, they played a positive role in terms of promoting economic and technological cooperation with foreign countries, supporting foreign trade development, facilitating the export of labor services, introducing advanced foreign technologies, equipment, and capital, and smoothly conducting foreign-related financial activities, standardizing the behavior of the external guarantees, and strengthening management of the external guarantees . With the rapid development of China’s foreign-related economy and the ever-expanding scale of transactions in the balance of payments, the behavior of cross-border guarantees has become increasingly diversified and complex. However, the above regulations only cover external guarantees and domestic loans with offshore guarantees and they fail to include other types of cross-border guarantees, so they cannot satisfy our current requirements for market development. Meanwhile, with regard to the relevant guarantee management policies that have been clarified, the relevant approval and verification procedures are complex, and lag behind in terms of the management mode relative to the market requirements and result in relatively high management costs. Therefore, under the guidance of the “Five Transformations,” the SAFE adjusted its thinking about management, promoted the streamlining of administration and delegation of power to lower levels as well as the transformation of functions, and promulgated the Provisions in good time based on adequate investigations and solicitation of opinions at an early stage in order to facilitate cross-border guarantee activities and to promote capital account convertibility under the guarantee item. II. What is the main idea behind this reform in terms of the approach to cross-border guarantee management? The Provisions mainly reflect the following ideas about management: Firstly, streamlining administration and delegating power to lower levels. Cancelling or substantially cutting back on the scope of control over quantity and the scope of registration of cross-border guarantees, with only the part of “partial cross-border guarantees that generate new liabilities or claims by residents to non-residents upon the compliance of the guarantees” subject to registration on a case-by-case basis. Meanwhile, the laws and regulations have been clarified and consolidated, and twelve normative documents related to cross-border guarantees have been abolished. Second, functions are transformed. The boundary between foreign exchange management and regulatory responsibilities for cross-border guarantees is now rationally defined. Based on the objectives and responsibilities of foreign exchange management, the scope of foreign exchange management of cross-border guarantees is rationally defined and cross-border guarantees integrated into foreign exchange management shall have the following features: conforming to the requirements in terms of the forms in a legal sense, guaranteeing compliance with payment methods, determining the relative amount in the balance of payments, and so forth. Meanwhile, by giving due regard to higher law, international practices, and market demand, foreign exchange management shall be disconnected from judgments about the effectiveness of contracts on cross-border guarantee transactions. Foreign exchange registration conducted by the foreign exchange authorities in line with their statutory duties for the balance-of-payments statistics is different from the confirmation registration performed by the relevant authorities of the industry in terms of both purpose and effectiveness, and it cannot be used as collateral or for going against a third party. Third, ex-ante approval is changed to ex-post regulation. All ex-anti approvals have been cancelled and registration has become the major management approach. The ex-ante review and approval procedures for the conclusion and compliance of the guarantee contracts have been cancelled and have been replaced by proportional self- registration management; and most of the business qualification limits have been abolished. Fourth, risk prevention is strengthened. In parallel with streamlining administration and delegating power to lower levels, efforts are made to prevent cross-border guarantees from becoming a channel for abnormal capital flows by means of support systems and regulatory approaches. The monitoring and analysis responsibilities of the foreign exchange authorities are clarified to emphasize off-site verifications, monitoring, and inspections, and to strengthen investigations of violation responsibilities. III. What is the content of this reform in terms of foreign exchange management of external loans with domestic guarantees? In the Provisions, the major content of the management of external loans with domestic guarantees includes: 1. Cancelling the quantity controls for external loans with domestic guarantees. Cancelling the ex-ante approvals or indicator verifications for financing or non-financing of external loans with domestic guarantees of domestic institutions. 2. Cancelling unnecessary qualification limits. Except for general restrictive clauses (e.g., on the use of guarantee funds) universally applicable to all institutions, qualification limits are abolished for specific entities (the requirement of the asset and liabilities ratio of the guarantor and the guarantee, or of related-party relationships) or for specific transactions (e.g., non-financing guarantees). 3. Registration is the major mode of management. Statistics and monitoring shall be conducted on external loans with domestic guarantees within the existing capital account information system. 4. Approvals for the compliance of guarantees are cancelled. Banks can handle the compliance of external guarantees on their own, and non-banking financial institutions and enterprises can handle compliance procedures with the banks based on the registration certificate for the guarantee. 5. Where external claims are generated upon the compliance of the guarantee, registration of external claims shall be handled as per the relevant requirements. IV. What is the content of this reform in terms of foreign exchange management of domestic loans with offshore guarantees? In the Provisions, the major content with respect to management of domestic loans with offshore guarantees includes: 1. Clarifying the business qualifications. The creditors shall be domestic financial institutions, the debtors shall be non-financial institutions, and the guaranteed liabilities can only be common loans or credit lines in the home currency or in foreign currency. 2. Centralized registration of the creditors. The creditors (i.e., domestic financial institutions) shall handle the filing of the statistics with the foreign exchange authorities via the capital account information system in a centralized manner. 3. The creditors shall handle collection of the payment for the compliance of the guarantees on their own. Domestic financial institutions can handle collection of the payment for the compliance of the guarantees directly with the overseas guarantors. 4. Debtors shall handle the external debt registration upon the compliance of the guarantee. Where external debts are generated upon the compliance of the guarantee, external debt registration shall be carried out, but it will not be subject to the quota for common external debts. With regard to external debts incurred by the compliance of domestic loans with offshore guarantees, the balance of the outstanding principal shall not exceed one time the value of the debtor’s net assets. V. According to the Provisions, in addition to external loans with domestic guarantees and domestic loans with offshore guarantees, how shall other cross-border guarantee contracts signed by domestic institutions be managed? According to the Provisions, with the exception of the necessary foreign exchange registration procedures that shall be performed and the certain qualification limits that shall be maintained for external loans with domestic guarantees and for domestic loans with offshore guarantees, domestic institutions can conclude cross-border guarantee contracts in other forms on their own. It should be emphasized that for cross-border guarantee contracts in other forms, the Provisions only abolish the limits on the conclusion of the guarantee contracts in terms of foreign exchange management, and the claim of the guarantee rights by the creditor under the guarantee item and the fulfillment of the guarantee compliance obligations by the guarantor shall still conform to the relevant administrative provisions on the external debt, direct investments, portfolio investments, and so forth. VI. How shall relevant risks be prevented and controlled after this policy reform? In order to address the risks from the sharply rising external claims and debts incurred by the large centralized guarantee compliance resulting from exposure to the international balance of payments, the following major risk control measures are adopted by the Provisions: First, statistics on the conclusion and compliance of the guarantee contract, which may lead to newly-added external claims and debts, shall be collected on a case-by-case basis. Second, cross-border guarantee transaction activities of all parties involved shall be restrained by means of guarantee compliance audit reviews (due diligence review), temporary suspension of contract conclusions after default as well as a negative list approach for capital use and other self-disciplinary requirements. Third, monitoring and disposal efforts will be reinforced for guarantee activities in violation of the regulations by adopting measures such as registration of claims and debts, off-site verifications, and foreign exchange inspections. Fourth, rights to conduct timely adjustments to the cross-border guarantee management patterns will remain with the foreign exchange authorities by means of the balance-of-payments safeguard clause. Through the above arrangements, cross-border fund flow risks under the guarantee item can be kept controllable. VII. In what respects does foreign exchange management reform of cross-border guarantees promote capital account convertibility? Release and implementation of the Provisions will achieve policy consistency in foreign exchange management for cross-border guarantees and a basic convertibility of cross-border guarantees. These are reflected in the following areas: in the field of domestic guarantees with external loans, although ex-ante approvals, approvals for the guarantee compliance, and most of the qualification limits are abolished, this reform maintains case-by-case registration in the contract conclusion process; while in the field of domestic loans with offshore guarantees, under the premise of conforming to the relevant restrictive conditions, Chinese- and foreign-funded enterprises are permitted to conclude contracts on their own and to handle guarantee compliance that is within one time the value of their net assets. Thus the policies on domestic loans with offshore guarantees for Chinese- and foreign-funded enterprises in China are unified and significantly improved. 2014-07-07/en/2014/0707/1117.html
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Q: Could you please provide a briefing on China’s foreign- exchange situation during the first half of 2013? A: China has seen a transition from an increase in rapid inflows to balanced inflows and outflows of foreign exchange since the beginning of 2013. Foreign-exchange settlements and sales reached USD 911.4 billion and USD 773 billion respectively, resulting in a surplus of USD 138.4 billion during the first half of the year. During the period from January through April, due to the benefits of adequate international liquidity, stable economic fundamentals, and strengthened expectations of an appreciation of the RMB, the trend in large-scale foreign-exchange inflows that emerged during the second half of last October continued, with foreign-exchange settlements and sales at banks registering a surplus of an average of about USD 32.1 billion per month. But due to the changed economic environment in China and the rest of the world, as well due to policy adjustments in China, net inflows of foreign exchange have dropped sharply since May, with the foreign-exchange settlements and sales reaching a surplus of USD 10.4 billion in May but recording a small deficit of USD 400 million in June. Q: Why was there a slump in net cross-border capital inflows during the last two months? A: This was due to international, domestic, seasonal, and policy factors. In the global markets, as the U.S. Federal Reserve announced a gradual withdrawal of the quantitative easing monetary policy after its economic recovery picked up, since May the emerging markets have witnessed a currency depreciation, a decline in the stock markets, and capital outflows. In China, because of downward pressures on its economic growth, those who are bearish on China were on the rise, expectations of an appreciation of the RMB lessened, and forward rates showed the RMB will depreciate more sharply against US dollar; deleveraging reappeared among Chinese firms, and cross-border credit sales and trade financing by banks changed from an average of net inflows of USD 3.3 billion per month during the January-April period to an average of net outflows of USD 21.8 billion per month during May and June. In addition, as the foreign-exchange purchasing price on offshore RMB markets became higher than that on the domestic foreign-exchange market, more purchases of foreign exchange were made in the Chinese mainland, and RMB net payments under the trade item fell from a monthly average of USD 10.9 billion during the January-April period to USD 5.1 billion during May and June. All of the above factors contributed to the decrease in the surplus in foreign-exchange settlements and sales by banks. In terms of seasonal and policy factors, since May and June are peak seasons when Chinese residents choose to travel or to begin their studies abroad, as well as seasons when most foreign-funded firms distribute their bonuses, average monthly purchases of foreign exchange for overseas tours and for investments rose 16 percent and 83 percent respectively from the January through April period of this year. During the past few months, government departments, including the People’s Bank of China, the General Administration of Customs, the China Banking Regulatory Commission, and the State Administration of Foreign Exchange (SAFE), have introduced policies and measures to regulate the settlement of cross-border trade in RMB and customs declarations for exports and to enhance management of bank wealth management products and foreign- exchange inflows, and have managed to contain capital arbitrage via false trading in liquidity. Q: Most emerging markets have been under pressure from currency depreciations and capital outflows during the past months. I am wondering whether China is at risk of continuous large-scale cross-border capital outflows during the second half of the year. A: As the U.S. Federal Reserve is expected to gradually increase its exit from quantitative easing that began in May 2013, there have been signs that this may lead to gradual withdrawal of foreign capital from the emerging markets, with a decrease in the MSCI Emerging Markets Index and the currency indices by more than 10 percent. So far, no signs of massive foreign-capital withdrawals have been discovered in China. First, FDI and net cross-border capital inflows in securities investments have continued to rise. In June, net FDI inflows totaled USD 11.9 billion, up by 14 percent month on month, and net foreign-exchange settlements for securities investments totaled USD 1.5 billion, 3.5 times that during the previous month. Second, FDI withdrawals have remained at a low level. Foreign- exchange purchases for FDI withdrawals totaled USD 3.5 billion during the first half of the year, down by 17 percent year on year. Third, there have been only slight changes in the investment profits repatriated by foreign-funded firms. Foreign-funded firms usually distribute bonuses around June of every year. During this June, profits repatriated by foreign-funded firms dropped 2 percent year on year to reach USD 12.6 billion. Given the uncertainties and instabilities in China and the rest of the world, it is expected that during the second half of the year China’s cross-border capital will stabilize amid fluctuations. As global economic growth continues to slow down, China’s overall external demand will remain weak while international trade frictions will increase, thus placing heavy pressure on exports. As most people believe that the RMB exchange rate is currently at an equilibrium, higher two-way volatility and weaker expectations of an appreciation of the RMB are favorable for slowing down capital inflows. In 2012, for example, China saw bi-directional changes in cross-border capital flows. This pattern of cross-border capital flows and the balanced supply and demand for foreign exchange will become more common in the future, so adaptive adjustments will be made to both domestic macro controls and to the behavior of domestic market players. During the next phase, the SAFE will focus on strengthening the monitoring of cross-border capital flows, increasing policy and data transparency, improving contingency plans and policies to limit the impacts of two-way cross-border capital flows, and will do whatever it takes to control risks in order to support a balance in the balance of payments and the sustained healthy development of China’s foreign-related economy. Q: What about the increase in the foreign-exchange positions of the banks after the SAFE introduced measures to strengthen administration of foreign-exchange fund inflows? A: On May 5, the SAFE issued the Circular of the SAFE on Relevant Issues on Strengthening Administration of Inflows of Foreign- Exchange Funds (Huifa [2013] No. 20, referred to as Circular No. 20 hereafter), stating that a bank’s minimal consolidated position in foreign-exchange settlements and sales will be linked to the foreign-currency loan-to-deposit (LDR) ratio. Banks whose foreign-currency LDR ratio exceeds the reference rate can reduce their LDR ratio via decreasing foreign-currency loans and increasing foreign-currency deposits, or via buying foreign exchange on the spot market and increasing its position through forward foreign- exchange trading. As the policy allows for a two-month transition period, since its issuance the influence of this circular has been absorbed by the financial market, and the foreign-exchange market has remained stable. The overall consolidated position of banks at the end of June was USD 22.5 billion more than that on May 5, the day on which Circular No. 20 was issued, and it was higher than the amount that Circular No. 20 required to be increased. Further analysis shows that net outstanding forward foreign-exchange settlements registered an increase of USD 23.8 billion, while the decrease in the banks’ positions on a cash basis was USD 1.3 billion during the same period, suggesting that forward foreign exchange was not traded thoroughly flat on the spot market so that banks could meet the requirements of Circular No. 20 to increase their consolidated positions. Circular No. 20 has had a limited impact on the banks’ domestic- and foreign-currency cash positions. 2013-08-09/en/2013/0809/1085.html
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To conscientiously serve the real economy, promote the facilitation of trade and investment, support the transformation and upgrading of the industrial structure, and explore investment and financing exchange facilities, the State Administration of Foreign Exchange (SAFE) released the Circular on the Issuance of Provisions on Centralized Operations and Management of Multinationals' Foreign Exchange (Interim) (Huifa No. 23 [2014], hereinafter referred to as the Provisions), based on the pilot program that has been carried out since the end of 2012. The Provisions state that following the principle of using funds through overall planning, efficiently allocating resources, and effectively guarding against risks based on the domestic and international markets, efforts should be made to make further innovations and deepen the pilot reform on centralized operations and management of multinationals’ (MNCs') foreign exchange: First, making innovations in the MNCs' account system. MNCs should be allowed to open either domestic or international master accounts, or both, for foreign exchange to centralized foreign exchange management for domestic and global member companies, including centralized collections and payments of foreign exchange and netting settlements, with the limits on the external debt and outbound lending under the account to be shared either entirely or partially. Second, further streamlining the review of documents. Banks should process the collection, settlement, purchase, and payment of foreign exchange under the current account in line with the principle of "understanding the customers," "understanding their businesses," and carrying out "due diligence reviews." A form must be filed to record the taxes for outbound payments under trade in services. Third, facilitating the MNCs’ allocation of funds. No limits will be imposed on the master account and overseas transfers of international foreign exchange funds, which can be carried out freely; within the limits of the external debt and outbound lending, domestic and international accounts will be connected to facilitate companies’ internal balancing of the surpluses and deficits. Fourth, managing the settlement of foreign exchange capital funds and the external debt based on a "negative list" approach. Foreign exchange capital funds and the external debt will be settled at the discretion of the MNCs, and outbound payments will be made after a review of the authenticity of the transactions. Fifth, enhancing statistical monitoring to prevent and control risks. Efforts shall be made to collect the receipts and payments and to centralize collections, payments, and net settlements of the MNC's foreign exchange in an all-round way to report a net reduction in data, with the documents retained in cases of inspections to make sure the control and monitoring "valve" on the limits is preserved. The deepening of the pilot reform on centralized operations and management of MNCs' foreign exchange reflects a transformation in foreign exchange concepts and management modes and is an important part of the deepening of the reform of the foreign exchange management system. First, further streamlining administration and delegating more power to lower levels to serve the real economy in an all-round way. Minimizing approval interventions to the best extent and facilitating capital utilization by businesses are favorable for further reducing financial costs for companies and for providing a benign policy environment for MNCs to establish capital centers in China, which will be favorable for creating conditions for the transformation and upgrading of the industrial structure and for promoting a transformation of the economic development pattern. Second, exploring ways to facilitate exchanges for investments and financing and for accumulating experiences in RMB capital account convertibility. Using the same account to achieve centralized management of different types of capital will improve the companies' and banks' capabilities to make innovations in capital management, thus opening up new approaches and accumulating new experience for the deepening of the reforms and for expanding the opening up in an all-round way. Third, improving the macro-prudential supervisory framework to carry out comprehensive supervision and to guard against risks. Based on the demands of the real economy, the framework should be implemented step by step and in a steadfast manner. Statistics on cross-border capital flows should be collected, with off-site monitoring and on-site verifications and inspections enhanced, so as to make sure our bottom line, eliminating systemic and regional financial risks, is strictly maintained. The Provisions will come into force as of June 1, 2014. (End.) 2014-06-20/en/2014/0620/1114.html
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A working conference on cracking down illegal and criminal activities related to the illegal trading of foreign exchange was held recently by the State Administration of Foreign Exchange (SAFE) and the Ministry of Public Security (MPS). At the conference, the joint efforts by the SAFE and the MPS in 2013 to crack down on illegal and criminal activities related to the illegal trading of foreign exchange were summarized and relevant work for 2014 was arranged. In addition, advanced groups and individuals in terms of combating illegal and criminal activities related to the illegal trading of foreign exchange in 2013 were commended. It was pointed out at the conference that the foreign exchange authorities and the public security organs at all levels have tightened cooperation and have jointly carried out investigations according to the arrangements of the CPC Central Committee and the State Council, uncovering in 2013 more than forty cases involving foreign exchange –related illegal and criminal activities including the illegal trading of foreign exchange in an amount over RMB50 billion and more than one hundred criminal suspects were captured on site. Great achievements were made and foreign exchange–related illegal and criminal activities of all kinds were successfully deterred. It was emphasized at the conference that fluctuations in cross-border capital flows have been increasing since 2013. Therefore, there is a heavy responsibility to prevent unusual foreign exchange capital flows. The foreign exchange authorities and public security organs at all levels are required to strengthen study and judgments about the situation, make innovations in terms of the means of investigation, and improve the relevance and effectiveness of cracking down on foreign exchange–related illegal and criminal activities. Efforts shall be made to increase regional cooperation and to consolidate centralized governance in key regions in due time so as to build joint forces for cracking down on foreign exchange–related illegal and criminal activities. Meanwhile, upstream and downstream crimes related to the illegal trading of foreign exchange shall be pursued based on available clues, crime networks shall be thoroughly investigated, in particular criminal activities including money laundering and activities transferring hidden illegal money. In addition to investigating the criminal responsibility of the operators of underground money shops, administrative penalties shall be imposed on the participants in underground money shop transactions to increase punishment for illegal and criminal activities, such as the illegal trading of foreign exchange. In addition, investigations and research shall be strengthened in order early on to discover and to prevent new types of foreign exchange–related illegal and criminal activities. It was requested at the conference that the foreign exchange authorities and public security organs in 2014 should continue to deepen their cooperation, upgrade the means of investigations, and continue to maintain high pressure and to crack down on foreign exchange–related illegal and criminal activities so as to safeguard the healthy development of China’s foreign-related economy and finance. 2014-07-07/en/2014/0707/1119.html
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With the aim of deepening the reform of the foreign exchange management system, promoting the facilitation of trade and investment, advancing convertibility under the capital account in an orderly manner, and regulating receipt and payment activities under cross-border guarantees, the State Administration of Foreign Exchange (SAFE) has, based on extensive solicitation of opinions from the society, released the SAFE Circular Concerning the Issuance of Provisions on Foreign Exchange Management of Cross-border Guarantees (HuiFa [2014] No. 29, hereafter referred to as the “Provisions”). The Provisions mainly cover the following areas: First, vigorous efforts are made to streamline administration and delegate power to lower levels by reforming the foreign exchange management modes for cross-border guarantees. Approval procedures related to cross-border guarantees are cancelled or substantially simplified, and only the part of “partial cross-border guarantees that create new claims or liabilities by residents to non-residents upon the compliance of the guarantees” shall be subject to registration on a case-by-case basis. Second, foreign exchange management of cross-border guarantees has been comprehensively standardized. The scope of foreign exchange management of cross-border guarantees has been rationally defined in line with the objectives and responsibilities of foreign exchange management, and all types of cross-border guarantees that conform to the legal requirements in terms of form, that adopt payments as the guarantee compliance mode, and that can have a significant impact on the balance of payments are included in the scope of the policy adjustment. Third, equal treatment for Chinese-invested and foreign-invested enterprises is realized. With regard to domestic loans with offshore guarantees, under the premise of meeting the relevant restrictive conditions, Chinese- and foreign-invested enterprises are permitted to sign contracts at their own discretion and to conduct guarantee compliances within the amount equivalent to one time their net assets in order to unify and significantly improve policy on domestic loans with offshore guarantees for domestic Chinese- and foreign-invested enterprises. Fourth, the management concept for risk prevention is strengthened. In parallel with streamlining administration and delegating power to lower levels, off-site verifications and foreign exchange inspections are stressed through a support system and a regulatory approach, and investigations of violations of responsibilities have been strengthened. Fifth, laws and regulations are cleared up and consolidated to enhance transparency. The Provisions also annulled twelve relevant normative documents related to cross-border guarantees. The Provisions shall be implemented as of June 1, 2014. 2014-07-07/en/2014/0707/1116.html
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Yi Gang, deputy governor of the People's Bank of China and director of the State Administration of Foreign Exchange (SAFE), recently made a tour of Shenzhen to inspect the demands for and implementation of policies to deepen reform of foreign exchange administration. While on his tour, he spoke with the leaders and department heads of the SAFE Shenzhen Branch and visited Qianhai Shenzhen-Hong Kong Modern Services Cooperation Zone and some MNCs. Director Yi inquired about the implementation, achievements, problems, and suggestions for improvements to the reform measures for foreign exchange administration, and listened to the reports on progress in the development of financial innovations in Qianhai and demands for policies to advance the reforms in key foreign exchange areas. He said that deepening the reform of foreign exchange administration must be based on implementing the spirit of the Third Plenary Session of the 18th CPC Central Committee. With reform innovations leading the way in terms of foreign exchange administration, efforts should be made to promote the "five shifts" in foreign exchange administration, focusing on streamlining administration and delegating power to lower levels and making functional transformations to promote trade and investment facilitation and to serve the real economy on the one hand, and, on the other hand, maintaining our bottom line, preventing risks and stressing post management to improve our capability and level of monitoring and analyzing cross-border capital flows and building a macro-prudential external debt and capital flow management system. These two areas should be given equal importance. In the meanwhile, foreign exchange departments should actively support local economic growth and should encourage some regions where necessary conditions have been met, rather than having all regions carry out early and pilot implementation of some foreign exchange administration policies, so as to highlight their characteristics and advantages, provided that the overall national plan is followed. On his inspection tour, Director Yi inquired about the impact of the reform of foreign exchange administration, especially the pilot policy for centralized operations and management of MNCs' foreign exchange capital for production and operations. He said that one of the core components of deepening the reform of foreign exchange administration is to continue to promote trade and investment facilitation so as to satisfy businesses' rational needs for foreign exchange policies, enabling businesses to fully use "the two resources and the two markets" to enhance their international competitiveness, and to upgrade the Chinese economy. 2014-07-07/en/2014/0707/1118.html