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Pan Gongsheng: Pursue All-round Opening-up with More Balanced Foreign Exchange Administration
Opening-up is imperative to the flourishing of our country. In his report to the 19th CPC National Congress, Secretary-general Xi Jinping said: "We shall make new ground in pursuing opening-up on all fronts". In the third group study among the members of the Political Bureau of CPC Central Committee, Xi Jinping stressed: "A system of pursuing opening-up on all fronts that is diversified, balanced, secure and efficient should be built to develop an open economy of higher standards". The foreign exchange market is a window for China's reform and opening up and communication with the rest of the world, and a hub that connects domestic and foreign markets and resources. In recent years, under the leadership of the CPC Central Committee with Comrade Xi Jinping at its core, foreign exchange authorities have established "four consciousnesses". Following the underlying principle of pursuing progress while ensuring stability, foreign exchange authorities have been committed to pressing ahead with the foreign exchange administration reform, promoting the liberalization of the foreign exchange market, and preventing the risks associated with cross-border capital flows, thus safeguarding the national economic and financial security. In addition, the healthy and orderly foreign exchange market environment is conducive to making new ground in pursuing opening-up on all fronts. I. China's cross-border capital flows have reached a basic equilibrium Under the combined impact of both domestic and foreign factors, cross-border capital flows had shifted from long-term net inflows to net outflows for a while in the past few years, leaving China's foreign exchange market seriously affected by cross-border capital flows for a period of time. Under the leadership of the CPC Central Committee and the State Council, authorities such as the People's Bank of China and the State Administration of Foreign Exchange (SAFE) adopted multi-prolonged measures and policies, particularly the macro-prudential policy for the counter-cyclical regulation of cross-border capital flows, which has produced positive results and ensured stability of the foreign exchange market and national economic and financial security. Under the combined effect of the macroeconomic fundamentals, global economic and financial environments, policies and measures, the cross-border capital flows and the supply and demand of foreign exchange in China reached a basic equilibrium in 2017, with foreign exchange reserves recovering slightly, the RMB exchange rate against the USD rising stably and the RMB exchange rate against a basket of other currencies becoming basically stable. (I) The supply and demand in the foreign exchange market has become more balanced. In 2017, a deficit of USD 111.6 billion was registered in banks' foreign exchange sales and settlements, down by 67% year on year. With spot and forward foreign exchange sales and settlements as well as options taken into consideration, the supply and demand of foreign exchange have moved towards an equilibrium since February 2017 and now stay basically balanced. Cross-border capital flows have also become more balanced. In 2017, non-banking sectors such as enterprises and individuals registered USD 124.5 billion in net outflows of cross-border capital, down by 59% year on year. Specifically, China posted USD 25.2 billion, USD 59 billion, USD 27.3 billion and USD 13 billion respectively in net outflows of cross-border capital from the first to the fourth quarter, indicating net outflows were on the decline. (II) Market participants' behaviors in foreign-related transactions have become more stable. Amid the two-way fluctuations of the RMB exchange rate, enterprises' and individuals' behaviors in foreign-related transactions have been diversified rather than simplistic as they were previously, and more of them arrange cross-border receipts and payments, and foreign exchange sales and settlements based on real demand. In 2017, the surplus in foreign exchange sales and settlements under trade in goods and foreign exchange settlements under FDI were on an upward trend, cross-border financing continued stable growth, and outbound investment and individual purchases of foreign exchange declined systematically. (III) The balance of foreign exchange reserves has perked up for 11 consecutive months. As at the end of 2017, the balance of foreign exchange reserves hit USD 3.1399 trillion, up by USD 129.4 billion year on year, representing rises for 11 straight months since February 2017. (IV) The RMB exchange rate has risen stably against the USD and remained stable against a basket of other currencies. In 2017, the central parity rate of the RMB against the USD rose by 6.2%, and the CFETS RMB exchange rate index compiled by China Foreign Exchange Trade System climbed by 0.02%. II. Favorable factors will help reduce risks associated with cross-border capital flows in China going forward In 2018, following the underlying principle of pursuing progress while ensuring stability, the new vision for development and the requirements for high-quality development, China will witness rising stability and resilience in economic performance and may continue to see stable development with strong momentum for growth. As external demand is strengthened alongside the world economic recovery, the financial markets are further liberalized, and market expectations improve, China's balance of payments and cross-border capital flows will maintain a basic equilibrium. The high-quality development model will help strengthen market confidence in the long term. In 2018, the first year of implementing the spirit of the 19th CPC National Congress, China will focus on the supply-side structural reform while stabilizing growth, promoting reform, adjusting structure, benefitting the people and preventing risks, so as to boost the sustainable and healthy development of the economy and society, which will consolidate the confidence of domestic and foreign market participants in investing and operating in China in the long term. The sound economic fundamentals are still a driver of stable cross-border capital flows in China. China's economic growth is relatively high at the global level, and in particular, the economic structure is improved, the aggregate supply and demand is more balanced and the momentum for endogenous growth is strengthened. The domestic industrial chains and supporting facilities are being enhanced, and workers' skills are well matched with companies' requirements, which will help ensure smooth operations and high returns. At the same time, residents' incomes are on the rise, and their consumption is further upgraded, indicating high potential of the domestic markets, which will be a key consideration in attracting investments. Further, China's macro policies are well targeted, systems and regimes are flexible, financial markets are robust and foreign exchange reserves are adequate, indicating China will be capable of responding to and solving risks. Making new ground in pursuing opening-up on all fronts will help balance cross-border capital flows. In 2018, the 40th anniversary of the implementation of the reform and opening up policy, the scope and level of opening up will be further expanded, market entry will be loosened, laws on foreign capital will be improved, and intellectual property rights protection will be intensified, so as to attract more capital to flow into the country on a long-term basis. With the smooth implementation of financial market reforms and opening up, foreign investors will become more aggressive in investing in China's capital market. Focusing on the Belt and Road Initiative, China will attach equal importance to "bringing in" and "going global" to make it easier to achieve balanced capital flows. The external environment will be favorable as the global economic and financial performance remains stable. In 2018, the global economy will continue to recover, with its growth rate expected by the IMF to be 3.9%, up by 0.2 percentage point from a year earlier. The consumption and employment in the US will be generally optimistic and Trump's tax plan will be favorable to boost the country's economy and push up the expectations of inflation. Spurred by a greater momentum for stronger domestic demand and rising external demand, manufacturing PMI in the Eurozone set a new record in January 2018 and economies such as Germany, Italy and the Netherlands are expected to see higher growth rates, and therefore, the Eurozone may sustain a huge momentum beyond expectations in 2018. Japan's GDP has continued to rise for seven consecutive quarters and its manufacturing PMI reading has been above 50 for 16 straight months, and therefore, the country's central bank has recently expanded the prediction interval of economic growth in 2018. Benefitting from the perking up of the global economy, higher commodity prices and the positive results of domestic reforms, BRICS countries such as Russia, Brazil, India and South Africa have registered fast increases in foreign trade and their manufacturing PMI readings climb, indicating optimistic economic performance. It should also be noted that China's cross-border capital flows are still susceptible to instabilities and uncertainties. First, major economies may be homogeneous in normalizing their monetary policies with resonance effect, which, coupled with the tax reform, infrastructure investment and trade protectionism in the US, may impact global financial markets and global capital flows. Second, the foundation for the stability of global financial markets is still weak. Although risk aversion is at a historical low across the world, yet the risk of adjustment after continued rallies of the stock markets in some developed countries, and political risks and geopolitical conflicts in some regions may lead to changes in risk aversion and heightened volatility of cross-border capital. Third, economic and financial risks still exist in China. The country is now still at a critical moment in addressing major economic and financial risks. The leverage ratio of enterprises remains high, and issues such as hidden debt of local governments, real estate market, shadow banking, and internet finance are to be addressed. As a result, market sentiment and confidence may be impacted during risk exposure and disposal. III. Pursue All-round Opening-up with More Balanced Administration As China's cross-border capital flows find an equilibrium, all the macro-prudential policies adopted earlier have regained their neutrality. Going forward, the two-way flows of China's cross-border capital will become a normal and remain generally balanced. Next, foreign exchange authorities will boost the balanced management of cross-border capital flows: first, regarding the purposes of management, foreign exchange authorities will look at the increases and decreases in foreign exchange reserves more reasonably, placing a stronger emphasis on dynamic equilibrium of the balance of payments while achieving a higher level of trade and investment liberalization and facilitation. Second, in terms of management philosophy, policy neutrality will be adhered to. In micro regulation of the foreign exchange market, the consistency in the policies and standards for two-way cross-border capital flows will be stressed: both capital inflows and outflows in compliance with laws and regulations will be supported. Third, in enforcement of foreign exchange laws, authenticity and compliance with laws and regulations will be stressed, and consistency, stability and predictability of enforcement standards across cycles will be emphasized, while illicit outflows and inflows, especially irregularities such as underground banks, fabricated transactions and market manipulation, will be cracked down on, so as to safeguard the normal order of the foreign exchange market. (I) Policies for a higher level of trade and investment liberalization and facilitation will be adopted. First, law-based administration will be adhered to so as to satisfy authentic demands for foreign exchange under the current and capital accounts in conformity with regulations. Second, efforts will be made to serve the building of a trade giant and support and cultivate new trade formats. The regulatory system, service system and policy framework will be improved to continue to support the healthy development of new trading formats and models such as cross-border ecommerce, market purchases and comprehensive foreign trade services, and to standardize the development of cross-border payments through third-party payment institutions. Third, the Belt and Road Initiative will be focused on, with equal importance attached to "bringing in" and "going global". The new framework of foreign exchange administration for foreign-owned enterprises under the model of pre-establishment national treatment plus negative list will be studied to build stable, equitable, transparent, predictable and law-oriented business environment and protect legitimate interests of foreign-owned enterprises. International production capacity cooperation will be promoted under the Belt and Road Initiative. Efforts will be made to standardize and guide ODI, with focus on supporting capable and eligible domestic enterprises to make outbound investments in an active and steady manner, under the principle of classified management. (II) The two-way liberalization of the financial market will be pressed ahead with. First, the securities market will be boosted for two-way liberalization. Further efforts will be made to promote the liberalization of domestic stock and bond markets, by improving bond connect, studying Shanghai-London Stock Connect and supporting Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect. The foreign exchange administration system for qualified institutional investors (QFII, RQFII, QDII, RQDII) will be reformed and improved. It will be made easier for market participants to allocate assets in larger space. The domestic market for derivatives such as commodity futures will be further opened up. Second, the open and competitive foreign exchange market will be opened up and improved. Efforts will be made to deepen the foreign exchange market, expand transaction participants, diversify transaction instruments, and expand the scope of transactions to boost market liberalization and satisfy participants' demands for risk mitigation. Third, education on risks will be intensified for market participants. Enterprises will be guided to build the awareness of "financial neutrality" and use various instruments on the foreign exchange market for hedging, so as to ensure sound exchange rate risk management. (III) The macro-prudential management system for cross-border capital flows will be built. The monitoring, early warning and response mechanism for the macro-prudential management of cross-border capital flows will be built and improved. The macro-prudential assessment system for cross-border capital flows will be built for the banking sector. Policy toolkits will be diversified, including management instruments aimed to reduce sharp fluctuations in cross-border capital, such as provisions of risks; the macro-prudential management policies focusing on bank and short-term capital flows. Efforts will also be made to adjust the short-term fluctuations of the foreign exchange market in a counter-cyclical manner to safeguard the security of the financial system and the equilibrium of the balance of payments. (IV) The micro-regulatory framework for the foreign exchange market will be enhanced. First, the cross-cyclical stability and consistency of policies will be ensured. The order of the foreign exchange market will be maintained in accordance with laws and regulations, the cross-cyclical consistency between law applicability and enforcement standards will be ensured, and a tough stance on foreign exchange irregularities will be maintained. Second, the authenticity, legality and compliance reviews will be conducted. Foreign exchange authorities will perform their review obligations in anti-money laundering, anti-tax avoidance and anti-terrorist marketing to protect the legitimate interests of market participants and crack down on price manipulation, false advertisement and consumer misleading. Third, penetrating regulation of cross-border transactions will be enhanced under the tracing principle. Fourth, the national security inspection of foreign investments will be ensured. (V)The operation and management capabilities of foreign exchange reserves will be strengthened. First, the coordination with monetary policy, foreign exchange rate policy, and cross-border capital flow policy will be further intensified to guard against systematic risks and make full use of the roles of foreign exchange reserves in ensuring external payment, and safeguarding stable foreign exchange rate and national economic and financial security. Second, investment capability building will be stepped up, and monetary and asset structure will be optimized so as to ensure security and liquidity while maintaining and increasing value. Third, key national strategies like the Belt and Road Initiative will be applied in a diversified way to boost international production capacity and equipment manufacturing cooperation to go deeper. 2018 is the first year to implement the spirit of the 19th CPC National Congress, the 40th anniversary of the implementation of the reform and opening up policy and a year crucial to securing a decisive victory in building a moderately prosperous society in all respects and to the implementation of the 13th Five-year Plan. Guided by the Xi Jinping thought on socialism with Chinese characteristics for a new era, foreign exchange authorities will uphold the underlying principle of pursuing progress while ensuring stability to fulfill the three tasks of serving the real economy, controlling financial risks and deepening financial reforms. Following the philosophy of balanced management, foreign exchange authorities will be committed to making new ground in pursuing opening up on all fronts, serving the development of the real economy, guarding against risks arising from cross-border capital flows and safeguarding national economic and financial security, in a bid to make new contributions to securing a decisive victory in building a moderately prosperous society in all respects and striving for the great success of socialism with Chinese characteristics for a new era. (The original text is available at caixin.com) 2018-02-07/en/2018/0207/1415.html
National Foreign Exchange Administration Work Conference 2018 Held in Beijing
The national foreign exchange administration work conference has been recently held in Beijing. At the conference, participants studied, promoted and implemented the spirit of the 19th CPC National Congress, the Central Economic Work Conference and the National Financial Work Conference, summarized the performance of foreign exchange administration over the past five years, studied the foreign exchange market conditions and concerns in foreign exchange, studied the logics and arranged for assignments regarding the foreign exchange administration reform for the moment and the near future. Pan Gongsheng, Secretary of the Party Leadership and Administrator of the State Administration of Foreign Exchange (SAFE), delivered a work report. The conference pointed out that under the leadership of the CPC Central Committee with Comrade Xi Jinping at its core and the guidance of the CPC Committee of the People's Bank of China, foreign exchange authorities have strengthened the Party's self-discipline, established and executed the new philosophy on development and deepened the foreign exchange administration reform over the past five years, based on the work arrangements of the CPC Central Committee and the State Council. They have further liberalized the foreign exchange market, supported the development of the real economy, and effectively tackled the impact on the foreign exchange market, maintaining the economic and financial security of the country. First, foreign exchange authorities have been committed to foreign exchange administration reforms and innovations. They have deepened the reform of delegation, regulation and service, achieved new progress in the capital account convertibility and the two-way liberalization of the financial market, pushed the liberalization and competitiveness of the foreign exchange market to new highs, and further enhanced cross-border trade and investment liberalization and facilitation. Second, foreign exchange authorities have prevented the risks arising from cross-border capital flows. They have improved the macro-prudential management of cross-border capital flows and micro-regulatory framework of the foreign exchange market. They have maintained a tough stance on foreign exchange irregularities to safeguard the healthy and orderly foreign exchange market. Third, foreign exchange authorities have maintained and increased the value of foreign exchange reserves while ensuring their security and liquidity, and served the national strategy by using foreign exchange reserves, providing a strong support for the Belt and Road Initiative and international production capacity cooperation. Fourth, foreign exchange authorities have been dedicated to strengthening the Party's self-discipline in all respects. New results have been achieved in the building of the Party's politics, ideology, organization, work styles, discipline and systems. Efforts have also been stepped up to build the foreign exchange administration teams. Participants at the meeting believed that by following the decisions and arrangements of the CPC Central Committee and the State Council and adhering to the general work guideline of making progress while maintaining stability, foreign exchange authorities took the initiative to press ahead with law-based administration and the reform of delegation, regulation and service, supported the development of new trading formats and enhanced trade and investment liberalization and facilitation in 2017. Also in the year, they deepened reforms in key areas and pushed forward the capital account convertibility and the development of the foreign exchange market; they raised requirements on authenticity and compliance reviews and cracked down on foreign exchange irregularities such as underground banks to safeguard the healthy and orderly development of the foreign exchange market; they improved the way of foreign exchange administration and strengthened the micro regulation capability in the foreign exchange market; they strengthened the operation and management of foreign exchange reserves to ensure their security, liquidity and the maintenance and growth of their value; they pushed forward the Party self-discipline in all respects and built professional talent teams with high qualities. As a result, new progress has been achieved in foreign exchange administration. Participants at the meeting realized that the 19th CPC National Congress kick-started the march towards socialism with Chinese characteristics for the new era, and proposed the new targets and tasks for building the modern economic system at a higher level and boosting the new landscape of full opening-up. In the new era, foreign exchange authorities should have a new look and make new contributions, making studying, promoting and implementing the spirit of the 19 CPC National Congress their top political task for the present and the near future, with a focus on developing a deep understanding of the task. They should develop "four awarenesses", build "four confidences" and ensure "four obediences" to enhance political stance and firmly safeguard the centralized leadership by CPC Central Committee. By implementing the four principles of "remaining true to the original aspiration, optimizing the structure, enhancing regulation and following market orientation", they should endeavor to ensure sound foreign exchange administration under the new circumstances. Participants at the meeting stressed that the year 2018 marks the first year of implementing the spirit of the 19th CPC National Congress and the 40th anniversary of the reform and opening up policy, and is crucial to the building of a moderately prosperous society in all respects and the implementation of the 13th Five-year Plan. Foreign exchange authorities should be united around the CPC Central Committee with Comrade Xi Jinping at its core. Under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, they should implement the requirements on the Party's self-discipline, and align their thoughts and actions with the judgments, decisions and arrangements of the CPC Central Committee regarding the economic and financial conditions. Following the general work guideline of maintaining stability while making progress, the new development philosophy and the requirements on high-quality development, they should focus on serving the real economy, controlling financial risks and deepening the financial reform. On the one hand, they should deepen the foreign exchange administration reform, and boost the two-way opening up of the financial market to serve the country's new pattern of comprehensive opening-up. On the other hand, they should work to ensure the stability of the foreign exchange market, preventing the risks associated with the cross-border capital flows, and safeguarding the security, liquidity, and value maintenance and growth of foreign exchange reserves, to guarantee economic and financial security of China, and make greater contributions to the building of a moderately prosperous society in all respects and the success in building socialism with Chinese characteristics in the new era. The priorities of foreign exchange administration for the moment and the near future were set at the meeting. First, foreign exchange authorities should unswervingly implement the requirements on the Party's self-discipline. They should support the core position of Secretary-general Xi Jinping in the CPC Central Committee and the CPC and safeguard the authority and centralized leadership of the CPC. They should study, promote and implement the spirit of the 19th CPC National Congress, and carry out educational programs under the theme of "remaining true to our original aspiration and keeping our mission firmly in mind". Focusing on the CPC's political construction, they should clean up undesirable work styles and tighten discipline and build a team of talents with firm political stance, desirable work styles and strong professional expertise, to provide political guarantee and professional support for foreign exchange administration to serve the reform and opening up. Second, they should further enhance the liberalization and facilitation of cross-border trade and investment. To be specific, they should support innovative development of foreign trade, and press ahead with the pilot program of foreign exchange administration for free trade zones. They should properly and systematically push forward the capital account convertibility, protect the legitimate rights and interests of foreign investment, and support capable and mature enterprises to make outbound investment. They should increase the transaction instruments and expand market players to build and improve the open and competitive foreign exchange markets. They should also strengthen risk education programs, guide market players to build the risk neutral awareness, and emphasize the management of foreign exchange rate risks so as to control the risks arising from external impact. Third, the regulatory capability of foreign exchange markets should be improved. Foreign exchange authorities should prevent and mitigate financial risks, and improve the two-in-one management system of macro-prudential management and micro market regulation regarding cross-border capital flows. The macro-prudential policy should be dedicated to the countercyclical adjustment of cross-border capital flows and the micro regulation policy should be devoted to maintaining the order of the foreign exchange market in accordance with the law and regulations. The implementation standards should be stable, consistent and predictable across cycles and foreign exchange irregularities should be cracked down. Fourth, infrastructures should be improved. Foreign exchange authorities should improve the laws and regulations on foreign exchange administration, with the emphasis on the basic work of the balance of payments statistics. They should also build digital foreign exchange administration platforms to improve the security of the foreign exchange administration system. Fifth, the foreign exchange reserves operation capability should be built. Foreign exchange authorities should support national strategies such as the Belt and Road Initiative and international production capacity cooperation, to ensure the security and liquidity of foreign exchange reserves and their value maintenance and increase. The conference was attended by the members of the Party Leadership of the SAFE, as well as the owners of the SAFE branches (foreign exchange administrative departments), relevant departments of the People's Bank of China and departments and units of the SAFE. 2018-02-06/en/2018/0206/1414.html
SAFE Press Spokesperson Answers Media Questions on Cross-border Capital Flows for January 2018
The State Administration of Foreign Exchange (SAFE) has recently released the data on banks' foreign exchange settlement and sales and their foreign-related receipts and payments for clients for January 2018, and its press spokesperson answered media questions on recent cross-border capital flows. Q: China's cross-border capital flows found an equilibrium in 2017. What have been the trends of cross-border capital flows since the beginning of 2018? A: China has seen a basic equilibrium between foreign exchange supply and demand since the very beginning of this year. First, the balance of foreign exchange reserves has been rising. According to the data on foreign exchange reserves released on February 7, the balance of foreign exchange reserves as at the end of January stood at USD 3.1615 trillion, up by USD 21.5 billion month on month, as a result of the equilibrium in the domestic supply and demand of foreign exchange, the foreign exchange rate appreciation of non-USD currencies and changes in asset prices. Second, banks' foreign exchange sales and settlements and domestic supply and demand of foreign exchange have remained in balance. Banks' foreign exchange settlements went up by 28% year on year and banks' foreign exchange sales grew by 11% year on year in January, leading to a deficit of USD 900 million, which was down by 95% year on year, indicating slight surplus and deficit have continued to alternate. If the impact of forward trading and options trading of enterprises were taken into consideration, the domestic supply and demand of foreign exchange would have reached a basic equilibrium in January. Third, the non-banking sectors' foreign-related receipts and payments have been in surplus. In January, the non-banking sectors such as enterprises and individuals registered a surplus of USD 24.6 billion in foreign-related receipts and payments, including a surplus of USD 25.7 billion in foreign exchange capital receipts and payments. The supply and demand of foreign exchange from major channels have stayed stable. On the one hand, foreign exchange sales and settlements under trade in goods and the capital and financial accounts have continued to register surpluses. In January, the sales and settlements of foreign exchange under trade in goods for clients recorded a surplus of USD 18.7 billion, the sales and settlements of foreign exchange under the capital and financial accounts for clients registered a surplus of USD 4.2 billion. In particular, direct investment and portfolio investment recorded a surplus of USD 900 million and USD 1.9 billion respectively. On the other hand, enterprises' returns on investment and individuals' purchases of foreign exchange have remained low. In January, foreign exchange purchases under the return on investment went down by 31% month on month and 23% year on year; and individuals' purchases of foreign exchange climbed by 11% month on month, indicating more foreign exchange was used by individuals under travel before the Chinese New Year, but it declined by 12% year on year. The development trend that two-way cross-border capital flows will remain generally balanced has taken shape in China. Recently, the steady economic growth in China has gained momentum. The market views of major currencies have been rationally diverged, with stable growth expected; the RMB exchange rate has presented a trend of ups and downs and two-way fluctuations, promoting cross-border capital flows to be more stable in China, and the foreign exchange market to achieve a balance on its own. Going forward, as the supply-side structural reform goes deeper, China's economic structure will be further optimized and its momentum for endogenous growth will be strengthened, suggesting China will witness stable and rapid economic growth. Globally the economy will continue to recover, but the global financial performance and the normalization of the monetary policies of major developed economies will continue to suffer from instability and uncertainties. Under such circumstances, the two-way fluctuations of the RMB exchange rate will become a norm and the RMB exchange rate will stay basically stable at a reasonable and balanced level, which is favorable for China's cross-border capital to flow in two ways and remain generally balanced in the medium and long term. 2018-02-26/en/2018/0226/1419.html
SAFE Press Spokesperson Answers Media Questions on BOP for 2017
The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on the Balance of Payments for the fourth quarter of 2017 and the whole year. On that basis, its press spokesperson answered media questions on relevant issues. Q: Could you brief us on China's balance of payments for 2017? A: The preliminary data in the Balance of Payments for 2017 show twin surplus under the current account and the financial account (excluding reserve assets) (including net errors and omission for the fourth quarter, the same as below), and increases in reserve assets. First, a reasonable surplus was registered under the current account and foreign trade rose on a year-on-year basis. In 2017, a surplus of USD 172 billion was recorded under the current account, and its ratio to GDP for the same period was 1.4%. Trade in goods in the Balance of Payments registered a surplus of USD 476.1 billion, with exports and imports of goods rising by 11% and 16% respectively, suggesting a stronger trend for recovery and growth in foreign trade. Second, the financial account (excluding reserve assets) became a surplus. In 2017, a surplus of USD 82.5 billion was posted under the financial account (excluding reserve assets), versus a deficit of USD 475.2 billion in the comparable coverage in 2016. In particular, direct investment recorded a net inflow of USD 63.8 billion, compared with a net outflow of USD 46.6 billion in 2016. Specifically, a net outflow of USD 101.4 billion was recorded under ODI, and a net inflow of USD 165.3 billion under FDI, which were high in both directions. Third, reserve assets were on the rise. In 2017, China witnessed an increase of USD 91.5 billion in reserve assets as a result of BOP transactions (excluding non-transaction factors such as foreign exchange rates and prices), versus a decrease of USD 443.7 billion in 2016. To be specific, foreign exchange reserves climbed by USD 93 billion, while the reserve position in the IMF declined by USD 1.5 billion. Overall, China's BOP remained robust in 2017, with cross-border capital flows changing from net outflows into a basic equilibrium. As China's economy remains steady with a stronger momentum for growth, the foundation for the general equilibrium in BOP will be stronger going forward. 2018-02-08/en/2018/0208/1417.html
Brief Table of External Debt, End-1998
Brief Table of External Debt, End-1998 （ in thousands of US dollars） Type of Debtor/Debt Loans from Foreign Governments Loans from International Financial Institutions Loans from Foreign Banks and Other Financial Institutions Buyer's Credit Loans from Foreign Exporters, Enterprises and Individuals Loans from Foreign Banks in China Bonds Issuing Abroad Deferred Payments Private Deposits from Overseas International Financial Leasing Liabilities to be Paid with Foreign Exchange in Compensation Trade Others Total Ministries of the State Council (Government Agencies) 13458833.3 22363197.4 449474 　　　 5318100 51815.1 　　　　 41641419.8 Chinese-funded Banks 8937910.7 　 9058848.2 11611858.4 268781 160277.8 3005826 773116.2 159410.7 1170 　　 33977198.9 Chinese-funded Non-banking Financial Institutions 　　 3679723.9 48870.8 7547.7 889885.6 3356612.8 　 7520.5 17783 　　 8007944.3 Leasing Company 　　 943954.7 24600 24326.3 507177.6 　 30679.7 　 144032.2 　　 1674770.5 Foreign-funded Enterprises 2936.4 560596 11071741.6 1189505.9 16820123.1 14311377.1 749747 342106.6 　 154140.8 7745.7 29084.8 45239105 Chinese-funded Enterprises 6477.3 30000 1334636.5 95035.6 232138 412108.1 　　　 12736371.4 141572.5 　 15501274.2 Others 　　 1300 　　　　　　　　 175 1475 Total 22406157.8 22953793.4 26539678.9 12969870.7 17352916.1 16280826.3 12430285.8 1710652.2 166931.2 13053497.4 149318.2 29259.8 146043187.9 FILE: Brief Table of External Debt, End-1998 2011-09-20/en/2011/0920/1411.html
SAFE Official Answers Media Questions on Foreign Exchange Reserves for February 2018
Q: The latest data on foreign exchange reserves disseminated by the People's Bank of China show that China's foreign exchange reserves for February 2018 fell by USD 27 billion month on month. Could you brief us on the causes of such changes? What are the trends in foreign exchange reserves for the future? A: As at the end of February 2018, China's foreign exchange reserves hit USD 3.1345 trillion, down by USD 27 billion or 0.85% month on month. In February, China posted stable cross-border capital flows and trading behaviors of domestic and foreign players, indicating the foreign exchange market maintained a basic equilibrium. Under the combined impact of heightened volatility in global financial markets, adjustments in foreign exchange rates, callback of asset prices, and the depreciation of major non-USD currencies against the USD, China's foreign exchange reserves declined slightly. Currently, China's economy sustains medium and high-speed growth and the supply-side structural reform is being advanced, presenting a good picture where growth and quality, structure and benefits are mutually complementary. The development trend that two-way cross-border capital flows will remain generally balanced has taken shape in China. Looking ahead, China's economy will be capable and mature to continue stable development with a strong momentum for growth. Spurred by fundamentals, the two-way fluctuations of RMB exchange rate will become a normal, which is favorable for the two-way and generally balanced cross-border capital flows in the medium and long term. On the other hand, the global economy will continue to recover, and major central banks will tighten their monetary policies, leading to heightened uncertainties in the financial market. Under the effect of both domestic and foreign factors, China will see stable foreign exchange reserves in the future. 2018-03-07/en/2018/0307/1420.html
Deepen the Development of Foreign Exchange Market to Better Serve the Real Economy
Over the past four decades since the reform and opening up policy was implemented, China's foreign exchange market has grown from nothing to the large scale it is at today, with a preliminary market system that adapts to the socialist market economy established, thus playing significant roles in macro control, resource allocation, exchange rate formation and risk management. In 2017, China posted USD 24 trillion in the trading of RMB against foreign currencies in the domestic foreign exchange market. To further support financial institutions in serving the real economy and preventing risks arising from foreign exchange, the State Administration of Foreign Exchange (SAFE) has recently released the Circular on Foreign Exchange Administration for Improving Forward Foreign Exchange Sales and Settlement (Hui Fa No. 3 [2018]) (Circular). Forward foreign exchange sales and settlement are the most basic and one of the major derivatives in the domestic foreign exchange market. Starting from the key links to diversify the trading mechanism, the Circular allows gross or netting settlement as the way of delivery when the forward contract for foreign exchange sales expires, while adopting netting delivery for forward foreign exchange settlement in 2016. This marks forward foreign exchange sales and settlement has been fully market-based in market-oriented pricing, delivery and settlement, and risk management. The Circular will become effective the day it is released. Going forward, the SAFE will continue to deepen the development and liberalization of the foreign exchange market to provide support and guarantee for trade and investment facilitation. 2018-02-13/en/2018/0213/1418.html
SAFE Official Answers Media Questions on Foreign Exchange Reserves for January 2018
Q: The latest data on foreign exchange reserves disseminated by the People's Bank of China show that China's foreign exchange reserves as of the end of January 2018 rose by USD 21.5 billion month on month. Could you brief us on the causes of such changes? What are the trends in foreign exchange reserves in the future? A: As at the end of January 2018, China's foreign exchange reserves hit USD 3.1615 trillion, up by USD 21.5 billion or 0.68% month on month. In January, China posted stable cross-border capital flows and trading behaviors of domestic and foreign players. In the global financial markets, foreign exchange reserves grew slightly under the combined impact of rises in foreign exchange rates of non-USD currencies and changes in asset prices. Going forward, China will accelerate the adjustment, optimization and upgrade of its economic structure and the economic fundamentals are expected to continue its stable growth and good momentum. As the global economy recovers, central banks will tighten their monetary policies. Boosted by fundamental factors, China's cross border capital flows and foreign exchange supply and demand will be further balanced, and the two-way fluctuations of RMB exchange rate will be more obvious. In the face of domestic and foreign economic and financial conditions, China will see stable foreign exchange reserves in the future. 2018-02-07/en/2018/0207/1416.html
SAFE Press Spokesperson and Chief Economist Wang Chunying Attends the State Council's Routine Policy Briefing: Policies for Optimizing Foreign Exchange Administration Initiatives and Improving Cross-border Trade and Investment Facilitation (Transcript)
Wang Chunying, press spokesperson, chief economist and director of the Department of Balance of Payments of the State Administration of Foreign Exchange (SAFE) attended a State Council Policy Briefing held by the State Council Information Office, clarified the policies for optimizing foreign exchange administration initiatives and improving cross-border trade and investment facilitation and answered relevant media questions. The briefing started at 4pm on Friday, October 25, 2019. Xi Yanchun: Ladies and gentlemen, good afternoon! Welcome to the State Council's policy briefing. The recent State Council executive meeting proposed 12 initiatives on optimizing foreign exchange administration and improving cross-border trade and investment facilitation. To help you better understand the initiatives, we are pleased to have with us here Ms. Wang Chunying, press spokesperson, chief economist and director of the Department of Balance of Payments of the SAFE. She will clarify relevant policies and take your questions. First, let's welcome Ms. Wang for some opening remarks. 2019-10-25 16:01:34 Wang Chunying: Friends from the press, good afternoon. Welcome to today's policy briefing. First, allow me to thank you for your enduring attention and support for foreign exchange administration. On October 23, 2019, the State Council executive meeting reviewed and adopted the policies for optimizing foreign exchange administration and improving cross-border trade and investment facilitation, and relevant documents can be found on the SAFE's official website. For a start, I'd like to give you a brief introduction of the policies. Guided by the strategic arrangements made at the 19th CPC National Congress to promote comprehensive opening up and high-level trade and investment liberalization and facilitation and Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the SAFE has proactively boosted the financial supply-side structural reform to serve the high-level opening up. In the year to date, the SAFE has introduced a series of initiatives to optimize the business environment and serve the growth of the real economy, such as deepening the reform of centralized funds operations and management by MNCs, piloting the facilitation of foreign exchange receipts and payments under the capital account, removing the limits on investment quotas for QFIIs and RQFIIs, and piloting the facilitation of foreign exchange receipts and payments under trade in goods. Twelve initiatives on foreign exchange administration for boosting cross-border trade and investment facilitation were deliberated and adopted at the State Council executive meeting, including six for cross-border trade facilitation and another six for cross-border investment and financing facilitation. I. Cross-border trade facilitation initiatives First, expanding piloting for the facilitation of foreign exchange receipts and payments under trade. When processing foreign exchange receipts and payments under trade in services and trade in goods for creditworthy companies, qualified banks can optimize their processes at their discretion. The SAFE started a pilot program for this in the Guangdong-Hong Kong-Macao Greater Bay Area, Shanghai and Zhejiang at the beginning of 2019. According to pilot banks, the program can cut more than 50% off the time for document preparation and review. This time, the pilot program will be rolled out to other eligible regions with the scope expanded to include trade in services. Second, simplifying receipt and payment procedures under trade in goods for micro and small cross-border ecommerce players. Micro and small cross-border ecommerce players whose annual size of trade in goods is below USD 200,000 can be waived of registering in the directory of enterprises with foreign exchange receipts and payments under trade. This initiative is expected to benefit more than 95% cross-border ecommerce corporate customers of payment institutions. But the SAFE and banks will use scientific and technological means to verify the authenticity of foreign exchange receipts and payments under trade in goods, for the purpose of tightened ongoing and ex-post management. Third, optimizing reporting of foreign exchange service under trade in goods. Companies will no longer be required to report to foreign exchange authorities their imports and exports in the early period and corresponding foreign exchange receipts and payments. Special business like trade credit will all be reported online. Fourth, allowing discretion to open accounts pending verification for export revenues. Companies can open an account pending verification for export revenues at their discretion and recognize export revenues into foreign exchange account in simplified procedures or settle the revenues directly. Fifth, facilitating the directory registration of branches and sub-branches. Branches that need to settle foreign exchange under trade can register in the directory of enterprises involved in foreign exchange receipts and payments under trade as legal persons do. Sixth, allowing centralized management of offshore funds by engineering contractors. Engineering contractors can centralize the management of offshore funds for different engineering projects to put idle- offshore funds to work and support diversified market expansion. II. Cross-border investment and financing facilitation First, allowing non-investment-oriented foreign investors to make equity investment in China with their capital in compliance with laws. Non-investment-oriented foreign investors, or foreign investors excluding foreign investment companies, foreign venture capital investment companies and foreign equity investment companies will be allowed to make equity investment in China with their capital in compliance with laws, including setting up new subsidiaries or merging other domestic players with their capital, provided that they follow the negative list approach to market access for foreign investors and the state's macro control policies. Second, expanding piloting for the facilitation of receipts and payments under the capital account. Any pilot company can make payments in China using receipts under the capital account like capital, external debt and overseas IPO funding without presenting in advance the authenticity supporting materials on a transaction-by-transaction basis to the pilot bank, who will process following the prudential regulation principle. A pilot program has been carried out in 12 pilot free trade zones including Shanghai and Tianjin. This time, the pilot program will be expanded to include six pilot free trade zones newly established in 2019 and the whole city of Shanghai. Third, facilitating settlement and use of some foreign exchange funds under the capital account. While transferring their shares to foreign investors, domestic institutions or individuals can go through the procedures for foreign exchange settlement of the consideration for the transfer with banks, without presenting the supporting materials for the use of funds. When hitting the bid or closing a deal, the foreign investors can use the margins thus remitted for legal domestic investment contributions, payment of considerations or foreign exchange settlement, with no need to transfer the margins back. Fourth, reforming the external debt registration mechanism. External debt write-offs can be registered with banks directly, rather than foreign exchange authorities, and the one-month time limit will be removed. The transaction-by-transaction registration for external debt of non-financial enterprises will be removed first in the Greater Bay Area and Hainan, and companies in these pilot regions can register with local foreign exchange authorities in a one-off manner, and borrow, use and repay external debt, provided that the debt is less than two times the net assets. Fifth, removing restrictions on the number of foreign exchange accounts opened under the capital account. Companies can open more than one foreign exchange account under the capital account to meet their fund management needs, provided that they follow the prudential regulation requirements. Sixth, expanding piloting for the transfers of domestic credit assets. Guided by the principles of risk controllability and prudent management, a pilot program will be carried out in the Greater Bay Area and Hainan to expand the scope of credit assets that can be transferred outside China from banks' non-performing loans to trade finance. Now I'd like to take your questions. 2019-10-25 16:07:25 Xi Yanchun: Thank you, Ms. Wang. Let's move on to the Q&A session, but remember to tell us your agency before raising your questions. CCTV: I am wondering what are your considerations behind the foreign exchange policy for optimizing cross-border trade and investment facilitation at this point of time? What would you say about the significance of this reform? Thank you. 2019-10-25 16:17:54 Wang Chunying: Thank you for your question. I'd like to answer from the following perspective. Foreign trade and investment has drawn deep concern from the CPC Central Committee and the State Council. Secretary-general Xi Jinping has stressed many times that "Six Stables" including stable foreign trade and stable foreign investment should be ensured to boost trade and investment facilitation and maintain sustainable and healthy economic growth. Premier Li Keqiang has made it clear that efforts should be stepped up to achieve comprehensive opening up, attract foreign investments and propel steady improvement in foreign trade. It has been clearly stated in this year's report on the work of the government that comprehensive opening up should be encouraged to boost trade and investment liberalization and facilitation. Leaders of the State Council including Han Zheng, Hu Chunhua, Liu He and Xiao Jie have also given similar instructions. Following the decisions and arrangements of the CPC Central Committee and the State Council, the SAFE introduces 12 initiatives for the facilitation of cross-border trade and investment after thorough surveys and initial piloting, with a view to strengthening the capabilities of foreign exchange administration to serve the real economy and boost trade and investment facilitation and high-quality economic growth. This reform is purposed to deepen the reform of "combining power delegation with regulation & optimizing services" and the financial supply-side structural reform through optimizing foreign exchange administration and simplifying processes. This reform will expand the channels where the funds can be used, support domestic players to expand foreign trade and investment and improve cross-border trade and investment facilitation. Moreover, it will also reduce burdens on players, revitalize the market and yield policy dividends. In the global business environment ranking released by the World Bank yesterday, China climbed up by 15 spots to No. 31. The aforementioned facilitation initiatives will create a better business environment for domestic players and foreign investors to start businesses and make innovations. This is what we consider in introducing the initiatives and what they mean for us. Thank you. 2019-10-25 16:18:19 Economic Daily: How would this reform facilitate and support foreign trading companies amid external challenges? Thank you. Wang Chunying: To answer your question, let's look at the 12 initiatives first. With six directly about trade, these 12 initiatives are launched to increase facilitation and reduce costs for foreign trade companies. Facing the complex external environment, the SAFE has deepened the reform of "combining power delegation with regulation & optimizing services" and the financial supply-side structural reform in accordance with the decisions and arrangements of the CPC Central Committee and the State Council, in a bid to help companies to save costs, increase the utilization efficiency of foreign exchange and support the growth of foreign trade companies. This reform will empower banks and foreign trade companies to a larger extent. The aforementioned policy adjustments, whether expanding piloting for the facilitation of foreign exchange receipts and payments under trade, or simplifying procedures for micro and small cross-border ecommerce players to handle receipts and payments under trade, or optimizing business reporting, are intended to give banks and companies more autonomy, in order to communicate a philosophy of more facilitation for companies with integrity, more convenience for micro and small enterprises, greater easiness for business reporting, more discretion for account use, more clarity of registration procedures and higher efficiency of fund use. I would here make an explanation or give you an overview. For example, when summarizing the outcomes of initial pilot for foreign exchange receipts and payments facilitation under trade in goods, pilot companies say that with substantial increase in the efficiency of foreign exchange receipts and payments, document preparation has been accelerated and labor costs have dropped. In the education program to promote that we should remain true to our original aspiration and keep our mission firmly in mind, we sought ideas from a wealth of companies, and more companies voiced their desire to join the pilot program. All this has motivated us to push ahead with this reform. While offering greater facilitation and helping save costs, these policy adjustments are designed to empower banks and foreign trade companies. In the meanwhile, we have implemented the decisions and arrangements of the CPC Central Committee and the State Council, such as deepening the reform of "combining power delegation with regulation & optimizing services" and the financial supply-side structural reform, ensuring "Six Stables" including stable foreign trade and stable foreign investment, and improving the business environment. We are also considering deepening the education program to promote that we should remain true to our original aspiration and keep our mission firmly in mind. I hope this could bring greater clarity to you. Thank you. 2019-10-25 16:37:49 China News Service: You said that piloting for the facilitation of foreign exchange receipts and payments under the capital account will be expanded based on the initial piloting. Could you brief us on the initial piloting and its impact? Thank you. 2019-10-25 16:38:11 Wang Chunying: Thank you for your question. Let me introduce the initial piloting first. According to existing regulations for foreign exchange administration, a company needs to present the authenticity supporting materials on a transaction-by-transaction basis for the bank to review the authenticity and compliance of transactions before handling the receipts and payments under the capital account (chiefly capital, external debt and overseas listing revenues). To implement the reform of "combining power delegation with regulation & optimizing services" and better serve the real economy, the SAFE has launched a pilot program for the facilitation of receipts and payments under the capital account since 2017. The highlight of the pilot program is as follows: pilot companies can make domestic payments using receipts under the capital account (including the RMB obtained from foreign exchange settlement) based on the payment orders, without the need for transaction-by-transaction reviews of transaction documents by banks. Up till now, this program has been carried out in 12 pilot free trade zones including Shanghai and Tianjin, as well as Fujian, Zhejiang, Jiangsu, Shenzhen and Ningbo. The pilot program has delivered positive results and been widely acclaimed by banks, enterprises and institutions since its launch. On the one hand, the program does have increased the facilitation of foreign exchange funds utilization by companies. As pointed out by a well-known accounting firm in the system innovation assessment of China (Zhejiang) Pilot Free Trade Zone in two years since its launch, this pilot program is one of the most highly-appraised initiatives of the five innovation achievements in deepening financial liberalization and one of the top 70 highly valuable innovative initiatives of the pilot free trade zone. On the other hand, this program has implemented the requirements of the CPC Central Committee to maintain stable foreign investments, met market players' rising demand for policy support and improved the business environment. Next, the scope of the facilitation piloting will be expanded to include six pilot free trade zones established in 2019 and the whole city of Shanghai. The SAFE will summarize its learnings to further roll out the pilot program to special economic regions with such demand and regions with flourishing foreign-related economies, and then to the entire country at a proper time. Hope this could shed some light on you. Thank you. 2019-10-25 16:38:30 Hong Kong Commercial Broadcasting: Could you kindly unveil the characteristics of foreign exchange receipts and payments in September? What will be the next steps? Thank you. 2019-10-25 16:53:10 Wang Chunying: We have elaborated on the situations at the SAFE's press conference on foreign exchange receipts and payments data just now, and the data are now available on our website. To find out relevant information, you can visit our website. For further questions, you can contact our news unit. 2019-10-25 16:53:30 Xi Yanchun: As the press conference started at 1:30 pm, relevant information has been released online, and you may have missed it on your way to this conference. You can view it when this conference is over. For further questions, we would be glad to help you. 2019-10-25 16:53:54 China Radio International of China Media Group We notice that among the cross-border investment and financing facilitation initiatives, one is about allowing non-investment-oriented foreign investors to make equity investment in China. Could you clarify this initiative in more detail? Thank you. 2019-10-25 16:54:25 One of our policies is to remove restrictions on equity investment by non-investment-oriented foreign investors with their capital in China. I suppose this is what you want to know. Let me brief you on the situation before the reform first and then we can make a comparison to find out changes after the reform. Prior to the reform, investment-oriented foreign investors could make equity investment with their capital in compliance with laws and regulations. What is an investment-oriented foreign investor? It refers to foreign investment company, foreign venture capital investment company and foreign equity investment company. Before this reform, these investment-oriented foreign investors were all eligible for making equity investment with their capital in compliance with laws and regulations and could reinvest in China with the legal profits obtained therein. Starting from 2015, the SAFE has canceled verification of reinvestment by foreign investors with profits obtained. If "investment" is included in the business scope of a non-investment-oriented foreign investor, the investor would be allowed to make equity investment in China through transfers of original currency or foreign exchange settlement. But if not, the investor would be banned from making equity investment in China. After the reform, no matter whether "investment" is included in the business scope or not, non-investment-oriented foreign investors could make equity investments in China in compliance with laws by using their capital in the original foreign currency or through foreign exchange settlement, provided that they comply with the existing special management measures on market access for foreign investors and the projects they intend to invest in in China are authentic and comply with regulations. In other words, since the introduction of this policy, all types of foreign investors can make equity investment with their capital, provided that they comply with the special management measures on market access for foreign investors and the projects they intend to invest in in China are authentic and comply with regulations. We have evaluated the effect of this policy. Of over 370,000 registered foreign-invested enterprises in China, less than 3,000 are investment-oriented, and more than 99% are non-investment-oriented, so this initiative could be of wide benefit. We believe it will significantly facilitate the use of capital and equity investment by non-investment-oriented foreign investors, especially when they invest in upstream and downstream enterprises along the industry chain. Hope this will be of some help to you. Thank you. 2019-10-25 16:55:06 South China Morning Post: My question is about the RMB capital account. Is there a schedule for full liberalization of the RMB capital account? It was previously expected that the RMB capital account would become convertible in 2020. Is it still possible? In the latest trade talks between China and the US, it is said that substantive progress has been achieved in exchange rate. Could you brief us on what consensus has been achieved? Thank you. 2019-10-25 16:58:24 Xi Yanchun: This seems a bit far from today's theme. 2019-10-25 16:58:38 Wang Chunying: And you raise two questions. As for China-US trade talks, you say that the exchange rate issue is covered in the talks. We learn that in the new round of high-level China-US trade talks, guided by the consensus between the two heads of state, the two sides had candid, efficient and constructive discussions on the economic and trade issues they both concern, with topics covering agriculture, IP protection, foreign exchange rate, financial service, expansion of trade cooperation, technology transfer and dispute settlement, in which substantial progress has been achieved. As for the RMB exchange rate, we will maintain the managed floating rate system based on market supply and demand and adjusted against a basket of currencies, so as to stabilize the RMB exchange rate at a reasonable and balanced level. This is what I want to say about the RMB exchange rate. Second, there is no schedule for the capital account liberalization, as far as I know. In other words, this is an ongoing process, where we will constantly promote the liberalization and facilitation of cross-border trade and investment to stably drive the capital account liberalization. The major considerations would be coordinating the growth stage of the economy, the situation of financial markets and the requirements for financial stability, and coordinating transactions and exchanges to press ahead with the capital account liberalization in an orderly manner and improve the facilitation of convertible items, with a focus on two-way liberalization of financial markets. We will properly expand the pilot program for foreign exchange sales and settlement by securities companies to increase the number of participants in foreign exchange markets, diversify trading products and further improve foreign exchange markets in depth, width and activeness. Second, we will support the healthy development of the STAR market, encouraging foreign investors to participate in the STAR market and ensure cross-border funds management for GDR under Shanghai-London Stock Connect. Third, we will standardize the management of domestic issuance of bonds by foreign institutions, and improve management approaches to systematically press ahead with the opening of domestic bond markets. Further, I should say that we will improve the two-in-one management framework that combines macro-prudential and micro regulation of cross-border capital flows. For macro-prudential regulation, we will tighten the monitoring early warning and response mechanism and diversify our toolkits. We will adjust market ups and downs against business cycles in an open, transparent and market-based manner. For micro regulation, we will strive to ensure the cross-cycle stability, consistency and foreseeability of policies while cracking down on false and fraudulent foreign exchange transactions. The liberalization of the capital account, I would say, is always on the road. Thank you. 2019-10-25 16:58:51 China Daily: Director Wang, you say that the SAFE will reform the registration mechanism for external debt. Could you provide more details? How will these initiatives facilitate companies? Thank you. 2019-10-25 17:08:04 Wang Chunying: The reform on external debt is chiefly about simplifying the procedures of borrowing. According to our announcements and what I said just now, this initiative covers two aspects: first, companies will register write-offs of external debt with banks directly, rather than with the foreign exchange authorities; second, removal of transaction-by-transaction registration will be piloted. They are different as one is about write-off registration, and the other is about player registration for borrowing, use and repayment. First, the external debt write-off registration reform. Companies should register write-offs of external debt with local foreign exchange authorities within one month since each debt is serviced, as per existing regulations. After this reform, this can be done directly with banks, with no one-month limit. This initiative was piloted in Guangdong, Fujian and Zhongguancun, Beijing at the end of 2018 and proved hugely beneficial. In Guangdong, for example, more than 500 write-offs involving over USD 10 billion in external debt have been registered with banks in the year to date, saving nearly 50,000km in mileage to and from the foreign exchange authorities. This is just one case of the pilot program. In the initial piloting, we found this could greatly facilitate companies and save plenty of travel costs, and therefore, this initiative is now rolled out across the board. Second, piloting of removing transaction-by-transaction registration for external debt. In 2016, the People's Bank of China and the SAFE introduced a national full-scale macro-prudential management policy for cross-border financing and canceled ex-ante approval for external debt made by companies and financial institutions. Within the upper limit for the risk-weighted balance of cross-border financing, which are two times the net assets, companies were allowed to borrow external debt on their own but needed to go through transaction-by-transaction registration with local foreign exchange authorities. In March 2019, the SAFE adopted the one-time external debt registration policy for the simplification of external debt management under centralized cross-border funds operations by MNCs, which was widely acclaimed by companies and banks. This time we plan to continue to adopt this policy for centralized cross-border funds operations by MNCs, and also carry out a pilot program in the Greater Bay Area and Hainan, allowing non-financial companies to do so. Within the registered amount, they can borrow, use and repay external debt, with inward/outward remittances and foreign exchange settlements and purchases handled with banks directly. Overall, I believe this reformative measure will further cut the cross-border financing costs. Thank you. 2019-10-25 17:08:55 ET Net: Could you share with us the considerations behind choosing the Greater Bay Area and Hainan as pilots for the removal of external debt registration and transfers of offshore credit assets? Thank you. 2019-10-25 17:17:39 Wang Chunying: We actually choose these regions as pilots for boosting cross-border trade and investment facilitation. These pilot regions, whether for cross-border trade or investment facilitation, can help to offer facilitation relevant to Hong Kong. The pilot policy for the Greater Bay Area is a case in point. In my view, the pilot policy shows our attention to the significance of the Greater Bay Area including Hong Kong across the board. Of the 12 initiatives, some have been piloted in the Greater Bay Area, such as the facilitation of foreign exchange receipts and payments under trade in goods, and some are to be piloted in the area, like removing the transaction-by-transaction external debt registration for non-financial companies. In our opinion, the Greater Bay Area, a developed export-oriented region, is frequently involved in international communications, quick to make innovations and home to some emerging modern industries, and piloting cross-border trade and investment facilitation here can unlock the area's advantages in all respects, strengthen its roles in shoring up and leading the national economic growth and opening up, and allow it to better serve the key strategic arrangements of the state. The same holds true for Hainan, a region that draws considerable attention from the CPC Central Committee and the State Council. This is why we think we should follow decisions and arrangements of the CPC Central Committee and the State Council in introducing foreign exchange administration policies and carry out pilot programs in these regions. 2019-10-25 17:18:11 Xi Yanchun: We always say that our motherland provides a strong back for Hong Kong and the prosperity of Hong Kong will drive our motherland to grow. We believe the series of facilitation initiatives unveiled by Ms. Wang will benefit Hong Kong too. Now I would like to conclude today's briefing with thanks to Ms. Wang again and thanks to you all. 2019-10-25 17:18:32 (The original text is available at www.people.com.cn) 2019-10-25/en/2019/1025/1593.html
Circular of the State Administration of Foreign Exchange Further Promoting Cross-border Trade and Investment Facilitation
The branches and foreign exchange administrative departments of the State Administration of Foreign Exchange (SAFE) in all provinces, autonomous regions, and municipalities directly under the Central Government, and the branches of the SAFE in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo; and national Chinese-funded banks: To advance the reform of "combining power delegation with regulation & optimizing services", better serve the real economy and promote cross-border trade and investment facilitation, the SAFE decides to further optimize foreign exchange policies and measures to facilitate foreign exchange handling by market players in compliance with regulations. Relevant issues are notified as follows: I. Expanding piloting for the facilitation of foreign exchange receipts and payments under trade Piloting shall be expanded for the facilitation of foreign exchange receipts and payments under trade in goods. Based on pilot efforts in the Guangdong-Hong Kong-Macao Greater Bay Area, Shanghai and Zhejiang, efforts shall be made to provide due support to other regions to pilot the optimization of document reviews for foreign exchange receipts and payments under trade in goods, cancellation of registration for foreign exchange refunding, and simplified verification of foreign exchange payments for imports. Pilot programs shall be carried out for the facilitation of foreign exchange receipts and payments under trade in services. When processing foreign exchange receipts and payments under trade in services for creditworthy domestic institutions, qualified, prudent and compliant banks may follow the principles of "know your customers, understand your business and carry out due diligence investigation". Efforts shall also be stepped up to boost electronic filing of tax documents for foreign exchange payments under trade in services to help banks to complete digital reviews through information sharing. II. Removing restrictions on domestic equity investments by non-investment-oriented foreign investors with their capital While investment-oriented foreign investors (including foreign investment companies, foreign venture capital investment companies and foreign equity investment companies) are allowed for domestic equity investments with their capital in compliance with laws and regulations, non-investment-oriented foreign investors shall also be allowed to make domestic equity investments with their capital, provided that they comply with the existing special management measures on market access for foreign investors (negative list) and the projects they intend to invest in are authentic and comply with regulations. Where a non-investment-oriented foreign investor makes equity investment in China through transfer of capital in original currency, the invested shall register for acceptance of domestic reinvestments as required and open a foreign exchange capital account to receive the transferred money, with no need to register for the recognition of contribution in cash. Where a non-investment-oriented foreign investor makes equity investment in China with the money from the settlement of foreign exchange capital, the invested shall register for acceptance of domestic reinvestments as required and open an account pending payment after foreign exchange settlement under the capital account to receive the money. III. Expanding piloting for the facilitation of foreign exchange receipts and payments under the capital account Any eligible company in the pilot regions can make payments in China using receipts under the capital account like foreign exchange capital, external debt and overseas IPO funding without presenting in advance the authenticity supporting materials transaction-by-transaction to the bank, provided that its use of the money is authentic and complies with the existing management regulations on use of the receipts under the capital account. Pilot banks shall control the risks arising from pilot businesses following the business development principles. Local foreign exchange authorities shall intensify monitoring, analysis, ongoing and ex-post regulation. IV. Easing the restrictions on foreign exchange settlement and use under the capital account Restrictions on foreign exchange settlement and use under the domestic asset realization account shall be removed. To receive the consideration from a foreign investor for equity transfer under FDI, the domestic transferor can open an account, receive remittances and go through foreign exchange settlement with the bank directly by presenting relevant registration certificates. Restrictions on the use and foreign exchange settlement of margins by foreign investors shall be eased. When a deal is closed, margins remitted in from abroad or transferred in from domestic accounts by foreign investors can be directly used for legal domestic capital contributions or for the payment of considerations both at home and abroad. Prohibition on foreign exchange settlement in the margin account shall be removed. Margins can be directly used for foreign exchange settlements or payment when a deal is closed or deductions are made in case of default. V. Simplifying receipts and payments procedures under trade in goods for micro and small cross-border ecommerce players When payment institutions or banks handle foreign exchange receipts and payments under trade in goods according to the Circular of the State Administration of Foreign Exchange on the Issuance of Measures for the Administration of Foreign Exchange Business by Payment Institutions (Huifa No. 13, [2019]), micro and small cross-border ecommerce players whose annual cumulative foreign exchange receipts or payments under trade in goods are below USD 200,000 (exclusive) can be waived of registering in the directory of enterprises with foreign exchange receipts and payments under trade ("directory registration"). Such players will be subject to supervision and inspection by the SAFE in compliance with laws. VI. Reforming the external debt registration management Non-banking debtors shall no longer be required to register external debt write-offs with local foreign exchange authorities. Instead, such registration by non-banking debtors can be done with the bank within the jurisdiction of the local SAFE branch (or foreign exchange administrative department). No time limit shall be set for such registration. Non-financial companies shall no longer be required to go through transaction-by-transaction registration for external debt in pilot regions. In these regions, non-financial companies can register external debt amounting to two times its net assets with local foreign exchange authorities. Within that amount, such companies can borrow funds under external debt at their own discretion, directly go through inward and outward remittance or foreign exchange purchase and settlement with a bank and declare the balance of payments as required. VII. Removing restrictions on the number of foreign exchange accounts opened under the capital account Restrictions like "a maximum of three special external debt accounts for one transaction", "one special margin account for inward remittances from abroad per customer" and "one domestic asset realization account for one equity transfer per transferor" shall be removed. Market players shall be allowed to open more than one foreign exchange account under the capital account when necessary, provided that the prudent supervision requirements are met. VIII. Optimizing reporting of foreign exchange under trade in goods Enterprises shall no longer be required to report their business in the coaching period to the local foreign exchange authorities. Enterprises in the coaching period with unusual or suspicious foreign exchange receipts and payments under trade in goods shall be subject to monitoring, verification and standard classified management by the SAFE. Trade credit and trade finance can be reported online through the monitoring system (enterprise end) for foreign exchange under trade in goods, with no need to visit and report to local foreign exchange authorities (excluding special businesses under different trading companies) XI. Allowing discretion to open accounts pending verification for export revenues For revenues under trade in goods, enterprises can open an account pending verification for export revenues ("account pending verification") at their discretion. If such an account is not opened, revenues under trade in goods that have been reviewed by the bank in compliance with existing regulations can be recognized into the foreign exchange account under the current account or be settled directly. The revenue declaration sheet for the account pending verification that is currently required to be submitted to the SAFE can be waived. X. Facilitating the directory registration of branches and sub-branches When applying for directory registration, alteration or deregistration, branches or sub-branches shall go through the procedures in accordance with the current requirements on enterprises as legal persons, by presenting the original or duplicates of their own business licenses, without the need to provide the Business License for Enterprises as Legal Persons. XI. Expanding piloting for the transfer of domestic credit assets Guided by the principles of risk controllability and prudent management, the scope of players that can participate in the transfer of domestic credit assets, the channels of transfer and the scope of credit assets that can be transferred, including banks' non-performing assets and trade finance, are allowed to be expanded in pilot regions. XII. Allowing centralized management of their offshore funds by engineering contractors By registering with the SAFE, engineering contractors can open an account for centralized funds management overseas in compliance with the laws and regulations of the country or region where the account is located. The receipts in the account shall include engineering payments from overseas project owners or domestic accounts, and from the same owner's other accounts for contracted engineering projects in the same country (region). The payments in the account shall include engineering receipts remitted back to China, relevant overseas engineering payments and funds transferred into the same owner's other accounts for contracted engineering projects in the same country (region). This circular will become effective as of the date of issuance (Paragraph 2 of Article 8 will come into force as of January 1, 2020 as the monitoring system for foreign exchange under trade in goods needs upgrading). This Circular shall prevail where there are inconsistencies between previous provisions and this Circular. Upon receipt of this Circular, the branches and foreign exchange administrative departments of the SAFE shall immediately forward it to the central sub-branches, sub-branches, urban commercial banks, rural commercial banks, foreign banks, and rural credit cooperatives, and the national China-funded banks should promptly forward it to the branches under their jurisdictions. Please report any problems encountered in the implementation to the SAFE in time. Tel: 010-68402450, 68402163, 68402250 State Administration of Foreign Exchange October 23, 2019 2019-10-25/en/2019/1025/1596.html

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