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To further implement the gist of the "delegation, centralization and service" reform, advance the supply side structural reform, execute the policy measures of "stabilizing growth, promoting reform, adjusting structure and serving the common good" and effectively reduce costs incurred by enterprises in the real economy, the State Administration of Foreign Exchange (SAFE) keeps streamlining regulations, announcing nearly 900 foreign exchange regulatory documents abolished and nullified since 2009. The SAFE has recently released the Circular of the State Administration of Foreign Exchange on Announcing 27Foreign Exchange Regulatory Documents Abolished and Nullified (Huifa No. 29 [2016]), adding 27 documents that are abolished and nullified to the total. First, under the principle of refining system supply and streamlining administration, 18 foreign exchange regulatory documents whose contents have been substituted by new documents and that could not adapt to the status quo of administration are abolished, based on content analysis piece by piece. These documents involve trade in goods management, individual foreign exchange administration, and foreign exchange registration and administration for overseas investments. Businesses involved will be handled in accordance with existing provisions. For example, individual use of foreign exchange will be handled pursuant to the Measures for the Administration of Individual Foreign Exchange and the implementation details under the same regulatory requirements, as well as the same principle of supporting and facilitating normal and reasonable use of foreign exchange by market players. Second, under the principle of building a concise and clear policy framework with consistent logics, the SAFE has strengthened the "ledger-based" streamlining of regulations, and announced nullified a total of 9 foreign exchange regulatory documents whose application periods have expired, or adjustment targets have disappeared, and are actually invalid, such as the circulars on streamlining half-closed accounts of units directly under the Central Government at the end of 1998, on implementing a pilot program for foreign exchange accounts management reform in 2005, and on foreign exchange annual check for foreign-invested enterprises in 2010 and 2011. Announcing the above documents abolished and nullified can further enhance the level of convenience and is favorable for market players to understand and implement the foreign exchange administration policies. Next, the SAFE will continue to closely follow the deployments of the CPC Central Committee and the State Council, accelerate administration streamlining, power delegation and transformation of government functions, strive to make breakthroughs in reform, and implement the long-term mechanism for regulation streamlining, so as to reduce transaction costs from policy. Meanwhile, the SAFE will intensify monitoring and early warning of cross-border capital flows, support banks to refine the self-discipline mechanism and to strictly perform the requirements and responsibilities for authenticity and compliance reviews, and take a tough stance on foreign exchange irregularities to safeguard a healthy order in foreign exchange markets and serve the development of the real economy. 2016-12-19/en/2016/1219/1233.html
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The State Administration of Foreign Exchange (SAFE) has recently disseminated the data on banks' sales and settlements of foreign exchange and their foreign-related receipts and payments for customers for November 2016. Its press spokesperson has thus answered media questions on the recent cross-border capital flows as follows: Q: Could you brief us on the changes to cross-border capital flows in China in November? A: Despite changing external environment, China's cross-border capital flows stayed within a stable range on the whole in November. Due to the heightened expectations of the Fed's interest rate hikes, the strengthening US foreign exchange rate, and the depreciation of non-USD currencies worldwide, China came under heavier pressure from cross-border capital outflows in November than in October, which, however, remained much lower than the level before the first interest rate hike by the Fed in the same period last year. In November, a deficit of USD 33.4 billion was registered under banks' sales and settlements of foreign exchange, down by 39% year-on-year, and higher than the deficit of USD 14.6 billion in October. A deficit of USD 24.6 billion was registered under the foreign-related receipts and payments of non-banking sectors including individuals and enterprises, down by 42% year-on-year, and higher than the deficit of USD 14.1 billion in October. The positive changes in the preliminary cross-border capital flows continued to take place in November. First, enterprises' demand for cross-border financing in foreign exchange was further strengthened. At end-November, the balance of cross-border financing denominated in foreign currencies by importers such as refinancing and forward L/C went up by USD 5.2 billion month-on-month, continuing to recover for nine straight months. Second, the pressure to repay foreign exchange loans made in the country in a centralized manner was significantly relieved. In the month, enterprises bought USD 5.1 billion in foreign exchange to repay domestic foreign exchange loans, which was consistent with that of October, and down by 57% year-on-year, reaching the three year low. Third, overseas institutions continued to buy domestic bonds. The statistics from China Central Depository & Clearing Co., Ltd. show that the balance of domestic bonds held by overseas institutions went up by RMB 15.8 billion month-on-month as at end-November, growing for nine consecutive months. Overall, the recently strengthening US dollars have had strong impact on global currencies and international capital flows, but the RMB exchange rate against the US dollars depreciated slightly, and remained stable against a backset of currencies. With the positive factors in its cross-border capital flows continuing to play their roles, China could better adapt to the changing external environment. 2016-12-16/en/2016/1216/1231.html
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To promote facilitation of receipts and payments under trade in goods and satisfy banks' and enterprises' demand for handling of foreign exchange through electronic data interchange (EDI), the State Administration of Foreign Exchange (SAFE) has recently released the Circular of the State Administration of Foreign Exchange on Standardizing Reviews of Electronic Documents for Receipts and Payments of Foreign Exchange under Trade in Goods (Huifa No. 25 [2016], the "Circular"). The highlights of the Circular include: First, allowing reviews of electronic documents when receipts and payments of foreign exchange under trade in goods are handled. While observing the existing regulations on the administration of foreign exchange under trade in goods and implementing the three principles of business operation, banks can choose to review paper or electronic documents at their discretion. Second, encouraging credible enterprises and banks doing business in compliance with regulations to handle receipts and payments of foreign exchange under trade in goods by using electronic documents. In particular, it is required that the handling bank should be class-B or above (excluding B-) in foreign exchange administration assessment over the past three years, and the enterprise should be class-A with regard to trade in goods. Third, defining the obligations of banks and enterprises. Banks shall make further efforts for authenticity reviews, independently and cautiously choose enterprises subjected to reviews of electronic documents and keep the documents for future reference. Enterprise shall work to ensure the authenticity and compliance of electronic documents presented, and cooperate with banks in authenticity reviews. Fourth, standardizing ex-post administration. The SAFE will verify or inspect reviews of electronic documents and punish irregularities in accordance with the law. This Circular shall come into force as of November 1, 2016. 2016-11-08/en/2016/1108/1226.html
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On December 11, 2016, the Bank for International Settlements (BIS) announced that China had officially started to report to the BIS locational banking statistics (LBS) under the international banking statistics (IBS) and released China's data on its website, which shows that the quality of China's balance of payments statistics has been internationally recognized again, thanks to continuous improvement on transparency. Joining LBS is another key progress China has made to achieve the targets of the G20 Data Gaps Initiative (DGI) since implementing the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) and participating in the IMF's Coordinated Portfolio Investment Survey (CPIS). Expanding the IBS-reporting population has been one of the targets of the G20 Data Gaps Initiative (DGI). China's joining takes the number of LBS-reporting countries to 46. A total of 12 EMEs now report to the LBS, along with 12 offshore financial centers and 22 advanced economies. At end-June 2016, banks in China reported outstanding cross-border claims of USD 778 billion and liabilities of USD 918 billion. This makes China the 10th largest cross-border creditor in the international banking market. Turning to the currency composition of the cross-border claims and liabilities, at end-June 2016 banks in China were net lenders of US dollars, with dollar claims of USD 549 billion and dollar liabilities of USD 274 billion, resulting in net claims of USD 275 billion. However, USD 358 billion of Chinese banks' cross-border liabilities were denominated in Renminbi, while Renminbi-denominated cross-border claims of banks in China stood at USD 73 billion, leading to USD 285 billion in net cross-border liabilities. The BIS text is available on its official website at www.bis.org/publ/qtrpdf/r_qt1612s.htm. 2016-12-13/en/2016/1213/1229.html
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Q: Foreign media reported that Deutsche Bank is discussing remitting overseas its gains from selling shares in Huaxia Bank with the State Administration of Foreign Exchange. Is it true? A: This is not true. There is no policy barrier against the business in foreign exchange administration. According to the existing foreign exchange administration regulations, any foreign institution who wants to transfer the shares it holds in a domestic institution may directly go through the formalities for foreign exchange purchase and payment related to share transfer with a bank, and can do so after passing the authentic and compliance reviews by the bank, with no need of ex-ante approval or verification by the SAFE. Foreign exchange authorities support every authentic and compliant cross-border equity transfer transaction in a bid to promote trade and investment facilitation. 2016-11-08/en/2016/1108/1227.html
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On the afternoon of December 9, Mr. Zhu Min, former vice president of the IMF, was invited to give a lecture entitled "Global Economic and Financial Trends" at the SAFE. The lecture was chaired by Pan Gongsheng, deputy governor of the People's Bank of China (PBC) and administrator of the State Administration of Foreign Exchange (SAFE), and attended by relevant officials from the PBC and the SAFE. Mr. Zhu briefed the audience on the relationship between the world economy and finance, the spillovers of the world economy and finance, future trends of the global economy and the orientation of the US economic policies. He also interacted and exchanged ideas with the audience on the monetary and exchange rate policies, the future movements of the US exchange rate and the impact on China's economy, as well as China's balance of payments. 2016-12-12/en/2016/1212/1228.html
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The State Administration of Foreign Exchange (SAFE) and the Ministry of Public Security (MPS) has jointly held the third Deployment and Promotion Meeting in 2016 against underground banks. The two authorities have been closely collaborating and cooperating with each other to organize the crackdowns on underground banks. By tracking the foreign exchange irregularities behind underground banks, they have cracked many illicit trading of foreign exchange, and fabricated trading of foreign exchange through fake documents for cheated purchases, evasion and frauds of foreign exchange. Both authorities said that they will always maintain a tough stance on crimes such as underground banks, and rectify foreign exchange administration order so as to safeguard economic and financial security. 2016-12-14/en/2016/1214/1230.html
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On September 23, 2016, Pan Gongsheng, Deputy Governor of the People's Bank of China and Administrator of the State Administration of Foreign Exchange (SAFE), met with Gerald Hassell, Chairman and CEO of the Bank of New York Mellon in Beijing. The two sides exchanged ideas on the global economic and financial trends, the liberalization of China's bonds market and cooperation opportunities. 2016-11-08/en/2016/1108/1224.html
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It is our mission to boost the reform and opening up of China's financial market, and enhance facilitation of cross-border trade and investment to serve the real economy, while guarding against the excessive impact from cross-border capital flows and safeguarding the stability of China's financial market in a complex and changing world. Dynamic Evolution of Cross-border Capital Flows across the World Cross-border capital flows, the natural products of economic globalization, help boost the effective allocation of capital around the world and drive the spread and flows of advanced technologies and management experience to promote global economic growth. At the same time, since cross-border capital flows are profit-seeking, pro-cyclical and easy to overshoot, the large-scale disorderly fluctuations of capital in the short term may impact the economy and finance. Historically, emerging economies had witnessed tremendous inflows and outflows of cross-border capital many times, which triggered systematic financial risks. When a huge amount of capital flows in, the operation room of the monetary policy in an emerging economy will be squeezed, and asset prices will be pushed up, thereby dampening the momentum of emerging economies for driving economic reforms and structural adjustment. In comparison, the massive capital outflows may lead to currency depreciation, violent volatilities in the financial market and heightened fragility of the financial system, and consequently trigger systematic financial risks. Since the advent of this century, global cross-border capital flows have weathered through two stages. In the first stage, which began in 2000 and ended in 2013, a tremendous amount of global capital flew into emerging economies. Before the 2008 global financial crisis, the inflows were attributable to the rapid economic developments and high returns on invested capital in emerging economies. After the global financial crisis, the inflows were a result of rampant liquidity in global markets due to the adoption of QE policies in major developed economies. In the second stage that began in 2014, global capital began to flow out of emerging economies. This change of course is chiefly because along with the economic slowdowns of emerging economies, developed countries adopted divergent monetary policies, especially the Fed's exit of QE policy and kick-starting of interest rate hikes. The global economy is still faced with heavy uncertainties at the moment. Major countries are struggling with many risk factors. The global financial markets are in volatility, cross-border capital flows are uncertain, and the volume, speed, direction and structure of cross-border capital flows are changing dynamically. After the financial crisis, the international community has reached a consensus that the global macroeconomic and macro prudential policy cooperation are of great significance. When adjusting policies, major economies should take into full consideration the spillovers to the global economy so as to jointly safeguard financial stability. Christine Lagarde, IMF Managing Director, noted rightly in her speech at the China Development Forum 2016 that "increased global integration brings with it greater potential for spillovers — through trade, finance or confidence effects. As integration continues, effective co-operation is critical to the functioning of the international monetary system. This requires collective action from all countries." In recent years, the international community has also begun to promote coordination and cooperation under the frameworks of the G20, IMF and FSB. Under such circumstances, fragile economies should be committed to boosting structural reform, optimizing the economic and foreign trade structures, and promoting the equilibrium of the balance of payments to achieve sustainable economic growth. The policy authorities of every country should implement proper macro-prudential policies to make macro and countercyclical adjustments to the pro-cyclical fluctuations and cross-market risk communication and to guard against systematic risks. Features and changes in China's cross-border capital flows Impacted by the changes in the landscape of global capital flows, China's cross-border capital flows have been divided into two phases since the beginning of this century. The first phase was between 2000 and the first half of 2014 when China posted the twin surpluses under the current and capital accounts, foreign exchange reserves rose rapidly and global capital flooded into China. Before the global financial crisis, massive direct investments flowed into China, and in the wake of the crisis, the share of other investment funds such as portfolio investments and external debt began to rise. The second phase began with the second half of 2014. China's current account has registered surplus but capital account, deficit, and the deficit has begun to overtake the surplus, cross-border capital has also begun to flow out, leaving foreign exchange reserves to turn from increase to decrease. In terms of time and direction, China is consistent with the global landscape of cross-border capital flows. Two changes should be noted: first, external assets of market participants have risen rapidly. Previously almost all of China's external assets were official foreign exchange reserves. When the official foreign exchange reserves reached its peak, China's external assets accounted for more than 70%. In recent years, China's external assets have been restructured, with official foreign exchange reserves dropping and external assets held by market participants rising. As at the end of 2016, foreign exchange assets held by the government and by market participants accounted for 50% respectively. Second, the external debt of market participants has declined. A few years ago as the Fed adopted the QE monetary policy, the interest costs of the US dollars were low and Chinese enterprises borrowed heavy external debt. In the past two years, as the Fed gradually exited from the QE policy and raised interest rates, the interest rates of the US dollars have climbed and the USD exchange rate, strengthened. At the same time, the RMB interest rate has declined. Under this circumstance, it becomes easier for Chinese enterprises to raise funds in China and they have begun to quicken its step to service external debt in the US dollars, so as to reduce the risks arising from high-lever operation and currency mismatch. In the first quarter of 2016, Chinese enterprises' full-scale external debt in domestic and foreign currencies fell to USD 1.4 trillion from USD 1.8 trillion at the end of 2014. In particular, the external debt in foreign currencies declined from USD 900 billion to USD 750 billion. Since the second quarter of 2016, China's external debt has rebounded as the deleveraging of Chinese companies' external debt came to a halt. China's cross-border capital inflows and outflows are currently developing towards an equilibrium. The trends of the foreign exchange market can be reflected from foreign exchange reserves, banks' sales and settlement of foreign exchange, balance of cross-border receipts and payments, and US dollar index. In December 2015, the Fed raised interest rates for the first time and in the fourth quarter of the year, the US dollar index went up by 2.4%, and from December 2015 to January 2016, China's foreign exchange market went through significantly heightened volatilities. In the fourth quarter of 2016, as expectations of Fed's interest rate hikes were strengthened, coupled with the presidential election in the US, the US dollar index climbed by 7.1%, but China's foreign exchange market experienced remarkably less fluctuation compared with the fourth quarter of 2015. Since January 2017, China's foreign exchange market has stayed stable. With foreign exchange reserves going up in February and March, the balance of cross-border receipts and payments became positive after a 17-month-long deficit, suggesting that China's cross-border capital inflows and outflows are moving towards an equilibrium. Going forward, the balance of cross-border receipts and payments will boast a sound and robust foundation: first, China's economy is in a high-speed growth range, and as the supply-side structural reform is deepened, China will witness better and more efficient economic growth. Second, the surplus under the current account remains in the reasonable range, with the balance for 2016 accounting for 1.8% of GDP. Third, China will continue to be one of the most attractive and competitive investment destinations for overseas long-term capital. Fourth, China has adequate foreign exchange reserves. China's ODI and FDI China's outbound direct investments (ODI) China has witnessed rapid growth in ODI in recent years, with that of 2016 exceeding 40%. Such fast growth is a testimony to the enhanced overall national strength, the higher level of opening up, and the stable advancement of the Belt and Road Initiative, the international production capacity cooperation, and administration streamlining and power delegation, which are favorable for boosting China's economic transformation, and the economic growth worldwide and in host countries to achieve mutual benefit and common development. However, there are also unreasonable and unusual investing behaviors in China's ODI, such as large-scale investments in industries beyond the main business, "small parent company and large subsidiaries", and "quick investment and quick exit". Heavily indebted though, some enterprises still borrow a large amount of money for overseas M&As, and some even are involved in illegal asset transfers in the guise of ODI. The Chinese government has always encouraged enterprises to participate in international economic competition and cooperation, the Belt and Road Initiative and international production capacity cooperation, so as to promote domestic economic transformation and upgrading and deepen the mutually beneficial cooperation between China and the rest of the world, by following the outbound investment management principle that "under the guidance of the government, enterprises will play a dominant role based on the market orientation and international practices". Foreign exchange administration also encourages capable domestic enterprises that meet the conditions to engage in real outbound investing activities in compliance with regulations. Given the lessons and experience of Japan in fast growth in outbound investments in the 1980's, making outbound investments quickly doesn't justify smooth investments by Chinese enterprises going global, but stable investments may ensure smoothness. Outbound investments and M&As are just like a bunch of thorny roses, which are beautiful and fragrant but may pierce your hands. Sometimes they are like sand on the beach, which it seems that you may hold a handful of them but finally they slip from your hands. Over the past few months, alongside the adjustments and implementation of the macro-prudential policies, China's outbound investments have slowed down, indicating market participants are becoming more reasonable. China's foreign direct investments (FDI) In 2016, China was ranked No. 3 worldwide and No. 1 among emerging economies by the size of foreign capital attracted. Its foreign investment structure was improved and upgraded, with the foreign capital continuing to go into high value-added service industry and the high-tech manufacturing industry. Given China's economic growth, advancement of the structural reform and immense market potential, China will remain one of the investment destinations that are attractive to long-term capital. Using foreign capital is a basic national policy for opening up and a key component of the open economic system. In his keynote speech to the World Economic Forum in Davos in 2017, President Xi Jinping pointed out that "China will actively build a loose and orderly investment environment". As for foreign exchange administration policy, FDI will be basically convertible, and foreign exchange capital will be settled discretionarily, and the authentic capital exchanges and payments in compliance with regulations such as capital increase and decrease, share transfer and investment withdrawal will be subject to no restrictions. The outward remittances of the profits of foreign-invested enterprises, an item under the current account, are convertible. A foreign-invested enterprise can either use its profits to make further investments or remit them out freely. An outward remittance of profits should be authentic and comply with relevant regulations including the Company Law in China. Where the losses of the previous years should be offset, the profit distribution resolution of the Board of Directors, the audited financial report and the tax clearance certificate in China should be presented. The four conditions are not newly introduced, but have been in existence for a long time and are reasonable. Policy framework and orientation of foreign exchange administration in China In formulating and implementing the foreign exchange administration policies, China has observed the following two principles: first, reform and opening up should be adhered to by supporting and boosting the two-way liberalization of the financial market, to further enhance the cross-border trade and investment facilitation and the real economy. Second, efforts should be made to guard against the risks arising from cross-border capital flows and the impact from disorderly flows of cross-border capital on the macro economy and financial stability, so as to maintain the stability of the foreign exchange market and create a sound market environment for reform and opening up. Based on the above principles, China's foreign exchange administration policies show the following connotations: First, an "open window" will not be closed again. Foreign exchange administration will not turn back onto the old path of capital controls. At the end of last century, we achieved full convertibility under the current account. Since the beginning of this century, we have also enhanced the convertibility under the capital account and achieved basic convertibility under the direct investment. What's more, we have smoothly pressed ahead with convertibility under portfolio investment by opening channels such as QFII, RQFII, QDII, RQDII, Shanghai-Hong Kong Connect and Shenzhen-Hong Kong Connect. These open-up policies will not be eliminated. Second, China's capital account shall be opened up in a prudential and orderly manner. In 2016, China' efforts to liberalize the capital account had many highlights, such as macro-prudential management of full-scale cross-border financing, further liberalizing and facilitating investment in the inter-bank bond and foreign exchange markets by foreign institutions, optimizing the policies for Shanghai-Hong Kong Connect and kicking-start the pilot program for Shenzhen-Hong Kong Connect, and deepening the QFII reform and reducing quota restrictions and lock-up constraints. However, reform needs both objectives and the strategies to achieve the objectives. The progress of liberalizing the capital account shall be aligned with the stage of economic development, the situation of financial markets and financial stability. At different stages, the internal and external factors shall be taken into full consideration to identify the priorities, cadences and steps in liberalizing the capital account. Third, a macro-prudential management and micro market regulation system for cross-border capital flows shall be established. Efforts shall be made to build the macro-prudential management system of cross-border capital flows, refine the early warning and response mechanism for cross-border capital flows, and further diversify the macro-prudential management toolkit for cross-border capital flows. Foreign exchange authorities shall intensify regulation of the foreign exchange market, conduct market regulation and market law enforcement in accordance with the existing laws and regulations and foreign exchange administration policies, and crack down on irregularities in the foreign exchange market to safeguard the solemnness of China's laws and regulations and its foreign exchange administration policies, and the healthy, stable and benign order in the foreign exchange market. Fourth, the exchange rate formation mechanism shall be improved to enhance the elasticity of the RMB exchange rate. Recently the RMB exchange rate has found a basic equilibrium amid the two-way fluctuations, fluctuated slightly against a basket of currencies and gone through ups and downs against the US dollar. Next, foreign exchange authorities shall stably advance the reform of the RMB exchange rate formation mechanism, make exchange rate policies more standardized and transparent, and guide market expectations to make sure that the RMB exchange rate finds an equilibrium at a reasonable and balanced level. Moreover, the exchange rate elasticity will be enhanced based on the changes in the supply-demand relation in the foreign exchange market to maintain the role of exchange rate in adjusting the equilibrium of the balance of payments. Operation and management of foreign exchange reserves in China Over the past two years, impacted by multiple factors both at home and abroad, China's foreign exchange market and cross-border capital flows have weathered through strong impacts and severe test. Since the beginning of this year, China's foreign exchange market has stayed stable, and cross-border capital flows have developed towards an equilibrium. As at the end of March, China registered foreign exchange reserves of RMB 3.01 trillion, accounting for nearly 30% of the world's total, which made it No. 1 among major economies and left the No. 2 far behind. How many foreign exchange reserves a country should hold to hit a reasonable level? There are no common standard for that both at home and abroad. It is actually dependent on a country's macroeconomic conditions, level of economic openness, capabilities of using foreign capital and financing abroad, as well as sophistication of its economic and financial systems. China boasts adequate foreign exchange reserves, measured either by traditional indicators or by aggregative indicators proposed by the IMF economists. China's foreign exchange reserves are impacted by three factors: first, exchange rate conversion and changes in asset prices. China's foreign exchange reserves are denominated and reported in the US dollars. When non-USD foreign exchange reserves are converted into the USD, the exchange rate will influence the changes of reserves, and the prices of bonds and stocks invested with foreign exchange reserves are changing every month and therefore become the key influencers to the changes in foreign exchange reserves. Second, diversified use of foreign exchange reserves. For example, when used to invest in the Silk Road Fund, the China-Latin America Production Capacity Cooperation Fund, and China-Africa Industrial Capacity Cooperation Fund, this part of foreign exchange reserves needs to be deducted from the foreign exchange reserves data. Third, the operation by the People's Bank of China in the foreign exchange market. Under the principle of security, flows, value preservation and growth, China's foreign exchange reserves are used to make prudential, standardized and professional investments, optimize and dynamically adjust investment portfolios and strategies to safeguard and promote the stability and development of the international financial markets, with respects for the international market rules and practices. China has no intention to strengthen its competitiveness by depreciating its currency. We do not have such a desire, nor have the necessity. The People's Bank of China provides foreign exchange liquidity to the market, in a bid to guard against overshooting of foreign exchange rate and the herd effect, and to maintain market stability. China's endeavor to strike a balance between enhancing the elasticity and maintaining stability of the foreign exchange rate is conducive to the international community, and can effectively avoid the negative spillovers from disorderly adjustment of the RMB exchange rate and the competitive depreciation of major currencies. (The original text is available in the May 2017 issue of the Modern Bankers) 2017-05-08/en/2017/0508/1266.html
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By following the work plans of the CPC Central Committee and the State Council, the State Administration of Foreign Exchange (SAFE) has been committed to serving the real economy, facilitating cross-border trade and investments, intensifying regulation of the foreign exchange market, cracking down on foreign exchange irregularities since 2016, in a bid to safeguard the healthy and benign order in the foreign exchange market. In accordance with the Regulations of the People's Republic of China on the Disclosure of Government Information (Decree No. 492 of the State Council), a selection of typical cases involving enterprises and individuals violating foreign exchange regulations are announced as follows: Case 1: Evasion of foreign exchange by Ningbo Dacheng International Trade Co., Ltd. In August and September 2015, Ningbo Dacheng International Trade Co., Ltd. fabricated the entrepot trade contracts with many overseas companies using other companies' expired bills of lading and set transaction prices that were 5-20 times higher than the market prices, illegally transferring funds overseas for 15 times, involving a sum of USD 119 million. Such behavior violated Articles 12 and 14 under the Regulations of the People's Republic of China on Foreign Exchange Administration, and was considered evasion of foreign exchange. Involving a huge amount of money, the behavior had an adverse impact on society and severely interrupted the order in the foreign exchange market. In accordance with Article 39 under the Regulations of the People's Republic of China on Foreign Exchange Administration, an administrative punishment of RMB 22.81 million was imposed on the company. Case 2: Evasion of foreign exchange by Grand China Logistics Holding (Group) Co., Ltd. From January to July 2015, Grand China Logistics Holding (Group) Co., Ltd. signed false charter contracts with its connected companies, domestic or overseas, and made false freight invoices, illegally transferring overseas funds of USD 45.0690 million. Such behavior violated Articles 12 and 14 under the Regulations of the People's Republic of China on Foreign Exchange Administration, and was considered evasion of foreign exchange. Involving a huge amount of money, this had an adverse impact on society and severely interrupted the order in the foreign exchange market. In accordance with Article 39 under the Regulations of the People's Republic of China on Foreign Exchange Administration, an administrative punishment of RMB 20.75 million was imposed on the company. Case 3: Evasion of foreign exchange by Hangzhou Zhiyu Information Technology Co., Ltd. From September 2015 to January 2016, Hangzhou Zhiyu Information Technology Co., Ltd. (formerly known as Wholesale Inc.) fabricated import transactions, and repeatedly used its contracts and invoices to make 44 payments in the total amount of USD 39.6770 million under "prepayment", leading to illegal outflows of large-sum foreign exchange. Such behavior violated Article 12 under the Regulations of the People's Republic of China on Foreign Exchange Administration and Article 3 under the Guidance on Foreign Exchange Administration under Trade in Goods, and was considered evasion of foreign exchange. Involving a huge amount of money, this had an adverse impact on society and severely interrupted the order in the foreign exchange market. In accordance with Article 39 under the Regulations of the People's Republic of China on Foreign Exchange Administration, an administrative punishment of RMB 10 million was imposed on the company. Case 4: Evasion of foreign exchange by Harbin Yabuli Timber Co., Ltd. From April to October 2015, Harbin Yabuli Timber Co., Ltd. repeatedly used expired Declaration Form for Import, changed the amount in the Form, used the information of other companies on their Declaration Forms for Import, and made false contracts and invoices for fabricated imports with foreign companies, illegally transferring funds of USD 18.92 million overseas. Such behavior violated Articles 12 and 14 under the Regulations of the People's Republic of China on Foreign Exchange Administration and Article 3 under the Guidance on Foreign Exchange Administration under Trade in Goods, and was considered evasion of foreign exchange. In accordance with Article 39 under the Regulations of the People's Republic of China on Foreign Exchange Administration, an administrative punishment of RMB 2.93 million was imposed on the company. Case 5: Evasion of foreign exchange by Techman Electronics (Changshu) Co., Ltd. In August 2015, to evade the authenticity review by the bank, Techman Electronics (Changshu) Co., Ltd. repeatedly used 7 copies of invoices, illegally transferring USD 3.82 million overseas through two banks. Such behavior violated Article 14 under the Regulations of the People's Republic of China on Foreign Exchange Administration and Article 15 under the Guidance on Foreign Exchange Administration under Trade in Goods, and was considered evasion of foreign exchange. In accordance with Article 39 under the Regulations of the People's Republic of China on Foreign Exchange Administration, an administrative punishment of RMB 1.17 million was imposed on the company. Case 6: Evasion of foreign exchange by a Mr. Che from Guangdong From December 2015 to January 2017, to transfer funds overseas and evade regulation, Mr. Che, native of Guangdong, transferred funds denominated in RMB into the accounts of 84 persons separately, including a Mr. Liu, and used their quotas for foreign exchange purchases to transfer USD 4.3552 million under personal travel and allowances for family maintenance into Che's personal accounts in Australia and Hong Kong. Che's behavior violated Article 7 under the Measures for the Administration of Individual Foreign Exchange and was considered evasion of foreign exchange that had adverse impact on society. In accordance with Article 39 under the Regulations of the People's Republic of China on Foreign Exchange Administration, an administrative punishment of RMB 1 million was imposed on Che. Case 7: Illegal arbitrage by a Mr. Zhao from Shandong From February to December 2015, to exchange his company's funds for a large sum of foreign exchange, Mr. Zhao, native of Shandong, transferred the money in his company's account into the individual accounts of 41 employees separately and purchased foreign exchange through online banking by using his employees' individual quotas for purchasing foreign exchange. Then Zhao asked his employees to withdraw the foreign exchange and transfer them into Zhao's personal account through 439 deals as time deposits, which amounted to USD 2.0468 million. Zhao's behavior violated Article 7 under the Measures for the Administration of Individual Foreign Exchange and was considered illegal arbitrage. In accordance with Article 40 under the Regulations of the People's Republic of China on Foreign Exchange Administration, an administrative punishment of RMB 705,800 was imposed on Zhao. Case 8: Illegal trading of foreign exchange by a Mr. Liang from Guangdong From November 2014 to October 2016, to evade taxes, Mr. Liang, native of Guangdong, transferred the money for exports in the amount of HKD 24.03 million into the overseas account of an underground bank through 82 deals. Later the underground bank transferred RMB 19.56 million into Liang's and his relatives' accounts through 94 deals. Liang's behavior violated Article 30 under the Measures for the Administration of Individual Foreign Exchange and was considered illegal trading of foreign exchange. Involving a huge amount of money, this had an adverse impact on society and severely interrupted the order in the foreign exchange market. In accordance with Article 45 under the Regulations of the People's Republic of China on Foreign Exchange Administration, an administrative punishment of RMB 586,600 was imposed on Liang. Case 9: Illegal foreign exchange trading by a Mr. Lou from Henan In March 2016, to illegally transfer the funds overseas, Mr. Lou, native of Henan, transferred RMB 7.1 million into 11 personal accounts controlled by an underground bank. The underground bank then exchanged the money for foreign exchange and transferred the foreign exchange amounting to AUD 1.426 million into an overseas account designated by Lou. Lou's behavior violated Article 30 under the Measures for the Administration of Individual Foreign Exchange and was considered illegal trading of foreign exchange that has interrupted the order in the foreign exchange market. In accordance with Article 45 under the Regulations of the People's Republic of China on Foreign Exchange Administration, an administrative punishment of RMB 235,000 was imposed on Lou. Case 10: Evasion of foreign exchange through split transactions by a Mr. Geng from Shanxi From February to June 2016, to illegally transfer assets overseas, Mr. Geng split the RMB funds and transferred the funds into the personal accounts of 31 persons. Then Geng had the funds exchanged for foreign exchange through online banking by using the annual quotas of the 31 persons for purchasing foreign exchange, and transferred the funds into his personal account in Hong Kong, which amounted to HKD 11.78 million. Geng's behavior violated Article 7 under the Measures for the Administration of Individual Foreign Exchange and was considered evasion of foreign exchange. In accordance with Article 39 under the Regulations of the People's Republic of China on Foreign Exchange Administration, an administrative punishment of RMB 150,000 was imposed on Geng. 2017-05-25/en/2017/0525/1269.html