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The State Administration of Foreign Exchange (SAFE) recently issued a circular announcing that the Regulations on Centralized Operations and Management of MNCs’ Foreign Exchange (Interim) (HuiFa No. 23 [2014], hereinafter referred to as the Regulations) will come into force as of June 1, 2014, in an attempt to deepen the pilot reform on centralized operations and management of multinationals’ (MNCs’) foreign exchange based on the early stage of the reform. A responsible person from the SAFE provided an interview to the press. I. What are the objectives of deepening the pilot reform on centralized operations and management of MNCs’ foreign exchange? A: The objectives include: first, to serve the real economy. Trade and investment facilitation will be vigorously promoted to further reduce operating costs for enterprises, to help enterprises make full use of the two markets and the two resources, and to support the economic development of MNC headquarters by creating conditions for industrial transformation and upgrading. Second, to further streamline administration and to delegate power to lower-level governments. Efforts will be made to advance the transformation in the concepts and approaches to foreign exchange administration and to make full use of the decisive role of the market in terms of resource allocations. Third, to explore capital account convertibility systems and mechanisms that can be replicated and promoted; to encourage enterprises and banks to make business innovations and to explore exchange facilitation for investment and financing, thus reducing foreign exchange administration costs, enhancing the international competitiveness of enterprises and banks, and continuing to release reform dividends. Fourth, to carry out integrated regulation and to enhance risk prevention and controls. Efforts should be made to conduct macro-prudential administration, to improve the orderly bi-directional flow mechanism for cross-border capital, to enhance analysis of the declaration and monitoring of data, and to firmly stick to our bottom line in terms of guarding against systemic and regional financial risks. II. According to our understanding, the pilot reform was kicked off at the end of 2012. What are the considerations this time around for deepening the pilot reform? A: In order to strengthen financial support for cross-border trade investment, since December 1, 2012 the SAFE has carried out three stages in the pilot reform of centralized operations and management of MNCs’ foreign exchange in 12 provinces and cities throughout the country. Seventy-three enterprises have joined the pilot reform (including 2,247 member units both at home and abroad), and 12 domestic and foreign banks have become pilot cooperative banks. The pilot reform, fully following market demand, has produced significant results. First, financial costs for enterprises have been reduced dramatically, thus significantly benefiting the real economy. For example, in Beijing alone, within one year the pilot enterprises delivered more than RMB 100 million in comprehensive returns. Second, the policy environment for a “headquarters economy” has been further optimized, thus promoting an upgrading of the industrial structure. As the pilot reform has proceeded, some MNCs have promoted their financial management centers in China to financial management centers in the Asia-Pacific region, and some have established worldwide regional settlement centers in China. Third, the international competitiveness of banks has been enhanced. Some pilot banks have witnessed a steady increase in market share and have achieved mutual benefits and a win-win situation with enterprises by providing innovative capital management services for the MNCs. Fourth, breakthroughs have been made in the existing framework, thus accumulating rewarding experiences for exploring regulation by market players and capital account liberalization. Fifth, risk prevention and control measures have been put in place, making sure the risks of foreign exchange receipts and payments remain under control. As the pilot results prove that centralized operations and management of MNCs’ foreign exchange are rather mature and effective and have been well received and supported by enterprises, banks, and local governments, the conditions for further deepening the pilot reform have been met. As a result, the SAFE has introduced these Regulations. III. What improvements and innovations are now being made in terms of deepening the pilot reform? A: This reform, unlike the existing management system that distinguishes the current account from the capital account, breaks down the regular boundary between the current account and the capital account, centralizing management of the foreign exchange of domestic and overseas member enterprises respectively by engaging MNCs that have a relatively sound corporate governance structure and reducing overall settlement and exchange costs and providing enterprises with wider space for capital operations, thus reflecting the servicing of the real economy. First, by making innovations to the MNCs’ account system. MNCs are allowed to open either domestic or international accounts, or both, for foreign exchange to carry out centralized foreign exchange management of domestic and global member enterprises. The master account for international foreign exchange may be used free of charge for overseas transfers without quota limits, and the funds under the domestic and international accounts may be conditionally transferred among one another. It is advised that funds be transferred in line with the specified limits for the external debt and outbound lending so as to provide financing benefits to domestic and overseas members. Second, facilitating the centralized utilization of funds by MNCs. MNCs can carry out centralized collections of funds from different member enterprises and of funds of different natures under the same account. They can handle receipts and payments of funds under the current account for domestic member enterprises, carry out centralized fund receipts and payments and netting settlements, and engage in direct investments, external debt, and outbound lending to reduce their financial costs. Third, further simplifying the document review process. Banks should process the receipts, settlements, purchases, and payments of foreign exchange under the current account in line with the principles of "understanding the customers," "understanding their businesses," and “carrying out due diligence reviews." A form must be filed for recording taxes for outbound payments under trade in service items. Fourth, limits on the external debt and outbound lending may be utilized in a coordinated manner. MNCs can either manage or utilize all limits on the external debt and outbound lending of member enterprises in a centralized manner, or can centralize some of the limits on the external debt and outbound lending to facilitate adjustments to the surpluses and deficits among member enterprises. Fifth, managing capital fund and external debt settlements of foreign exchange based on a "negative list" approach. The foreign exchange of capital funds and external debt may first be settled by entering the special RMB deposit accounts opened by the enterprises and it may be paid after verification of its authenticity. IV. To which market players is the policy for deepening the pilot reform applicable, and what are the application procedures? A: MNCs (member enterprises are consolidated for calculation), or single enterprise groups with foreign exchange receipts and payments equal to or exceeding USD 100 million in the prior year, whether China-funded or foreign-funded, can engage in the pilot reform on centralized operations and management of MNCs’ foreign exchange if they have real business requirements and specified management measures and approaches, have no material behavioral violations with respect to foreign exchange, and their trade in goods are classified as Category A. However, deepening the pilot reform cannot be completed once and for all; it should be advanced in phases, with priority given to those enterprises with significant business requirements, sound internal-control mechanisms, and strong risk-control capabilities. Based on the demands of the real economy, the pilot reform will be able to meet the development requirements for foreign exchange receipts and payments and to follow the principles for progressive development and smooth and steady implementation, without mandatory participation by enterprises. Enterprises that plan to carry out the pilot reform should submit in advance the documents to be filed with the branches of the SAFE and upon filing they can start up such businesses. The SAFE branches will provide supervision by strengthening monitoring and analysis. V. How does one apply for the filing procedures to engage in the pilot reform? A: The filing procedures are divided into two parts. First, the operations procedures of the SAFE branches for filing with the SAFE. If the branches plan to carry out centralized operations and management of MNCs’ foreign exchange in their respective jurisdictions, they should formulate and refine their operations procedures, such as the conditions for access based on the Regulations and the actual local situation, and should implement the procedures after filing with the SAFE according to the procedures. In order to ensure that the centralized operations and management of MNCs’ foreign exchange are conducted smoothly and to provide facilitation to enterprises to engage in such business, the branches should complete the filing procedures by June 1, 2014. Second, MNC filing with the SAFE branches. MNCs, such as those in the Shanghai Pilot Free Trade Zone, should file with the local SAFE branches before engaging in such business. MNCs that had already started this business prior to implementation of the Regulations do not need to file with the branches if they plan to continue their previous framework and policies for centralized operations and management of foreign exchange; if they plan to adjust the pilot plan in accordance with the Regulations, they only need to submit to the branches those materials, such as their modified business requirements, rather than those materials that have already been submitted. The branches shall complete the filing procedures and issue the notice of filing within 20 days upon receipt of the filing of the completed application materials. VI. After starting the pilot reform, how will MNCs carry out the centralized receipts and payments of foreign exchange and netting settlements under the current account? A: MNCs can designate a sponsor to carry out the foreign exchange receipts and payments under the current account on behalf of the domestic member enterprises in a centralized manner, to centralize the accounting of foreign exchange receivables and payables under the current account during a certain period of time, and to settle the net amount after the receipts and payments are offset. In principle, the netting settlement should be conducted at least once every calendar month. The procedures for foreign exchange collections and settlements, as well as for purchases and payments, have been significantly streamlined, and the administering banks should conduct the relevant business in line with the principles of “understanding the clients,” “understanding their businesses,” and “carrying out due diligence reviews.” Although the MNCs’ foreign exchange receipts and payments under the MNCs’ current account have been greatly facilitated, banks and enterprises should perform their corresponding legal obligations to ensure the authenticity of the transactions. When a bank verifies the authenticity, it should retain the documents for five years for future review; and the enterprise should retain the receipt-related and payment-related documents for each transaction for five years for future review. For both the actual receipt and payment data of the sponsors and the original receipt and payment data of the member enterprises prior to the centralized receipts and payments or netting settlements, the BOP statistical declaration and the information on the verification declaration on the trade in goods should be carried out as per all the relevant stipulations. All SAFE branches should enhance off-site monitoring and on-site verifications and examinations by making full use of technologies, such as the monitoring and analysis platform for cross-border capital flows. VII. As the pilot reform is conducted, how will the MNCs handle voluntary foreign exchange settlements under the external debt and foreign direct investments (FDI)? A: When MNCs operate and manage foreign exchange under the external debt and FDI in a centralized manner, they can make adjustments in the use of funds among the domestic member enterprises and can voluntarily settle the foreign exchange. Foreign exchange under FDI includes foreign exchange capital funds, funds under the asset realization account, as well as funds under the domestic reinvestment account. The following regulations should be followed with respect to foreign exchange settlements: First, foreign exchange settlements should be conducted by the sponsor designated by the MNCs via the master domestic account that they have opened for the foreign exchange. Second, RMB funds obtained from the foreign exchange settlement should be transferred to the corresponding special RMB deposit account opened by the sponsor (capital account—the account for payment after the settlement of the foreign exchange). When the use of funds is applied, the opening bank should make direct payments upon verifying the authenticity and should retain the relevant documents for five years for future review. The relevant documents may be those involving items that fall within the business scope of the sponsor or those involving items that fall within the business scope of the member enterprises. In principle, the documents should be submitted by the fund user. Third, the use of funds after the settlement of the foreign exchange should follow the prevailing regulations on foreign exchange administration and should not be used for purposes prohibited by the laws and regulations. Fourth, banks and enterprises should submit foreign exchange settlement and payment data to the relevant business information system of the foreign exchange authorities in a timely and accurate manner as per the regulations. VIII. After the MNCs carry out the pilot reform, how should they declare the BOP? A: The sponsor and member enterprises for the centralized operations of the MNCs’ foreign exchange should declare to the banks the nature of the cross-border fund receipts and payments as per the stipulations and should declare the BOP statistics. First, the receipt and payment of cross-border funds via the master domestic and international accounts for foreign exchange should be declared in accordance with the BOP declaration requirements for cross-border fund receipts and payments. The fund receipts and payments between the master domestic and international accounts for foreign exchange and domestic non-residents should be declared based on the requirements for transactions between domestic residents and domestic non-residents. Second, capital transfers between principal domestic and international accounts for foreign exchange are not subject to BOP declarations, but the relevant data should be submitted based on the requirements for foreign exchange transfers between domestic residents. Third, with respect to the BOP declaration for centralized receipts and payments or netting settlements under the current account, declaration of the actual payment data and the original receipt and payment data that are recovered from each deal should be differentiated. IX. What measures will be taken to prevent and control risks from deepening the pilot reform? A: First, the “valve” for controlling and regulating the limits will continue to be rigorously implemented. Transfers between the master international and domestic accounts will be conducted within the specified limits for the external debt and outbound lending. Second, data monitoring will be strengthened. Special account codes will be assigned to the master domestic and international fund accounts to collect foreign exchange receipt and payment information; data recovery declarations will be conducted for centralized receipts and payments as well as for netting settlements. Third, the responsibilities of banks and enterprises will be stressed. Banks and enterprises will sign confirmation letters to ensure business compliance. Fourth, verifications and inspections will be enhanced. When banks and enterprises conduct the relevant business, they will be required to retain the relevant documents for future review and to strengthen statistical data monitoring and analysis via the cross-border fund monitoring platform of the foreign exchange authorities to ensure the controllability of risks. 2014-06-20/en/2014/0620/1113.html
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Q: Since the Fed initiated the QE tapering at the beginning of this year, some emerging economies have been struggling due to the currency depreciation and capital flight. Under such circumstances, what changes have occurred in terms of China’s cross-border capital flows and what are the main contributing factors? A: Presently China still has a large amount of net inflows of cross-border capital. In January 2014, China reported USD 73.3 billion of surplus in sales and settlements of spot foreign exchange and USD 25.4 billion of surplus in sales and settlements of forward foreign exchange (signed contracts), each representing a record high. Amidst the overall currency depreciation in the emerging markets, the RMB exchange rate remained stable during the month, with the nominal and real effective RMB exchange rate indexes prepared by the BIS up 1.2 percent and 2.1 percent respectively. Internal and external factors such as the real economy, the market, and seasonal fluctuations are the primary contributors to the massive amount of net inflows of foreign exchange. Customs statistics show that in January the surplus of imports and exports amounted to USD 31.9 billion, representing an increase of 13 percent year on year. Ministry of Commerce statistics show that within the month foreign capital disbursements amounted to USD 10.8 billion, up 16 percent year on year. Further, market sentiment prone to inflows continued after September 2013. Despite the polarization in the emerging economies, China has witnessed good economic performance and the RMB exchange rate has remained stable. Within the context of the key advanced economies continuing to maintain low interest rates, market players both at home and abroad remained bullish regarding the RMB and bearish regarding foreign currencies. In the run-up to the Chinese New Year, foreign trade businesses commonly accelerate exports and collection of expenses, resulting in a huge demand to convert foreign exchange into RMB. Additionally, huge amounts of compensation and funds for family maintenance are remitted by overseas migrant workers and overseas Chinese. Q: Recently the RMB exchange rate has been on the decline both at home and abroad. On February 25, the spot rate hit a 7-month low in the domestic market. What do you think about this phenomenon? A: It is true that the RMB exchange rate has presented bi-directional fluctuations both at home and abroad, which can be explained by the following four factors: (1) the recent movements in the RMB exchange rate are the culmination of the adjustments by market players of the RMB trading strategies during earlier stages; (2) the range of fluctuations has been normal as compared with the currency fluctuations in the advanced and emerging markets; (3) as the institutional reform of the RMB exchange rate deepens and the market begins to play a more decisive role in setting the rate, bi-directional volatility of the exchange rate will become normal, calling for efforts by market players to adjust their strategies and to adapt to any changes; (4) the bi-directional fluctuations of the RMB exchange rate at a balanced and rational level will be conducive to promoting an equilibrium in the BOP, creating a better foreign-related economic environment and guarding against financial risks. Q: As the global economy is still facing a post-crisis period, with increasing complexity of the economic and financial environments both at home and abroad, will there be any risks from a massive amount of cross-border capital flight? A: There is little likelihood that China will see massive and sustained cross-border capital flight in the foreseeable future. This can be attributed to two factors: the first is that China’s net inflows of cross-border capital through real economic channels, e.g., trade and investment, will remain massive due to the strong economic fundamentals. It is especially noteworthy that the country will gradually develop and put into practice a series of reform programs in related fields after the Third Plenum of the 18th Central Committee of CPC. This will play a helpful role in achieving the country’s mid- and long-term economic-growth objectives. Over the long term, a positive economic outlook and a huge market potential will continue to be a magnet for capital inflows. The restoration of the global economy, especially of the developed economies, will enable China to maintain a surplus in imports and exports. The second is that the fiscal and financial risks in the country remain under control. The robust current account, the dominance of mid- and long-term capital in the form of FDI in external debts and the abundance of foreign exchange reserves have strengthened the country’s capability to withstand any external impacts. Meanwhile, it should be noted that the country will face great uncertainties in terms of its external environment. Given that China's balance in the current account will gradually improve and the exchange rate of the RMB will tend to move in a rational direction toward equilibrium, there is still a likelihood that the country will witness bi-directional fluctuations of cross-border capital. Thus, it is necessary that with respect to this situation the market players adopt a rational perspective and adopt measures to cope with the changes. Looking ahead, the SAFE will continue to intensify efforts to monitor cross-border capital flows, further increase policy and data transparency, improve pre-arranged policy planning to cushion the impacts of the bi-directional cross-border capital flows, and adopt rigorous measures to guard against risks so as to maintain the healthy and sustainable development of the foreign-related economy. 2014-02-26/en/2014/0226/1109.html
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A briefing on the inspection of the banks’ foreign exchange was recently held by the SAFE. The heads of the relevant businesses of 21 Chinese-funded banks and 11 foreign counterparts attended the meeting. It was pointed out at the meeting that in 2013 the SAFE earnestly implemented the decisions and arrangements of the CPC Central Committee and the State Council, rigorously promoted facilitation of trade and investment, carefully prevented risks arising from cross-border capital flows, increased efforts to inspect the banks, as the major channel of cross-border capital flows, seriously investigated foreign exchange–related violations by banks and actively warned the banks of the risks of foreign exchange operations so as to encourage the banks to improve their compliance with foreign exchange operations. Based on the findings, on a whole the banks’ compliance with foreign exchange operations has been improved, but violations still exist as banks put an emphasis on business expansion and neglect administration of internal controls. The meeting provided information on foreign exchange–related violations by banks, revealing a total of 439 cases discovered during 2013. The violations mainly included: 1. not handling foreign exchange settlements and sales in accordance with the relevant regulations. For example, some banks failed to create foreign exchange settlement and sale items separately and failed to handle their own foreign exchange settlement and sale business in compliance with the relevant regulations; while some banks handled foreign exchange capital settlements for companies and foreign exchange settlements and sales for individuals in violation of the relevant rules. 2. Failing to review the authenticity and consistency of the capital receipts and payments on the current account in accordance with the relevant regulations. For instance, some banks handled the balance of foreign exchange generated through trade in goods for unlisted companies, and some banks failed to review the retained data during the handling of capital receipts and payments for trade in goods (transit trade included) in compliance with the relevant regulations and provided receipts and payments business for Class B and Class C companies which is in violation of the relevant rules. 3. Violating the relevant regulations to provide capital receipts and payments on the capital account. Some banks failed to make timely foreign payments using the capital (RMB) acquired by handling foreign exchange capital settlements and sales in accordance with the relevant regulations. 4. Not complying with the relevant regulations to make statistical declarations on the balance of payments and to submit the relevant data. In addition, internal control systems were not improved, authenticity reviews were mere formalities, and some banks engaged in arbitrage by taking advantage of inbound and outbound linkages and avoiding the regulations by means of off-balance-sheet business innovations. All these issues require more attention. It was requested at the meeting that all banks should enhance their macro awareness, handle the relationship between individual benefits and the policy orientation in a correct manner, actively conduct their foreign exchange business in a rational way, enhance a sense of responsibility, practically carry out “understanding your customers,” seriously fulfill their duty of authenticity reviews, improve compliance awareness, strengthen internal control administration and system construction, and further improve the operational level of compliance to create a sound environment for the foreign exchange market. It was stressed at the meeting that in 2014 the SAFE will, in accordance with the decisions and operations of the CPC Central Committee and the State Council, continue to decentralize and further improve the level of facilitation of trade and investment, promote growth of the real economy, and, at the same time, closely monitor cross-border capital flows, prevent shocks from two-way capital flows across borders, maintain the bottom line in avoiding systemic and regional financial risks, and continuously reinforce and improve inspections of the foreign exchange business of financial institutions, such as banks, to encourage the finance industry to better serve the real economy and maintain foreign-related economic and financial security. 2014-04-23/en/2014/0423/1112.html
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For the purpose of adapting to the requirements for statistics and monitoring of foreign-related receipts and payments under the new situation of China’s opening-up and for providing better services for macroeconomic decision making and social analysis and applications, the State Administration of Foreign Exchange (SAFE) recently revised and released the Classification and Codes for Foreign-related Receipt and Payment Transactions (2014 version) (HuiFa [2014] No. 21, hereafter referred to as “Codes [2014 version]”). The Codes (2014 version) will serve as an important institutional basis for preparing the balance-of-payments statistics in line with the Balance of Payments and International Investment Position Manual (Sixth Edition) issued by the International Monetary Fund (IMF). The major changes in the Codes (2014 version) are reflected in the following areas. First, adjustments have been made to adapt to the new international standards. For example, in line with the principle of ownership changes, transit trade has been transferred from trade in services to trade in goods, while the receipt and payment of processing fees for processing trade with supplied materials and outward processing have been transferred from trade in goods to trade in services; c investments, reverse investments among associated enterprises and corresponding revenue items have been added under direct investments. Second, monitoring of fund flows under trade in services will be further strengthened. For example, service items such as freight services, import and export freight insurance, travel, project contracting, and intellectual property rights are refined and adjusted. Third, statistical preparations and regulatory requirements are better met. For example, capital flows under trade in goods are classified by whether they are integrated into the Customs statistics, and transaction categories that are not covered in the Customs statistics are further refined; relevant codes are added under the securities investments for trading activities market conducted by non-residents in the domestic securities. Fourth, the declaration burdens of the declaring entities are lessened. Revision work has been conducted in line with the principles of necessity and minimization to delete and combine certain items. The Codes (2014 version) will take effect as of May 1, 2014. The recommended national standards for the previous classification of foreign-related receipt and payment transactions will be adjusted accordingly. 2014-04-17/en/2014/0417/1111.html
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In 2013 the State Administration of Foreign Exchange (SAFE) received and handled 61 proposals from the NPC and the CPPCC. These proposals mainly involved areas such as the facilitation of trade and investment, support for enterprises “going-global,” and management of foreign exchange reserves. The SAFE attached great importance to the handling of these proposals, arranged relevant work, and made great efforts to carry out the related tasks. As a result, the handling of the relevant proposals for 2013 was completed successfully. The leadership placed great emphasis on the handling of the proposals and made detailed plans for the relevant tasks. The leading Party group of the SAFE also attached great importance to the handling of the proposals; the leadership of the Party branches held special meetings to make plans for the relevant work and to complete the specific requirements. Efforts were made to make institutional improvements to standardize the relevant work. A series of measures was formulated to ensure that the relevant work would be implemented in a systematic and standardized manner. The SAFE also managed to enhance coordination and communicationsso as to improvethe effectiveness and efficiency of the handling of the proposals. Various measures were taken to communicate with the delegates through a number of channels and to listen to comments and suggestions from the delegates in order to ensure the quality of the handling of the proposals. Efforts were intensified to provide training to relevant personnel and to enhance supervision. Relevant personnel who handle proposals from the NPC and the CPPCC were trained in a focused way, and supervision was enhanced so that there would be a response to each task. After the handling of the proposals, meetings were held to sum up the experience and good practices. The year 2014 is the first year that the SAFE has carried out the spirit of the Third Plenary Session of the 18th Central Committee of the CPC and it is an important year to fulfill the objectives of the 12th Five-Year Plan. The SAFE will make conscientious efforts to handle the 2014 proposals from the NPC and the CPPCC, which will be regarded as a benchmark for assessing implementation of the eight-point regulations of the Party Central Committee and for making efforts to carry out the mass line educational campaign. In 2014 the SAFE will further improve its work style, fulfill the relevant tasks in a pragmatic manner, and endeavor to achieve good performance with regard to the handling of the relevant proposals. 2014-02-27/en/2014/0227/1110.html
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A meeting was recently held by the State Administration of Foreign Exchange (SAFE) to convey and study the spirit of the second clean government work conference of the State Council and to make plans for implementation. Yi Gang, administrator and secretary of the Party Leadership Group of the SAFE, presided over the meeting. The meeting underlined the importance of studying and implementing the spirit of the conference for the present and for the foreseeable future. The SAFE should conscientiously implement the central government's requirements for combating corruption and upholding integrity, promote the building of a clean government through institutional reforms, and strive to achieve new progress in its efforts to combat corruption and to build a clean government. At the meeting it was emphasized that the SAFE should implement the spirit of the third plenum of the eighteenth Central Commission for Discipline Inspection and the second clean government work conference of the State Council, further integrating anti-corruption and upholding integrity in foreign exchange administration efforts. Specifically, the SAFE should (1) continue to implement the eight-point guideline and the three-point covenant; (2) deepen the reform of foreign exchange administration in key areas and continue to streamline administration and delegate power to lower levels; (3) enhance the building of institutional systems to combat corruption, to uphold integrity, and to deepen risk controls in this regard; (4) impose stringent rules on financial discipline and management; (5) advance transparency in foreign exchange administration; and (6) enforce rigid discipline. Leadership teams should play an exemplary role in implementing the rules for improving the work styles of CPC officials, for building clean government, and for ensuring that decrees of the central government are adequately conveyed to the lower levels. 2014-02-12/en/2014/0212/1105.html
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In order to improve foreign exchange administration regarding the conversion of external debts into loans (loan conversion), to streamline administration, to institute decentralization, and to promote facilitation of investment and financing, the State Administration of Foreign Exchange (SAFE) recently released the Circular of the State Administration of Foreign Exchange on the Issuance of the Foreign Exchange Administration Regulations on the Conversion of External Debts into Loans (Huifa No.5 [2014], hereinafter referred to as “the Circular”). The Circular mainly includes the following: (1) Ending deal-by-deal registration and remittance approval of loan conversions at the SAFE, and replacing them with a centralized registration of creditors for loan conversions; (2) Terminating the account opening and approval for loan conversions; as a result, loan conversion debtors will be allowed to complete account-opening procedures at the banks by presenting an application to open an account and an agreement to convert the loan; (3) Loan conversion creditors or debtors will be allowed to complete the procedures for the transfer of the relevant funds within China directly at the opening bank by presenting the agreement regarding the loan conversion; (4) Ending examination and approval of policy-based foreign exchange settlements for loan conversions; loan conversion debtors will be allowed to complete the procedures for foreign-exchange settlements of funds for the loan conversions directly at the opening bank by presenting the agreement for the loan conversion; (5) Removing the procedures for the approval of capital repayments with interest and foreign exchange purchases under the item of loan conversions; as a result, loan conversion debtors will be allowed to complete repayment procedures directly at the banks by presenting items such as the agreement on the loan conversion and the repayment notification. This Circular will enter into effect as of March 1, 2014. 2014-02-21/en/2014/0221/1106.html
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In order to further increase the transparency of information regarding the BOP statistics and to make it easier for the general public to study and analyze information related to the foreign-exchange circumstances, the State Administration of Foreign Exchange (SAFE) beginning from February 2014 began to release aggregate data on outstanding forward foreign exchange settlements and sales by banks on behalf of their clients and aggregate data on foreign-related receipts and payments and data on China international trade in services, based on the specifications and category of data released each month. The previous Timetable for the Release of the BOP and Relevant Data was revised and promulgated. With the release of the aggregate data on the outstanding forward foreign exchange settlements and sales by banks on behalf of their clients, users of the relevant data will be able to obtain comprehensive insights into aggregate forward foreign exchange settlements and sales. The release of the aggregate data on foreign-related receipts and payments will enable users of the data to obtain insights into changes in the foreign-related receipts and payments in various currencies. The data on China international trade in services will enable users to obtain timely insights into China’s development of trade in services, thus increasing the reliability of relevant data for research, analysis, and policy adjustments. To facilitate utilization of relevant time-series data, beginning from 2010 the SAFE also released aggregate monthly historical data on outstanding forward foreign-exchange settlements and sales by banks on behalf of their clients. 2014-02-24/en/2014/0224/1108.html
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In order to increase transparency in the release of data on foreign exchange administration and to facilitate efforts by the general public to acquire and use the BOP and relevant data, the Timetable for the Release of the BOP and Relevant Data is hereby revised and promulgated (see the Appendix for details). FILE: Timetable for the Release of the BOP and Relevant Data 2014-02-24/en/2014/0224/1107.html
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The State Administration of Foreign Exchange (SAFE) recently disseminated the data for February 2016 on banks' settlement and sales of foreign exchange and their foreign-related receipts and payments for customers. The press spokesperson of the SAFE answered media questions on recent cross-border capital flows. Q: Could you brief us on China's recent cross-border capital flows? A: The pressure from cross-border capital outflows from China has been significantly eased. The deficits in foreign exchange settlement and sales and in foreign-related payments and receipts by the non-banking sectors, companies or individuals, have contracted since the beginning of this year. In February, the non-banking sectors recorded a deficit of USD 35 billion in foreign exchange settlement and sales, down by 50% month on month, or by a daily average of 37% month on month if calculated by trading days after the adjustment of the impact from the Chinese New Year holiday. The non-banking sectors also registered a deficit of USD 30.5 billion in foreign-related payments and receipts, down by a daily average of 39% month on month. In particular, the deficit in foreign-related payments and receipts of foreign exchange was USD 10.5 billion, down by a daily average of 42% month on month. Chinese market players' adjustment of their structure of assets and liabilities in domestic and foreign currencies has become smoother. On the one hand, efforts have been made to steadily encourage people to hold more foreign exchange. The balance of foreign exchange deposits grew by USD 8.3 billion in February, which was down by USD 11.3 billion month on month. On the other hand, companies slowed down debt servicing. For example, the balance of cross-border financing for imports dropped by USD 2.5 billion in February, which was down by USD 7.2 billion month on month. The changes in domestic and external market environments have helped ease the pressure from cross-border capital outflows. First, global financial markets are being stabilized after fluctuations. The US dollar index has sustained small fluctuations after being downgraded at the end of January, and the VIX that reflects market aversion has dropped from the peak in mid-February. Second, the domestic RMB exchange rate has stayed stable. In February, the RMB exchange rate against a basket of currencies fluctuated slightly, but the central parity rate of the RMB against the USD and domestic and overseas trading prices rose, and the spread between the CNY and the CNH further narrowed, indicating market players' weaker desire to buy foreign exchange. In addition, no adjustment has been made to the foreign exchange administration policy except the requirement on the authenticity and compliance of foreign exchange transactions has been highlighted to curb speculations, which stabilizes market sentiment. China's cross-border capital flows are expected to stay stable in the near future. China will continue to register a large trade surplus and heavy use of foreign capital, and companies' external debt will be more stable after more than one year's deleveraging. As for internal and external environments, market expectations of the Fed's interest rate hikes have been lowered recently, and the Fed's adjustment of the monetary policy, if meeting market expectations, will be favorable for stabilizing international financial markets and capital flows. China's GDP growth target for 2016 is 6.5%-7%, which is high at the global level, indicating the fundamentals for attracting inflows of foreign capital have not changed. 2016-08-30/en/2016/0830/1204.html