August 13, 2007 - The SAFE recently released the "Circular of the State Administration of Foreign Exchange on Reserving Foreign Exchange Income under the Current Account by Domestic Institutions at Their Own Discretion" (hereinafter referred to as the "Circular") and lifted the quota limit on the foreign exchange account under the current account for domestic institutions. Therefore, domestic institutions can reserve foreign exchange income under the current account at their own discretion according to their operational needs.
Previously, domestic institutions could retain their foreign exchange income under the current account within a total of 80% of the foreign exchange receipts under the current account and 50% of the foreign exchange payments under the current account of the previous year.
This policy adjustment is an important reform of the foreign exchange management system. The implementation of the new policy will further strengthen autonomy and the convenience for domestic institutions to hold and use foreign exchange and is favorable for domestic institutions to reinforce the management of funds as well as conducive to promoting an equilibrium in the balance of payments.
The SAFE will continue to strengthen oversight and management of the authenticity and compliance of the foreign exchange receipts and payments under the current account, strictly monitor cross-border capital flows, and intensify efforts to investigate and deal with false and illegal foreign exchange transactions to maintain stable and healthy economic and financial development in line with implementation of national macro-control and regulation.
The "Circular" shall be effective upon promulgation.