To boost the opening up of foreign exchange markets, the State Administration of Foreign Exchange (SAFE) has recently released the Circular of the State Administration of Foreign Exchange on the Improvement of Foreign Exchange Risk Management by Foreign Institutional Investors in the Interbank Bond Market (Huifa No. 2 [2020]) (Circular), with the aim of further facilitating foreign exchange risk management by foreign institutional investors in the interbank bond market.

The Circular has been designed to offer more foreign exchange hedging channels to foreign institutional investors in the interbank bond market. Foreign non-banking investors will be allowed to enter the interbank foreign exchange market by dealing with domestic financial institutions over the counter or indirectly through becoming a prime broker; in addition to these two channels, foreign banking investors can access the interbank foreign exchange market directly. Moreover, the business processes for foreign exchange derivatives transactions with foreign institutional investors will be simplified and mechanisms for foreign exchange derivatives transactions will be further improved, so as to optimize the collection of foreign exchange transaction information and reduce transaction costs of market players.

The SAFE, based on the requirements of the CPC Central Committee and the State Council, will continue to press ahead with reform and opening up in the foreign exchange area and boost the growth of foreign exchange markets to better serve the real economy and the opening up of financial markets.