China will quicken its steps to relax controls on foreign exchange (forex) to finally realize full convertibility of its currency, renminbi, while at the same time improving its regulatory administration.
Shanghai, the country's financial hub, will play a leading role in the process, according to Hu Pingxi, director of the State Administration of Foreign Exchange (SAFE)'s Shanghai branch.
After lowering the bars for local enterprises to set up settlement accounts for foreign exchange, the city will take the lead in allowing all enterprises to open such accounts.
Fang Shangpu, deputy director of the branch, said the measure will greatly facilitate the service sector's business in foreign currency.
Since May 8, SAFE's Shanghai branch has allowed all 15 authorized domestic banks to approve forex current accounts for their corporate clients, a right that used to be reserved solely for SAFE.
"We are looking at authorizing foreign banks and financial companies to conduct forex business," Fang said.
Similar reforms in the capital account are also in the pipeline, he said, but didn't give any time frame.
Verification and cancellation of forex receipts on export will be further simplified.
Prior to this, not all domestic enterprises were allowed to open settlement accounts for foreign exchange in order to give the government better control over the flow of foreign currency, while all foreign companies were free to do so.
Another great leap forward will be allowing more banks to approve the repayment of forex loans made to their clients.
China has pledged to improve the timeliness of reporting foreign exchange receipts in international payments. The period for reporting has been reduced from 20 to 10 working days. And in 2003 the period will be further shortened from 10 to five working days.
To achieve the goal, SAFE and various banks are working together to explore ways of speeding up and simplifying the reporting procedures with the aid of advanced technology, such as online reporting.
Fang said as China has joined the World Trade Organization, it's high time to revise forex management to keep it in line with international practices to give enterprises more leeway in handling their forex, and to help improve the investment environment for foreign companies, and promote foreign trade.
"These new measures will also enable the authorities to monitor the flow of foreign capital more efficiently," he added.
As for the administration of forex in the insurance and securities sectors, Fang said SAFE is working closely with the China Insurance and Securities Regulatory Commissions to phase in related policies.
(China Daily June 22, 2002)