Li Bin, Spokesperson and Deputy Director of the State Administration of Foreign Exchange (SAFE), stated on September 10 at the themed press conference series “Kick-starting the 15th Five-Year Plan” hosted by the State Council Information Office that SAFE will comprehensively and deeply advance foreign exchange administration reforms, upgrade foreign exchange services, and continuously build a foreign exchange administration system and mechanism that is “more convenient, more open, more secure and smarter”, so as to elevate the development of a strong financial country and high-level opening-up to new heights.

Li Bin noted that the core of greater openness lies in broader scope and higher standard for opening-up in the foreign exchange sector. SAFE will strive to raise the level of capital account opening and further strengthen the synergy and alignment between capital account liberalization and China’s external economic development as well as the RMB internationalization process.

New Cross-border Investment Facilitation Measures to Be Rolled Out in Succession

This year marks the 30th anniversary of China’s achievement of current account convertibility of the RMB. According to Li Bin, over the past three decades, the scale of China’s current account transactions has expanded from USD 300 billion to more than USD 8 trillion. By sharing opportunities and pursuing common development with countries worldwide, China has made important contributions to fostering an open world economy.

On further improving the facilitation of cross-border trade, Li Bin said that leveraging foreign exchange bank due diligence reform, the authority will shift facilitation policies from focusing on business administration toward prioritizing convenience for market entities. Higher comprehensive facilitation will be granted to entities with good integrity and compliance records. Specific measures include continuing to vigorously support new trade forms such as cross-border e-commerce and providing convenient fund settlement services for cross-border e-commerce. In response to new demands arising from high-quality Belt and Road cooperation, SAFE will support “going global” enterprises to conduct flexible trade settlement.

While steadily advancing cross-border trade facilitation, China has also gradually lifted the level of capital account convertibility. He explained that among key components of the capital account, direct investment has basically achieved convertibility. For cross-border securities investment, an institutional framework has taken shape, featuring institutional investor schemes, market connectivity mechanisms and direct market access for overseas investors. Meanwhile, full-scope macroprudential management applies to cross-border financing.

“We will balance development and security to raise the level of capital account opening. We will coordinate capital account liberalization with RMB internationalization, and advance capital account opening from channel-based opening to institutional opening, from business facilitation to entity-based facilitation, from foreign exchange administration to coordinated management of local and foreign currencies, and from exchange settlement links to full-chain management and services,” Li Bin said.

Li Bin disclosed that in the direct investment sector, SAFE will roll out new cross-border investment facilitation measures in succession in the next phase in response to corporate demands. In cross-border financing, it will steadily expand autonomy and facilitation for cross-border financing, building a macroprudential framework for cross-border claims and liabilities characterized by simple rules, convenient operation, effective supervision and controllable risks. The People’s Bank of China and SAFE will also upgrade the policy on integrated domestic and foreign currency capital pools for multinational corporations. In cross-border securities business, the authority will further open up the securities issuance market, align opening rules for securities trading markets with international norms, integrate opening channels, optimize institutions and unify rules, and raise the level of two-way opening of financial markets.

Building the “Four More” Foreign Exchange Administration System and Mechanism

Li Bin elaborated on the “Four More” foreign exchange administration framework at the press conference:

The core of being “more convenient” is to enable compliant and reputable market entities to conduct foreign exchange business more efficiently and smoothly. SAFE will vigorously push forward foreign exchange due diligence reform for banks and continuously improve the foreign exchange facilitation policy system under the principle of “greater convenience for higher integrity, priority for compliant entities”. More creditworthy enterprises will be allowed to handle foreign exchange businesses without document review and upon direct instructions. On top of upgrading and expanding existing facilitation policies, SAFE will research and roll out more targeted support measures focusing on delivering the “five major articles” of finance, new trade forms and multinational corporations.

The core of being “more open” is to broaden the scope and raise the standard of opening-up in the foreign exchange sector. Given that direct investment, securities investment and cross-border financing are major components of the capital account, SAFE will steadily press ahead with foreign exchange administration reforms in these areas during the 15th Five-Year Plan period and enhance institutional stability and predictability. It will continue to strongly support the development of international financial centers and opening-up of key regions, strive to lift capital account opening levels, and further strengthen the synergy and matching between capital account liberalization and China’s external economic development as well as RMB internationalization.

The core of being “more secure” is to strengthen and improve risk prevention, control and supervision of cross-border capital flows. SAFE will continue to improve the dual-pillar management framework of “macroprudential regulation plus micro-supervision” for the foreign exchange market. It will refine macroprudential management of cross-border capital flows to effectively guard against systemic risks stemming from large-scale inflows and outflows of cross-border funds and better maintain the sound operation of the foreign exchange market. It will strengthen supervision over the authenticity and compliance of foreign exchange businesses and severely crack down on illegal activities such as fraudulent transactions and underground banks.

The core of being “smarter” is to upgrade the governance system in the foreign exchange sector for more scientific decision-making and more effective policy implementation. SAFE will continue to improve a more systematic and complete legal framework for foreign exchange administration and push forward the revision of the Regulations on Foreign Exchange Administration. It will further strengthen policy transmission, follow-up and accountability, and improve three evaluation systems: foreign exchange policy assessment, foreign exchange ecosystem assessment, and assessment of banks’ compliance and prudent operation in foreign exchange businesses. Efforts will also be made to develop a modern balance of payments statistical system and more.

Source: Shanghai Securities News