Li Bin, Spokesperson and Deputy Director of the State Administration of Foreign Exchange (SAFE), stated at the press conference themed “Kicking off the 15th Five-Year Plan” hosted by the State Council Information Office on September 10 that SAFE will comprehensively deepen foreign exchange administration reforms, improve foreign exchange services, and continue to develop 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 nation and high-level opening-up to new heights.

Li Bin noted that the core of greater openness lies in expanding the scope and raising the standard of opening-up in the foreign exchange sector. SAFE will strive to improve the level of capital account opening, and further strengthen the coordination 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 successively

This year marks the 30th anniversary of China’s achievement of current account convertibility for the RMB. According to Li Bin, over the past three decades, China’s current account transaction volume has expanded from USD 300 billion to more than USD 8 trillion. China has shared opportunities and pursued common development with countries worldwide, making important contributions to building an open world economy.

On further improving cross-border trade facilitation, Li Bin said that taking the reform of banks’ foreign exchange due diligence as the starting point, SAFE will shift facilitation policies from focusing on business administration to prioritizing entity convenience, granting higher overall facilitation to entities with integrity and compliance records. Specific measures include: continuing to vigorously support the development of new trade forms such as cross-border e-commerce; providing convenient capital settlement services for cross-border e-commerce; actively responding to new demands for high-quality Belt and Road cooperation, and supporting “going global” enterprises in flexible trade settlement.

While continuously advancing cross-border trade facilitation, China is also gradually raising the level of capital account convertibility. He said that among the major components of the capital account, basic convertibility has been realized under direct investment. Cross-border securities investment has formed an institutional framework featuring institutional investor schemes, market connectivity mechanisms and direct market access for overseas investors. Meanwhile, full-scale macro-prudential management is applied to cross-border financing.

“We will balance development and security, and 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 convenience to entity convenience, 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 remarked.

Li Bin disclosed that in the field of direct investment, SAFE will roll out new cross-border investment facilitation measures in response to corporate demands in the next stage. In cross-border financing, it will steadily enhance the autonomy and convenience of cross-border financing, and build a macro-prudential management framework for cross-border claims and liabilities featuring simple rules, easy operation, effective supervision and controllable risks. The People’s Bank of China and SAFE will also upgrade the policy for the integrated local and foreign currency capital pools of multinational corporations. In cross-border securities, it will further open up the securities issuance market, align opening rules for securities trading markets with international practices, push forward the integration of opening channels, institutional optimization and rule unification, and boost the two-way opening of the financial market.

Building the “four more” foreign exchange administration system and mechanism

Li Bin elaborated on the “four more” foreign exchange administration system and mechanism at the press conference:

The core of “more convenient” is to enable compliant and reputable market entities to handle foreign exchange businesses more efficiently and smoothly. SAFE will vigorously push forward the reform of banks’ foreign exchange due diligence, and continuously improve the foreign exchange facilitation policy system of “greater convenience for higher integrity, priority for compliant entities”. More creditworthy enterprises will be exempted from document review and conduct foreign exchange transactions directly upon instructions. Meanwhile, on the basis of upgrading and expanding existing facilitation policies, more targeted support policies will be studied and implemented for key areas including the financial “five major articles”, new trade forms and multinational corporations.

The core of “more open” is to expand the scope and raise the standard of opening-up in the foreign exchange sector. As direct investment, securities investment and cross-border financing constitute the main components of the capital account, SAFE will steadily advance foreign exchange administration reforms in these areas during the 15th Five-Year Plan period to enhance institutional stability and predictability. It will continue to strongly support the development of international financial centers and opening-up in key regions, strive to improve capital account opening, and further strengthen the coordination and alignment between capital account liberalization and China’s external economic development as well as RMB internationalization.

The core of “more secure” is to deliver stronger and more effective risk prevention and supervision over cross-border capital flows. SAFE will continue to improve the dual-pillar management framework of “macro-prudential regulation plus micro-supervision” for the foreign exchange market; refine macro-prudential management of cross-border capital flows to effectively guard against systemic risks stemming from large and volatile cross-border capital movements, and better maintain the sound operation of the foreign exchange market; strengthen supervision over the authenticity and compliance of foreign exchange transactions, and severely crack down on illegal activities such as fraudulent transactions and underground banks.

The core of “smarter” is to improve the governance system in the foreign exchange sector for more scientific decision-making and more effective policy implementation. SAFE will further refine the systematic and complete legal system for foreign exchange administration and promote the revision of the Regulations on Foreign Exchange Administration; strengthen policy transmission and performance tracking, and improve three evaluation systems covering foreign exchange policy assessment, foreign exchange ecosystem assessment, and evaluation of banks’ compliance and prudent operation in foreign exchange businesses; and push forward the development of a modern balance of payments statistical system.

Source: Shanghai Securities News