Facilitating Trade in Foreign Exchange Management
China Forex: What are the key objectives of the Current Account Department in 2016?
Du Peng: In 2016,our department will be taking its guidance from the spirit of the Fifth Plenary Session of the 18th Central Committee of the Chinese Communist Party and the conclusions of the Central Economic Work Conference. We will push ahead with the transformation of foreign exchange administration under the current account by optimizing supervision and inspection,improving our post-transaction supervisory system,and giving full play to inspections. We will pay close attention to changes in foreign exchange conditions,enhance risk detection and early-warning capabilities and step up collaboration with external departments in order to provide more effective supervision. In so doing we will boost trade facilitation,support selected emerging businesses and serve the real economy. We will also enhance the guidance and supervision of commercial banks and other financial institutions.
China Forex: In 2015 there was a trend of net cross-border outflows of capital. What measures might be taken in response to this situation in 2016?
Du Peng: Last year,our department made strenuous efforts to cope with a severe situation in foreign exchange receipts and payments and foreign exchange settlements. Under the SAFE guideline of "controlling outflows" we implemented a coordinated strategy of special inspections of enterprises suspected of reporting false trades,forging documents and buying or selling customs declarations. Our efforts made a big impact in stemming the outflow of profits from the services trade and greatly deterred irregular and illegal cross-border flows of capital.
In 2016,the key tasks are to enhance supervision and inspection while we strengthen the risk prevention and early warning systems. We expect to focus our efforts on ensuring the smooth operation of the monitoring system for foreign exchange services while we improve the interviewing and inspection mechanisms for the supervision of enterprises and banks. At the same time we need to set our monitoring indicators and threshold values in a flexible fashion. We also need to strengthen our "window guidance" to help execute policy directives and pay close attention to new developments in the foreign exchange area.
China Forex: Facilitating trade and investment is always a focus. What measures do you expect this year?
Du Peng: "Preventing risk and promoting facilitation" are two long-term objectives in the management of foreign exchange under the current account. In 2015,based on the reform of foreign exchange administration on merchandise trade and services trade under the current account,we continued to delegate authority and streamline our administrative operations. We unveiled the Circular of the State Administration of Foreign Exchange on Printing and Distributing the Guidelines for Foreign Exchange Administration of Insurance Services (Huifa [2015] No. 6),delegating approval authority for market entry to corporate insurance institutions as well as setting of limits on foreign exchange conversion in the insurance services sector. We also released the Circular of the State Administration of Foreign Exchange on the Pilot Scheme of Cross-border Foreign Exchange Payment Services Provided by Payment Institutions (Huifa [2015] No.7),expanding a pilot scheme on cross-border foreign exchange payment services of payment institutions on a national scale. Additionally,we gave strong support to the reforms in cross-border e-commerce as well as the facilitation of integrated foreign trade service enterprises. We also aided the concept of creating a "single window" for services related to international trade.
In 2016,the current account department will continue to research and carry out measures that will simplify foreign exchange management,give assistance to a pilot scheme of cross-border foreign exchange payments by payment institutions and study ways to expand the use of electronic documentation related to merchandise trade. We will work with other government departments to facilitate the centralized foreign exchange operations of multinational corporations. We will also look to make improvements in the detailed rules related to free trade zones and collaborate with the State Council and the Ministry of Commerce to stabilize economic growth and conduct pilot programs on new types of businesses in the field of foreign trade. Finally,we will work on reforms related to customs clearance.
China Forex: Will the State Administration of Foreign Exchange adjust its annual ceiling on foreign exchange sales and settlements by individuals in the near term? Once the monitoring system for individual foreign exchange monitoring is fully rolled out on a national scale,what new measures can we expect in the management of foreign exchange transactions of individuals?
Du Peng: For the time being,SAFE does not plan to adjust the annual limit on settlements and sales of foreign exchange by individuals. SAFE has long used annual limits for individuals and the current ceiling is US$50,000. Foreign exchange purchase and settlement transactions can be freely made with an identity card,and transactions over US$50,000 can be made with special authorization. Cross-border credit card purchases are also not counted in this annual US$50,000 limit. With the rise in income levels of Chinese citizens,demand from individuals for foreign exchange has been increasing. Since 2007,foreign exchange purchases by individuals have risen 30% on average. Data show that individual foreign exchange transactions were driven by real demand with more than 80% for travel and foreign study. More than 96% of individual foreign exchange transaction were within the annual US$50,000 limit. The national average purchase