Steadily Promoting Renminbi Convertibility Under the Capital Account
Over the past 40 years of reform and opening up，under the leadership of the Communist Party of China (CPC)，China's foreign exchange administration under the capital account has given overall consideration to facilitation and risk prevention in accordance with the characteristics of foreign-related economic development and the requirements of opening up at different stages，effectively serving the development of the real economy. At the same time，it has held the bottom line of non-occurrence of systemic financial risks，and gradually explored a path of capital account opening with Chinese characteristics.
1978-2000: Exploring the reform of foreign exchange administration under the capital account
Since the third Plenary Session of the 11th CPC Central Committee，the financial system reform began to be implemented in a planned and step-by-step way along with the economic system reform. In 1993，the Notice of the State Council on Further Reform of the Foreign Exchange Administration System was issued，clearly stating that "the long-term goal of the reform of China's foreign exchange administration system is to realize the convertibility of the renminbi". Generally speaking，the renminbi convertibility under the capital account was at a low level in this stage. Strong administrative management was implemented and most transactions under the capital account needed prior approval.
Since the reform and opening up，the active use of foreign direct investment (FDI) has become an important means to drive China's economic development，with the formulation of laws on Sino-foreign joint ventures，Sino-foreign cooperative ventures and exclusively foreign-owned enterprises as the starting point. It played an important role in alleviating the shortage of foreign exchange resources in China at that stage to boldly introduce foreign-invested enterprises to open factories in China and to develop export-oriented economy. The FDI has gradually become the main form of foreign capital utilization in China since 1992，when the proportion of FDI began to exceed external borrowing.
Regarding the direction of capital flows under the capital account，the foreign exchange revenue under the capital account should all be transferred back to China in this stage，unless otherwise stipulated by the State Council. Domestic institutions (including foreign-invested enterprises) should open special foreign exchange accounts in designated foreign exchange banks for foreign exchange receipts under the capital account，and only after the approval of the SAFE could the foreign exchange receipts be surrendered.
2001-2008: Advancing the reform of foreign exchange administration under the capital account rapidly
With China's accession to the World Trade Organization (WTO) in 2001，China's trade with other countries has experienced a rapid growth. At the same time，the reform of the financial system has made swift progress，and the financial opening has gradually gathered pace. In accordance with the unified arrangements and requirements of the CPC Central Committee and the State Council on promoting the renminbi convertibility under the capital account，the SAFE has implemented the reform of foreign exchange administration under the capital account in a steady and orderly way in such fields as direct investments，portfolio investments，and external credits and debts.
First，continuously improving the framework of China’s foreign exchange administration for FDI. Established in the 1990s，the framework underwent adjustments and basically took shape during the Asian financial crisis in 1997 and the diversion in the balance of payments situation in 2002.
Second，carrying out the pilot reform of the outbound direct investments (ODI) administration. In 2002，the SAFE implemented the requirements of the State Council for the reform of the administrative approval system，abolished the foreign exchange risk examination and the guarantees for remitting profits of overseas investment，and implemented the regional quota management. In 2004，eligible domestic member companies of transnational corporations were allowed to make loans to overseas member companies，and collect or adjust regional and global foreign exchange funds，so as to optimize the allocation of foreign exchange resources. In 2005，the pilot reform of foreign exchange administration for ODI was expanded nationwide，with the total purchases of foreign exchange for ODI up from US $3.3 billion to US $5 billion. Since then，the SAFE has further expanded the foreign exchange sources for the overseas investment of enterprises，cancelled the quota restriction of foreign exchange purchases，and allowed the antecedent expenses of overseas investment to be remitted first.
Third，opening the domestic securities market in an orderly manner. At the end of 2002，the China Securities Regulatory Commission (CSRC) jointly launched the Qualified Foreign Institutional Investor (QFII) system with the People's Bank of China (PBC)，the SAFE and other departments，allowing qualified foreign institutional investors to enter the domestic capital market for portfolio investments within the approved investment quota. The SAFE is responsible for the investment quota and exchange administration. Since then，the QFII system has undergone many rounds of reform，constantly simplifying procedures in terms of qualification threshold，investments scope，quota approval，and capital exchange.
Fourth，guiding domestic funds to conduct foreign portfolio investments in an orderly manner. In order to meet the needs of domestic investors for foreign portfolio investments，China officially launched the Qualified Domestic Institutional Investor (QDII) system at the end of 2006，allowing qualified banks，securities operators and insurance companies to make foreign portfolio investments within the approved investment quota with their own foreign exchange or foreign exchange purchased on behalf of clients.
Fifth，promoting the two-way opening of the bond market. In 2005，international development institutions were allowed to issue renminbi bonds in China. In 2007，domestic financial institutions were allowed to issue renminbi bonds in the Hong Kong Special Administrative Region.
Sixth，establishing a basic framework for external debt administration. In 2003，the National Development and Reform Commission (NDRC，the former State Development and Planning Committee)，the Ministry of Finance and the SAFE jointly issued the Interim Measures for the Administration of External Debt，clarifying the scope and the division of work of external debt administration: the NDRC is responsible for the formulation of plans for the use of foreign loans and the verification of long-term and medium-term international commercial loan quotas. The SAFE is in charge of the verification of the balance quota of the short-term external debts，the contract-signing and withdrawal registration of external debts，and the approval of principal repayment and interest payment of part external debts，as well as related foreign exchange sales and purchases management and the statistics and monitoring of external debts.
Seventh，gradually relaxing the foreign exchange administration of cross-border guarantees. At this stage，with the acceleration of "going global" of Chinese enterprises，their demand for cross-border financing was increasing.
From 2009 to now: Deepening the reform of foreign exchange administration under the capital account on all fronts
During this period，in order to adapt to the new requirements for the domestic financial system reform due to the changes in the global economic and financial landscape，the reform of foreign exchange administration under the capital account has continued to simplify and optimize various administrative procedures on the basis of the previous reforms，facilitating the cross-border trade and investment. At the same time，the SAFE has actively explored means of supervision during and after the event to effectively prevent the risk of cross-border capital flows.
Direct Investment
First，establishing a foreign exchange administration framework for FDI in China centered on registration. At the end of 2012，the SAFE issued the Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment，making major adjustments to existing policies to build a foreign exchange administration model for FDI adapting to the wider opening up and with higher management efficiency and lower social