China's Foreign Exchange Regulatory Reform in the New Era

With the approval of the State Council，the State Administration of Foreign Exchange released a number of high-level opening-up pilot projects of cross-border trade and investment on January 4，2022，including Lingang New Area of Shanghai Free Trade Pilot Zone，Nansha New Area of Guangdong Free Trade Pilot Zone，Yangpu Economic Development Zone of Hainan Free Trade Port，and Beilun District，Ningbo City，Zhejiang Province.

This pilot reform has given full play to the role of pilot in special economic regions. The establishment of special economic zones is a major decision made by the Communist Party of China (CPC) and China to further promote reform，opening-up and socialist modernization. Since the reform and opening-up，foreign exchange reform in special economic regions has gone through five rounds of development.

The first round of development can be traced back to the early stage of the reform and opening-up. Foreign exchange reservation system was implemented in the five special economic zones of Shenzhen，Zhuhai，Xiamen，Shantou and Hainan，the to encourage enterprises to earn foreign exchange by exporting，which greatly alleviated Chinas shortage of foreign exchange and promoted the development of foreign-related economy.

The second round was in the 1990s，when bonded zones were established in China，including Shanghai Waigaoqiao Free Trade Zone，Tianjin Port，and Futian District，Pingshan Port and Yantian Port in Shenzhen. In accordance with the requirements of the socialist market economy，facilitation measures had greatly promoted the development of the export-oriented economy. For instance，allowing enterprises in the bonded zone to retain foreign exchange income under the current account and not implementing import and export verification and write-off.

The third round started at the beginning of the 21st century. Since China's entry into the WTO，the liberalization and facilitation of trade and investment have been vigorously promoted by the promotion of the reform of foreign exchange management for trade in goods and the optimization of the import and export verification in various customs special supervision areas，including the bonded zones，export processing zones，bonded logistics parks，and bonded port areas. The unification of foreign exchange management policies of various special customs supervision areas，for instance，bonded zones and export processing zones，also rendered China as a major trading country and the world factory.

The fourth round started from the 18th National Congress of the CPC. In order to further expand the opening-up policy，the CPC Central Committee and the State Council established the Shanghai Pilot Free Trade Zone in August 2013. Since then，21 pilot free trade zones have been established by six batches followed by a "1+3+7+1+6+3" pattern，covering almost all the developed areas in the east，central and west regions of China. Furthermore，SAFE promptly followed up and issued 20 innovative measures for foreign exchange management in the pilot free trade zones by four batches，which played an active role in promoting the freedom and facilitation of trade and investment，promoting the opening of capital accounts，and optimizing the business environment.