Integrated Promotion of High-quality Opening-up and High-level Security...

Title: Integrated Promotion of High-quality Opening-up and High-level Security in Foreign Exchange Administration under the Capital Account

CHINA FOREX: In 2023, what work has been done to promote the high-level opening-up of the capital account, and what has been done towards serving the real economy with foreign exchange administrated under the capital account?

XIAO Sheng: In 2023, the Capital Account Management Department of the State Administration of Foreign Exchange (hereinafter referred to as the Capital Account Management Department) conscientiously implemented the relevant decisions and arrangements of the Central Committee of the Communist Party of China (CPC) and the State Council, and upheld the general principle of seeking progress while maintaining stability. We ensured both development and security, continuously deepened reform and opening-up in the capital account, solidly promoted the facilitation of cross-border investment and financing, and effectively served the high-quality development of the real economy. Specifically, the following work was carried out.

We promoted a high-level opening-up of the capital account. Firstly, we implemented the Opinions on Providing Financial Support for the Building of the Guangdong-Hong Kong-Macao In-depth Cooperation in Hengqin and the Opinions on Providing Financial Support to the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone in Comprehensively Deepening Reform and Opening-up, carried out pilot projects to facilitate payment and settlement for projects such as "Macau New Neighborhood", and implemented policies to facilitate the property purchase by residents of Hong Kong and Macau in the Greater Bay Area. The "Qianhai Hong Kong Enterprise Loan" pilot project was launched to facilitate cross-border financing for Hong Kong-funded small and micro-sized enterprises in Qianhai. The Kehuitong pilot project was also initiated in the Hetao Shenzhen-Hong Kong Science and Technology Innovation Cooperation Zone (HTCZ) to facilitate the cross-border transfer of research funds for research institutions in the zone. We supported the development of high-end shipping services in Shanghai, and researched and formulated a package of supporting policies for the construction of the Xiong'an New Area and the New International Land-Sea Trade Corridor in Chongqing, as well as supporting the construction of a pilot zone for sci-tech innovation and financial reform in Zhongguancun. Secondly, we promoted the optimization and expansion of pilot projects for cross-border investment and financing. Solid progress was made in the implementation of trials of high-level opening-up for cross-border trade and investment in Lingang (Shanghai), Nansha (Guangdong), Yangpu (Hainan), and Beilun (Ningbo). Various reform pilot policies were accelerated for replication and promotion. The Circular of the State Administration of Foreign Exchange on Further Deepening Reforms to Facilitate Cross-Border Trade and Investment and the Notice of the State Administration of Foreign Exchange on Expanding the Pilot Program of High-level Opening-up of Cross-Border Trade and Investment were successively issued. Nine facilitation policies were introduced nationwide and eight opening-up pilot policies were implemented throughout Shanghai, Jiangsu, Guangdong, Beijing, Zhejiang, and Hainan to support the high-quality development of the real economy. Thirdly, we improved and optimized policies for the integrated capital pool for domestic and foreign currencies of multinational corporations. The pilot program of centralized operation and management of cross-border funds in domestic and foreign currencies of multinational corporations (hereinafter referred to as the “low-version” capital pool pilot program) and pilot program of integrated capital pool for domestic and foreign currencies of multinational corporations (hereinafter referred to as the “high-version” capital pool pilot program. We launched pilot projects for “low-version” capital pools, studied and formulated plans for upgrading and expanding the “high-version” capital pools, and provided greater support for the development of the headquarters economy. Fourthly, we continued to deepen the two-way opening-up of financial markets. We optimized the management of Qualified Foreign Institutional Investors (QFII)/RMB Qualified Foreign Institutional Investors (RQFII), allowed custodian banks to directly handle the relevant fund registrations, and canceled administrative licensing for the registration involved. We have also launched a revision of the Provisions on the Administration of Domestic Securities and Futures Investment Funds of Foreign Institutional Investors, and promoted the orderly business development of the Qualified Domestic Institutional Investors (QDII). In addition, we have continued to improve the policy of opening up the domestic bond market to foreign investors.

The facilitation of cross-border investment and financing has also been enhanced. Firstly, we continuously improved the management of direct investment. We proceeded prudently with the pilot program of cross-border investment via equity funds. Secondly, we promoted the implementation of cross-border financing facilitation policies for science and technology enterprises across the country, achieving comprehensive expansion and upgrading of pilot projects, and removing the need for approval before opening external debt accounts in different places. Thirdly, we advanced reforms in foreign exchange administration for overseas listings and non-bank financial institutions. We initiated the revision of foreign exchange administration regulations for overseas listings, promoting the integration of domestic and foreign currency policies for overseas listings, and simplifying the administration process. Fourthly, we continued to deepen the effectiveness of facilitation reforms and promoted the use of digital services for capital account transactions nationwide, encouraging banks to handle institutional and individual capital account transactions through online and remote channels more efficiently, which effectively reduced costs for market entities. We also optimized the management of capital accounts and negative lists to facilitate capital exchange and utilization.

CHINA FOREX: What is the overall strategy for foreign exchange administration under the capital account in 2024 given the current global financial situation?

XIAO Sheng: In 2024, foreign exchange administration under the capital account will be guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and will fully implement the guiding principles of the 20th CPC National Congress, the Central Economic Work Conference, and the Central Financial Work Conference. Furthermore, the decisions and arrangements established at the National Foreign Exchange Administration Work Conference will be diligently implemented. Guided by the principles of seeking progress while maintaining stability, we will focus on high-quality opening-up under the capital account and better coordination of financial opening-up and security, and promoting stability through progress. On a foundation of comprehensively strengthening regulation and preventing and resolving risks, we will promote the orderly reform of foreign exchange administration in the fields of cross-border direct investment, external debt, and securities investment. We will steadily expand high-level institutional opening-up under the capital account, promote the facilitation of cross-border investment and financing while enhancing risk prevention and control capabilities, safeguard against systemic risks, and promote high-quality development with high-level opening-up.

CHINA FOREX: In a recent special seminar speech to provincial and ministerial-level officials, President Xi Jinping emphasized "focusing on institutional opening-up to promote high-level opening-up". What measures will be introduced in 2024 to promote high-level opening-up under the capital account?

XIAO Sheng: In 2024, foreign exchange administration under