Developing An Integrated Capital Account Management System...

CHINA FOREX: What specific measures did the Capital Account Management Department implement in 2024 to facilitate high-standard capital account opening-up while supporting the real economy?

XIAO Sheng: In 2024, the Capital Account Management Department implemented the directives of the Central Committee of the Communist Party of China (CPC) and the State Council, adhering to the principle of pursuing progress while ensuring stability. The department effectively balanced openness with security, advancing reforms in direct investment and external debt management. It systematically advanced institutional opening-up in the securities sector while strengthening cross-border investment facilitation and risk management capabilities. These measures supported high-quality development through high-standard financial opening-up. Key initiatives are as follows.

Promoting high-standard opening up of capital accounts. Firstly, the focus was on supporting the national major regional development strategies. Xiong'an in Hebei, Chongqing, and Xiamen in Fujian were designated as pilot regions for high-standard opening-up. Comprehensive research initiatives were conducted to support the development of the New Western Land-Sea Corridor and the construction of international financial centers in Shanghai and China's Hong Kong. Secondly, significant efforts were made to upgrade and expand high-standard opening-up pilot programs for cross-border trade and investment. The scope of these pilot programs was broadened, with guidance provided to SAFE branches in regions including Shanghai, Jiangsu Province, and Guangdong Province to ensure rapid implementation. The progress of these pilot programs was closely monitored to guarantee effective execution. Notably, the "Kehuitong" (Research Remittance Connect) pilot project was extended to 16 regions, including Beijing and Shanghai. Thirdly, the policy framework for multinational enterprises(MNEs)' cash pools underwent iterative upgrades and phased implementation. The integrated foreign and domestic currency cash pool policy framework was optimized, which introduced both "standard" and "advanced" versions. The advanced version of the integrated cash pool for MNEs was further enhanced and implemented in 10 regions, including Shanghai and Beijing. This further improved the convenience of cross-border receipts and payments for company groups, better supporting the development of headquarters economies. Following a year-long pilot implementation, the standard version cash pool policy underwent comprehensive evaluation, leading to the formulation of optimized policies and a nationwide implementation strategy. By the end of January 2025, over 1,000 multinational company groups had engaged in the cash pool business, encompassing 18,000 affiliated companies. Fourthly, the initiatives continued to deepen the two-way opening-up of financial markets. The regulatory framework for direct overseas listings of domestic enterprises was optimized, while market connectivity mechanisms including the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect, and Bond Connect were strengthened. Provisions governing mutual fund recognition were revised accordingly. The Regulations on the Domestic Securities and Futures Investment Capital of Foreign Institutional Investors were amended, simplifying foreign exchange administration procedures for Qualified Foreign Institutional Investors (QFII/RQFII). Under the revised framework, custodial banks are now authorized to directly process relevant fund registration matters. The Qualified Domestic Institutional Investors (QDII) program was advanced in an orderly manner, with US$2.27 billion in QDII quotas allocated to 53 QFIIs in 2024.

Continuing to enhance the facilitation of cross-border investment and financing. Firstly, regulations and policies were revised. The Guidelines for the Foreign Exchange Business under Capital Account (2024 Edition) were issued, further improving standardization and efficiency of government services. Secondly, integrated domestic-foreign currency management was advanced. Policies governing the integrated management of bank credit asset transfers in both foreign and domestic currencies were revised and optimized. Furthermore, cross-border lending policies in domestic and foreign currencies were refined, enabling more efficient and streamlined cross-border capital management for banks. Thirdly, digital service capabilities were upgraded. Digital services for capital account-related operations were rolled out nationwide. Thirty-seven new capital account administrative licensing items were incorporated into the online processing system, enabling market participants to access improved services through "online processing" and "remote processing" platforms. Fourthly, administrative simplification and decentralization were further promoted. The pilot program authorizing banks to handle foreign debt registration was extended to 18 regions, while the pilot program exempting foreign-invested enterprises from registration procedures for domestic re-investment activities was also extended to 18 regions. Additionally, the pilot program allowing banks to manage registration for domestic enterprises' overseas listings was broadened to 12 regions.

CHINA FOREX: What is the overall approach of the Capital Account Management Department in 2025?

XIAO Sheng: In 2025, the Capital Account Management Department 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. The Department will steadfastly uphold reform and opening-up policies, better coordinating development with security while maintaining the principle of ensuring stability through progress. Focusing on three key priorities-- systemic integration, key areas, and reform effectiveness, it will deepen comprehensive reforms. Furthermore, the department will accelerate reforms in cross-border direct investment and external debt management, progressively expand financial market opening-up, support regional strategies, strengthen ongoing and ex-post regulation, and enhance risk prevention mechanisms. These efforts aim to foster synergy between high-quality opening-up and high-level security, contributing to a new, higher-level open economic system.

CHINA FOREX: What initiatives will the Capital Account Management Department undertake in 2025 to support two-way opening-up and the development of the real economy?

XIAO Sheng: The Capital Account Management Department will continue to focus on advancing high-quality capital account opening-up, establishing a capit