Policy update: China to ease the pressure on RMB appreciation
cctv.com 09-11-2003 09:51
In this week's policy update, we will have a closer look at new regulations issued by the State Administration of Foreign Exchange - to raise the limit of foreign exchange Chinese tourists can carry overseas. The limit is raised from current 2, 000 US dollars to 3000 for an overseas stay of up to 6 months. The policy will take effect on October 1st this year. The move is regarded as another step in a series of financial reforms, to ease the pressure on RMB appreciation. These measures are viewed as a move in the direction of a more flexible exchange system in the country.
The new regulation says that the maximum foreign exchange that Chinese can carry overseas for trips lasting 6 months or more has been raised to 5,000 US dollars. Foreign currency expenditure on tourism, business trips, international exchange, training, study and labor will be permitted. The government has introduced a raft of new financial policies recently. These include increases to the volume of foreign exchange earnings that enterprises are allowed to keep and allowing multinational companies operating in China to purchase foreign exchange from the inter-bank market. The move is regarded as another step in a series of financial reforms in the country.
Song Guoliang, Professor of Finance Institute, UIBE, said, "Actually, the increasing foreign exchange reserve has brought more pressure to Chinese government. China doesn't want to see the inflow of more international floating capital. And other thing is that it is becoming more common for Chinese people to travel abroad for study, tourism and visits to relatives. The current 2,000 US dollar limit cannot meet the needs of consumers. The regulation could also boost demand for foreign currency. "
The central government is exploring ways to make the currency more flexible in the long term. But the central government has repeatedly stated that China will act according to market conditions.
"Some people argue that we could totally open up the exchange market right now because of China's high level of foreign exchange reserves. I don't think we can do that now. The controls put in place by the government not only take into account the nation's foreign exchange reserves, but other issues, for instance, illegal activities such as the smuggling of money and black market transactions which will result in serious punishment. But the 5,000 US dollar limit could greatly help China balance the currency market. "
From February this year, China's forex markets were no longer restricted to half-day business, but were opened up for the whole day. In the same month, China's forex authorities also allowed more Chinese firms to invest overseas. In March and April, a total of 29 administrative approvals on forex transactions were cancelled. In June, Qualified Foreign Institutional Investors were given a quota for investment in China. In July, the requirement for Chinese investors sending money overseas to pay a guarantee to the forex authorities was lifted. And in August, multinationals in Beijing, Shanghai and Shenzhen were authorized to freely dispose of their forex in non-trade businesses.
Editor:Zhang Wenjie Source:CCTV.com
