China eases forex rules in special economic zones

PUBLISHED : Thursday, 23 May, 2013, 12:05pm
UPDATED : Thursday, 23 May, 2013, 12:05pm

China’s foreign exchange regulator said it will simplify regulation of foreign currency transactions for companies operating in China’s special economic zones, as Beijing moves to liberalise the yuan.

Companies working within Chinese special economic zones would be able to take legal profits derived from exports out of the country, said the State Administration of Foreign Exchange (SAFE) in a statement on its website.

SAFE said the changes, which will start to take effect from June, will eliminate several paperwork requirements of a technical nature and reduce the frequency of regulatory checks.

The latest move responds to growing demand from international firms operating in China for freedom to use soaring stores of yuan.

Beijing has launched a series of pilot programmes in recent months to simplify capital flows in and out of China.

One enables firms to move money in or out of the country with a one-off approval from the regulator, instead of requesting approvals for each transaction.

Another allows “cross border netting”, meaning a company in China that has lent to, or borrowed from, a firm outside China can settle the two transactions on a net basis, instead of paying and receiving cash in two transactions on a gross basis.

A third test allows a unit of a firm to make payments or collections on behalf of all other units, allowing a company with 30 units in China to use one bank account instead of 30.

China’s special economic zones were originally created to facilitate trade when China’s current account was more tightly restricted, but now that trade has been largely liberalised the zones are being converted into test beds for currency reforms.

The Qianhai zone near Hong Kong is being used for a pilot project allowing Hong Kong banks to lend yuan to firms inside the zone.