May 18, 2007 - The SAFE recently held a symposium on the inspection of foreign exchange inflows and sales in Chongqing . During the symposium, the progress of the inspection work, which had been carried out in ten provinces and cities of China since early April of this year, was announced and summarized, and the relevant inspection work for next stage was arranged. Ms. Hu Xiaolian, deputy governor of the PBOC and administrator of the SAFE, was present and delivered a speech. The meeting was chaired by Mr. Deng Xianhong, deputy administrator of the SAFE.
This activity constitutes a special inspection developed by the SAFE according to the situation of sustained foreign exchange inflows in recent years. Ten important coastal provinces and cities such as Guangdong were chosen to undergo this inspection, which covers foreign exchange collection and sales, as well as the use of RMB capital from foreign exchange sales of all FX-related entities from January 2006 to March 2007. The inspection focused on such behaviors as foreign exchange collection and sales under trade items of goods and services, capital inflows and foreign exchange sales of foreign-funded enterprises, inflows and foreign exchange sales of external debt and trade financing, capital inflows and foreign exchange sales under individual accounts, capital inflows and foreign exchange sales of round-tripping investments, and illegal capital inflows and foreign exchange sales through underground money shops.
According to Ms. Hu, the ten provinces and cities undergoing the inspection are quite representative, as the amount of their foreign exchange collection and sales accounts for more than 60% of Chinas total amount. Therefore, the inspection in these key regions can provide a comprehensive picture of the capital inflows to China . So far, the SAFE branches that joined the inspection have attached great importance to this activity and have reached phased achievements through overall planning and thorough arrangements, as well as through concerted efforts. During the next stage, the branches will concentrate efforts on the following three tasks. First, the branches will consolidate the inspection achievements of the previous phase, carry out extended inspections of the revealed clues and issues, and seriously deal with the verified illegal foreign exchange activities while exposing the typical cases. Second, the branches will strengthen case analyses and in-depth investigations and research, and further adjust relevant policies and improve administrative approaches. Third, the branches will reinforce macro analysis, closely connect local conditions with the national situation, judge the overall situation of the balance of payments in a scientific manner, and further unify thoughts and improve the awareness and initiative to resolutely implement the macro-decision making of the Central Government.
Ms. Hu emphasized that the Party Central Committee and the State Council have attached great importance to the situation of a sustained balance of payments surplus and clearly pointed out that the promotion of an equilibrium in the balance of payments must be treated as an important task for maintaining steady macro-economic development. Since this year, the trend in foreign exchange capital inflows has remained strong, and national foreign exchange reserves have been increasing continuously. Thus, the task of realizing an equilibrium in the balance of payments is still arduous. However, this task is the focus of foreign exchange administration and must be implemented in a down-to-earth manner. As one of the important approaches, foreign exchange inspections should be fully utilized. In addition, some other practices should be adopted. First, the SAFE shall further deepen the systemic reform of foreign exchange administration, facilitate trade and investment, steadily boost the convertibility of items under the capital account, and make a great effort to develop and improve the functions of the foreign exchange market. Second, the SAFE shall further adjust the foreign exchange management policy of easy in and difficult out and apply balanced management to capital inflows and outflows. The current focus is to reinforce management of capital inflows and foreign exchange sales. Third, the SAFE shall speed up the revision and promulgation of the Regulations on the Foreign Exchange System and improve the regulatory system for foreign exchange administration. Fourth, the SAFE shall establish a coordination mechanism for supervision and bring cooperative efforts into full play, realizing resource sharing and joint supervision. Fifth, the SAFE shall fully utilize modern science and technology as well as the available electronic system and data, thus strengthening the supervision and monitoring of foreign exchange receipts and payments. Sixth, the SAFE shall faithfully execute the laws, reinforce punishment, expose the various illegal cases, and enhance the dissemination of information on policies and regulations.