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Foreign exchange account settlement to be made easier
With China's foreign reserves reaching US$233.8 billion in April,
demand exists for a better process of settling foreign accounts.
To this end, a more convenient method for settling investing accounts
will soon be in place for foreign investors after changes were made
to the process of settling accounts. This new procedure, as announced
by China's State Administration of Foreign Exchange (SAFE), will
be effective from July 1 onwards.
Overseas investors will now be able to settle capital stock accounts
directly with authorized local banks compared to in the past where
every settlement, of foreign investors' capital stock accounts,
have to be approved by SAFE before being submitted to the banks.
Now, however, individual banks will be accountable for checking
settlements and SAFE will oversee the bank's operations.
A spokesman for SAFE mentioned that the change in the settlement
of accounts is targeted at improving the investment environment
in China by improving the efficiency of foreign funded enterprises.
The present approval system is said to have greatly slowed down
the flow of capital from foreign investors. A trial program, launched
at 200 authorized banks in August, kick-started the national reform
of the process of settling accounts. This experiment was carried
out in 20 cities, in provinces such as Shanghai, Guangdong and Zhejiang
and was regarded as a success with positive feedback from foreign
invested enterprises.
A spokesman for the pilot scheme said the reform shortens the time
taken for foreign investors to settle all procedures at bank counters.
Furthermore, he contested the notion that the change means SAFE
is abandoning or weakening control of the settlements of capital
stock accounts, adding that it has merely shifted its focus from
foreign investors to authorized banks. However, the essential documents
for settlement remain unchanged and the reform is only limited to
the settlement of investment accounts.
SAFE will only authorize those banks that have had no large faults
in capital account settlements in the past three years. Moreover,
banks involved should report settlement data to the administration
every working day and those without networks are asked to submit
monthly reports. This moderation to the banking sector is an example
of SAFE's continuous effort to strengthen the management of foreign
exchange under the standards set down by the World Trade Organization.
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