China Launches Trial Program that Allows Multinationals to Transfer Forex

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Making Money with Forex Fundamental Analysis - April 29, 2014

China Launches Trial Program that Allows Multinationals to Transfer ForexChina will expand a pilot program that will make it easier for multinationals to transfer foreign exchange in and out of the country, as it moves to loosen its vice-like grip on its capital account.

The trial program, which started in 2012 in Shanghai and Beijing, was prompted by growing calls from multinationals operating in the country for more room to bolster their capital management using their yuan stockpiles. Nonetheless, China still intervenes to prevent speculation against the currency.

The State Administration of Foreign Exchange, the authority responsible for overseeing China’s $3.3 trillion forex reserves, will expand the program to include any foreign firm or Chinese company that has operations inside or outside the country that earns annual income of at least $100 million.

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SAFE lists one of the primary targets of the trial experiment as “to explore and reproduce a mechanism for the capital account convertibility system”.  This comes at a time when China has promised to let market forces dictate the economic trajectory.

Starting June, multinationals will be allowed to simultaneously open domestic and overseas accounts and collect and settle accounts in foreign exchange. It will also permit free movement of offshore accounts within a firm with no quota limits, though domestic accounts will still have caps, reported Reuters.

Companies have lauded the move, saying easier transfer of currency will reduce costs and bolster their efficiency. China wants to promote the use of yuan as a currency for global transactions, and shift its trading away from Hong Kong alone. Currently, Hong Kong handles more than 80 percent of yuan’s trading. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com

 

 

 

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