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China to further improve its foreign exchange administrative mechanisms |
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China improved its foreign exchange administrative mechanisms over a period of decades before it announced the convertibility of the Chinese RMB currency under the current account, which covers imports, exports and services, on December 1, 1996. Authorities are mulling ways to improve its administration over foreign exchange and accelerate the reform of China's foreign exchange systems, during China's run-up to entering the WTO. Now, the central government carries out its policies through designated banks, and bases the renminbi's exchange rate against major foreign currencies on supply and demand in the interbank market. It still maintains a tight grip over the flow of foreign currencies under the capital account of the international balance of payments. China's foreign exchange policy reform is tending towards making the renminbi completely convertible. The full convertibility of the renminbi depends on macroeconomic conditions, the international balance of payments, the proceedings of economic reform, the government's ability to exercise effective macroeconomic controls, the maturity of financial supervision and the formation of related laws. A legal framework should be established to guarantee the orderly flow of foreign exchange and to prevent money laundering and capital outflows through illegal channels. At the beginning of last year, a computer system linking SAFE with customs offices and banks authorized to conduct foreign exchange business was put into use, which made it much easier to find out if customs declaration forms were true or false. The State is expected to install an information system that would allow monitoring of the overall flow of foreign exchange in China. It would assist authorities in taking prompt measures. กก |