Reform Of Foreign Exchange System And Settlement Of Foreign Currency In Commercial Enterprises

At present, the state has reformed the foreign exchange management system. In accordance with the decision of the CPC Central Committee on Several Issues concerning the establishment of a socialist market economic system, we have established a market based floating exchange rate system and a unified and standardized foreign exchange market, and gradually made the renminbi a convertible currency.

The main contents of the reform of the foreign exchange system are:

1., from January 1, 1994 onwards, the exchange rate will be merged and a single, managed floating exchange rate system based on market supply and demand will be implemented.

2., banks should implement foreign exchange settlement and sale system, and cancel foreign exchange retention and surrender.

3., establish an interbank foreign exchange market and improve the exchange rate formation mechanism.

4. prohibit foreign currency valuation, settlement and circulation in China.

5. the mandatory plan for canceling foreign exchange receipts and payments. The state mainly uses economic and legal means to achieve macro control of foreign exchange and international balance of payments.

Since January 1, 1994, the people's Bank of China has announced the RMB exchange rate based on the trading price of the previous day's foreign exchange market and referring to the changes in the main currencies of the international financial market.

The characteristics of this exchange rate system are: the supply and demand relationship in the foreign exchange market will be the main basis for determining the exchange rate.

1. the foreign exchange earnings of all Chinese funded enterprises, organs and social organizations shall continue to be used.

They are sold to designated foreign exchange banks at the bank's exchange rate.

2. foreign legal persons or natural persons as foreign exchange in foreign investment, foreign loans, foreign exchange issued by bonds and stocks, foreign exchange projects pferred into the territory during the contract period of overseas construction projects of contract firms, donated foreign exchange receipts with designated purposes, and foreign exchange receipts of international organizations and overseas Chinese legal institutions in China, and all foreign exchange can be opened in foreign exchange designated banks.

3. the total amount of foreign exchange sold by an enterprise can be purchased after the purchase. The general trade remittance can be purchased at the designated foreign exchange bank as long as there is an import contract and a notice of payment from an overseas financial institution.

For foreign trade importing quotas, permits and registration systems, foreign exchange purchase can be carried out only by holding corresponding contracts and vouchers.

For business payment under non trade terms, the purchase of foreign exchange is handled by payment agreement or contract and notice of payment by overseas institution.

4. the foreign exchange management of foreign invested enterprises in China remains unchanged.

Foreign invested enterprises can still reserve foreign exchange accounts in designated foreign exchange banks or domestic and foreign banks.

For the remittance of production, business, repayment of principal and interest and dividends, the State Administration of foreign exchange shall examine and approve the exchange in accordance with relevant regulations and purchase it from designated foreign exchange banks.

In addition, the foreign exchange management regulations of foreign banks in China have not changed.

5. the balance of retained foreign exchange quota before December 31, 1993 will continue to be used according to the RMB exchange rate announced by the state in December 31, 1993.

The cash deposits of enterprises before December 31, 1993 should be treated in two ways:

(1) in accordance with the new foreign exchange management method, it is still allowed to set up foreign exchange deposit accounts in designated foreign exchange banks.

(2) in accordance with the new foreign exchange management measures, foreign exchange accounts can also be retained if the foreign exchange settlement is to be made.

The balance in the account allows for payment of current account, repayment of foreign exchange obligations or sale to banks.

6. after the foreign exchange certificates cease to be issued, the foreign exchange certificates circulated will cease to be used from July 1, 1995 and withdraw from circulation.

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