Viewpoint
Date:2019/11/04

New measures have been carried out to advance the implementation of high-level trade and investment and promote the financial opening up. Recently, State Administration of Foreign Exchange (SAFE) has released 12 policy measures to facilitate the cross-border trade and investment, including expanding the pilot areas for the facilitated payment of foreign exchange earnings from trade, facilitated payment of foreign exchange earnings under capital account, and other projects. Within half a month, China issued a series of financial opening up policies such as relaxing the restrictions on market access for foreign-funded banks and insurance institutions and facilitating the investment of overseas institutional investors in the bond market.

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Frequent Moves in Financial Opening up

Recently, SAFE has released 12 policy measures to facilitate the cross-border trade and investment, including expanding the pilot areas for the facilitated payment of foreign exchange earnings from trade, facilitated payment of foreign exchange earnings under capital account, and other projects. With the constant adjustment of the foreign exchange management policies, China’s business environment has been continuously improved.

These measures mainly aim to optimize the foreign exchange management and simplify the procedures of foreign exchange services. These measures conduce to broadening the channels to use capital, supporting domestic enterprises to expand foreign trade investment, and continuously facilitating the cross-border trade and investment. Meanwhile, these measures will further reduce the burdens on enterprises and stimulate market vitality.

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Specifically, among the measures to facilitate the cross-border trade, the first is to expand the pilot areas for the facilitated payment of foreign exchange earnings from trade. The pilot areas are expanded to some other regions with mature conditions, and the scope of the pilot business is expanded from the foreign exchange earnings from goods trade to such earning from service trade. Among the measures to facilitate the cross-border investment and financing, the pilot areas for the facilitated payment of foreign exchange earnings under capital account are expanded, and non-investment foreign-funded enterprises are allowed to conduct domestic equity investment with capital funds by law.

This year, the financial opening up has also been significantly sped up. Recently, the State Council has amended the Regulation on the Administration of Foreign-Funded Insurance Companies and the Regulation on the Administration of Foreign-funded Banks, further relaxing the access thresholds for foreign-funded banks and insurance companies, and removing multiple business restrictions. According to the latest policy signal revealed by the CSRC, the financial restrictions in many aspects will be canceled in the next step.

Promoting Capital Account Opening up Appropriately and Systematically

At the Bund Financial Summit, Lu Lei, Deputy Director of SAFE, stated: China will appropriately and systematically promote the capital account opening up and the construction of the foreign exchange market; at present, China’s direct investment has basically become convertible; under the securities investment, the layout for cross-board investment systems typified by QFII and interconnection has basically taken shape; the market entities conduct full-covered cross-border debt financing autonomously under the macro-prudential management policy; in the next step, China will coordinate the transaction and exchange links and focus on the two-way opening up of the financial market to systematically promote the opening up of non-convertible projects; China will moderately increase the participating entities in the foreign exchange market and enrich the varieties of foreign exchange transactions; China will also support the establishment and development of Sci-Tech innovation board and encourage the overseas investors to participate in the Sci-Tech innovation board.

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The financial opening up is always pushed forward from point and area. China will further facilitate exchange, promote the pilot facilitated payment of foreign exchange earnings from goods trade, conduct facilitated payment services of foreign exchange earnings under capital account, and further enhance the allocation of RMB financial assets and the construction of risk management centers.

The opening up for capital account will be pushed forward steadily and systematically. China will coordinate the phased requirements of the economic development with those from financial market conditions and financial stability. China will also coordinate the transaction and exchange links, focus on the two-way opening up of the financial market to systematically promote the capital account opening up, and further facilitate the convertible projects. 

Upgraded Risk Prevention and Control in Opening up Process

China’s step-by-step promotion of financial opening up has been acknowledged in the industry. At the Bund Financial Summit, Richard Cantor, Chief Credit Officer of Moody's and Moody's Investors Service, said, “In history, some countries opened up their markets too quickly, with too much liquidity flooded in; while the liquidity outflow brought about economic collapse. China is adopting a gradual approach to reform, which is generally stable and smooth.”

Under the current domestic and international environment, in the process of further opening up the financial industry, China will continuously upgrade the relevant risk prevention and control measures to ensure a smooth and orderly flow of cross-border funds.

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With the ever-deepening opening up, foreign-funded financial institutions have constantly expanded their businesses in China, posing increasing competition to domestic financial institutions. In the future, the transaction structures of capital services will become more complicated, with prominent transnational and cross-market characteristics. Therefore, the regulatory authorities need to further enhance the system construction to offset the regulatory shortcomings and weak links. Only in this way can China effectively reduce the adverse impact of foreign financial institutions on the domestic financial market.

The basic strategic trend of China’s foreign exchange management reform is to promote a deeper opening up on the basis of risk prevention and control. To perfect the financial regulatory system and better coordinate the macro-prudential and micro-regulatory requirements through reform is an important guarantee for the effective risk prevention and control in the opening up. Therefore, specifically, the reform requires that China should take the prevention and control of systematic risks as the bottom line and strengthen macro-prudential management; the country should, following the concept of allowing micro-economy to develop astronomically, improve the market-friendly prudence and behavioral regulation. In a word, China should open up the market as much as possible under the premise of controlling the bottom line, and avoid major risks to realize the sustainable opening up.

In the future, China will continuously improve the management framework integrated with macro-prudence and micro-regulation for cross-border capital flows. For macro-prudence, China will strengthen monitoring, warning, and response mechanisms, and enrich the toolbox; China will regulate pro-cyclical market volatility in an open, transparent, and market-oriented counter-cyclical manner. For micro-regulation, China will adhere to the stability, consistency, and predictability of cross-cycle policies, and will also crack down on fraudulent and deceptive foreign exchange transactions that violate laws and rules.

SENDKING Viewpoint:

With the support of the sound economic development, China has recently released a series of major financial opening up policies, manifesting its confidence in pursuing mutual benefit and win-win development with global investors and its determination to faster integrate itself into the global financial market. In the context of global economic development with rising uncertainty in free trade, China is speeding up its opening up process. In terms of the financial sector, an “all-around and three-dimensional” opening up pattern is becoming clearer and clearer.

As a growing number of global investors and overseas financial institutions have been entering the Chinese financial market, the types of participants in this market will increase and the ecosystem of this market will be more diverse. Predictably, in the competition and cooperation processes, the Chinese financial industry will continuously improve its competitiveness and advance toward high-quality development. This means that the Chinese investors will enjoy more higher-quality financial services.

As China has accelerated its pace to open up the financial industry, reforms have taken place in all segments of the financial market. The reform and opening up promote and supplement each other, gradually improving the financial market system. As a highly promising financial institution, SendKing has endless development potential. In the future, under the new economic structure, SendKing will constantly adjust its businesses and provide innovative and professional services to promote the long-term economic development of the society. In this way, SendKing is devoted to bring clients wealth opportunities and create a "wealth dream" in the new economic era.


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