China Forex: In view of the difficult global economic and financial situation，what are SAFE's objectives in the regulation of foreign exchange under the capital account in 2020?

Ye Haisheng: Generally speaking，SAFE in 2020 will implement decisions made by central government leaders. These decisions call for promoting reform on the capital account，facilitating cross-border investment and financing，as well as preventing risks in cross-border payments and receipts.

China Forex: How will SAFE carry out these government decisions?

Ye Haisheng: In 2019 SAFE put forward reforms that include upgrading the centralized management of cross-border funds of multinational companies，removing quota ceilings on the Qualified Foreign Institutional Investment (QFII) and Renminbi Qualified Institutional Investment (RQFII) programs，expanding access to the interbank bond and foreign exchange markets，and making cross-border investment and financing more convenient. In 2020 we will see the implementation of these measures.

With regard to the facilitation of cross-border investment and financing，SAFE will put in place six related measures including reforming the procedures for foreign debt registration and domestic equity investment with the capital of foreign-invested enterprises. SAFE will facilitate payments and receipts under the capital account and push ahead with a pilot program on cross-border asset transfers. At the same time，SAFE will eliminate 11 categories of foreign exchange accounts in a significant step towards simplifying regulation and facilitating banking for corporations. 

In terms of the centralized management of cross-border funds of multi-national companies，issues will be dealt with during the implementation of the related rule. Capital movements will be watched closely during and after business transactions. Additionally，SAFE will deliberate the pilot scheme for the two-way capital pools for domestic and foreign currencies of multinational companies. This will be put in place at an appropriate time.

As for opening up the capital market，SAFE will effectively regulate the  issuance and cross-border transfers of Chinese Depositary Receipts (CDRs) and Global Depositary Receipts (GDRs) related to the Shanghai-London Connect program. It will also support the listing of qualified red chip companies on the Science and Technology Innovation Board. Meanwhile，SAFE will also take steps to regulate cross-border capital flows related to the full circulation of H shares.

Last but not least，SAFE will help with regional economic development. Several programs facilitating foreign exchange and related business will be introduced in Shanghai，Tianjin and other pilot free trade zones. Additionally，there will be steady progress in the pilot programs for capital account foreign exchange reforms in the cities of Qingdao and Hefei. These two cities will see support for the development of the demonstration area for economic and trade cooperation between China and the Shanghai Cooperation Organization and the Yangtze River Delta region. In addition，SAFE will put into effect pilot programs on innovative foreign exchange business under the current account in the provinces of Fujian，Jiangsu，and Zhejiang as well as the cities of Ningbo and Shenzhen.

China Forex: Could you give us some details on the reforms of foreign exchange regulation under the capital account in 2020?

Ye Haisheng: SAFE will make steady progress in opening up the capital account and improving convertibility in 2020，while ensuring that overall risks in cross-border capital flows are contained. 

The goal of making cross-border bond investments easier will be pursued vigorously. SAFE will carry out measures that remove quota limits on the the QFII and RQFII investment programs and will strive to reduce barriers to market entry under those programs. The regulator will also seek uniform policies pertaining to the interbank and exchange bond markets. And it will make it practical for foreign institutions to issue panda bonds in the domestic market on a regular basis. Furthermore，SAFE will steadily expand the pilot program to allow securities companies to settle and sell foreign exchange. At the same time，it will improve the regulation of foreign exchange risk management for onshore investment and financing by foreign investors.

Additionally，there will be a concerted effort to promote innovative policies. SAFE will give its full support to the plans for the Guangdong-Hong Kong-Macao Greater Bay Area，the Shenzhen Demonstration Pilot Zone for Socialism with Chinese Characteristics，the Hainan Free Trade Zone，the Shanghai International Financial Center，the Xiong'an New Area near Beijing and the newly established pilot free trade zones. There will be experimental reforms related to cross-border investment and finance for individuals under the capital account. For example，the pilot program for wealth management services will connect products in the mainland with those for Hong Kong and Macau.

As for direct cross-border investment，SAFE will carry out the Law of the People's Republic of China on Foreign Investment and its implementation rules. This will be undertaken according to the policy of "pre-establishment national treatment with a negative list" which assures national treatment to foreign investors and permission to invest in all areas not specifically designated as off limits. SAFE will also help with the revision of the Measures for the Regulation of Strategic Investment in Listed Companies by Foreign Investors，relaxing the limits on qualifications，investment lock-up requirements as well as limits on shareholdings. Additionally，the Qualified Foreign Limited Partner (QFLP) program will be expanded and pilot projects for the Qualified Domestic Limited Partner (QDLP) program will move ahead in an orderly manner.

China Forex: What facilitating measures will be rolled out for capital account regulation with the specific goal of serving the real economy?

Ye Haisheng: Further work will be done to streamline administration and delegate powers in the foreign exchange regulation under the capital account. Details are as follows:

Firstly，the procedures for registration and statistical reporting for foreign direct investment will be simplified.

Secondly，the registration of external debts will be upgraded by replacing the case-by-case model with a one-time registration for non-financial enterprises.

Thirdly，SAFE will deliberate the feasibility of nationwide implementation of facilitation measures for payments and receipts under the capital account. At the same time，it will explore using blockchain technology in related areas.

Moreover，SAFE will start a pilot project on cross-border transfers of credit assets. The program will expand the number of participants and the  channels for transferring domestic credit assets abroad. Non-performing assets of banks and trade financing will become transferable.

China Forex: What will SAFE do in the area of risk prevention?

Ye Haisheng: Regulating foreign exchange under the capital account is a significant challenge at a time of economic slowdown both domestically and globally. SAFE will strive to forestall major financial risks and firmly hold the line against systemic risks. The regulator is working on the following areas:

SAFE will establish comprehensive rules governing the rights of banks in the area of external debts. Related statistics and monitoring will be strengthened. 

Another focus of monitoring is offshore bond issues by Chinese enterprises，especially the property and urban construction investment companies. SAFE will work with other government departments to prevent the cross-border transmission of risk from such bonds.

Moreover，another priority is the monitoring and regulation of these key areas，including foreign direct investment，overseas lending and overseas loans with domestic guarantees. SAFE will carefully monitor key enterprises in these areas and deal with risks in a secure manner.