Title: Optimizing Foreign Exchange Management under the Capital Account and Facilitating Cross-Border Investment and Financing

 

General Secretary Xi Jinping has emphasized that finance is one of the matters of national significance and is crucial to achieving Chinese modernization. The capital account is an important area of China's financial reform and opening-up, as well as the building of a financially robust country. We should focus on increasing the supply of facilitation policies and services, controlling the pace of opening-up, improving the quality of opening-up, and better serving Chinese modernization through the high-quality development of foreign exchange administration. Recently, to facilitate enterprises, individuals, and other entities in handling foreign exchange business under the capital account, the State Administration of Foreign Exchange (SAFE) has widely solicited views and suggestions from market participants. Based on their feedback, the SAFE has revised and released the Guidelines for the Foreign Exchange Business Under the Capital Account (2024) (hereinafter referred to as the new version of the Guidelines). The new version of the Guidelines covers emerging and cross-sector businesses in areas such as direct investment, cross-border financing, and securities investment. It provides important guidance and authoritative references for handling foreign exchange business under the capital account, thereby further facilitating cross-border investment and financing.

 

The SAFE has made significant efforts to fully implement the spirit of the Central Financial Work Conference and optimize the foreign exchange administration under the capital account. For the first time, the Central Financial Work Conference systematically outlined the fundamental principles of the Road of Financial Development with Chinese Characteristics, stressing the people-centered value orientation and the ultimate goal of financial services supporting the real economy. This sets the direction for effective foreign exchange administration in the new era and on the new journey. In revising the new version of the Guidelines, the SAFE adhered to the problem-oriented approach, focused on addressing previous issues hindering policy implementation and incorporating feedback from businesses, individuals, and other stakeholders. The aim is to refine the procedures for foreign exchange businesses by optimizing foreign exchange services, streamlining processes, promoting business facilitation, and enhancing online services. These improvements will increase business efficiency and strengthen policy safeguards to ensure that the capital account administration supports the high-quality development of the real economy.

 

While upholding fundamental principles and breaking new ground, we have steadily advanced the institutional opening-up of the capital account. During a seminar on boosting high-quality financial development for leaders of provinces and ministries, General Secretary Xi Jinping highlighted that a high-level financial sector opening-up should be achieved with a focus on institutional opening-up. The new version of the Guidelines incorporates the latest reform and opening-up policies on capital account, namely, optimizing foreign exchange administration under the capital account and promoting the facilitation of cross-border investment and financing. This aligns with the latest achievements of institutional opening-up including the implementation of the pre-entry national treatment plus negative-list administration system for foreign investment in the foreign exchange field, the introduction of digitization of capital account operations, and the self-settlement of foreign exchange capital settlement accounts. These measures aim to further expand the institutional opening-up of the capital account, encouraging foreign-funded financial institutions and long-term capital to establish and grow businesses in China.

 

The SAFE commits to promote facilitation of cross-border investment and financing so as to support the high-quality development of the real economy. High-quality development is the core objective of the new era. Capital account reform should take promoting high-quality development as its fundamental goal by improving the quality and level of cross-border investment and financing, thereby injecting vitality into high-quality economic development. The new version of the Guidelines integrates recent policies for facilitating cross-border investment and financing, fully considering the actual needs of enterprises, individuals, and other entities. It adheres to a demand-oriented approach and further optimizes administration for the benefit of businesses and the public. For instance, it optimizes the administration of capital account and negative list management, introduces new measures to facilitate cross-border financing for technology-based enterprises, and extends the time limits for the registration of reductions in domestic shareholders' shareholdings in overseas-listed companies, as well as the fund registration of bonds issued by overseas institutions in China. These improvements aim to practically facilitate the exchange and use of funds under the capital account .

 

Development and action are prioritized. In the next stage, the SAFE will adhere to the principles of pursuing progress while ensuring stability, and promoting stability through progress, continue to deepen the reform and opening-up of the foreign exchange sector, and further facilitate cross-border trade, investment, and financing. Firstly, we will persist in taking financial services for the real economy as the fundamental purpose. This includes promoting the facilitation of cross-border investment and financing, implementing the new version of the Guidelines, and continuously optimizing foreign exchange administration and services of the capital account. Secondly, we will emphasize institutional opening-up as the fundamental aspect of high-level opening-up. We will persist in deepening the reform of foreign exchange administration under the capital account by improving rules, regulations, management, and standards, working hard to open up capital account. Thirdly, we will prioritize security as an intrinsic requirement of high-level opening-up. We will integrate high-quality opening-up of the capital account with high-level security measures, maintaining the bottom line of financial security under open conditions.

 

XU Zhibin is the Deputy Administrator of the State Administration of Foreign Exchange