Foreign Exchange News
- China takes new tack in forex management, individuals to have more leeway
Date: 17-Apr-2007 Sources: (People's Daily)
Chinese individuals may be allowed to make direct purchases of foreign stocks, funds and bonds as the country adopts a new strategy in foreign exchange management strategy, the China Securities Journal reported Monday.
Ba Shusong, vice director of the Finance Institute of the Development Research Center under the State Council, told the journal that for decades China has encouraged companies to export in order to earn foreign exchange but provided far fewer incentives for imports.
'The government is now taking a more balanced approach,' Ba said.
The world's fourth largest economy saw its foreign exchange reserves hit 1.2 trillion U.S. dollars at the end of March, up 37 percent year-on-year, with the increase in March more than doubling to nearly 45 billion dollars.
The government began to allow local residents to purchase overseas investment products through banks, insurance and fund management companies last year and expanded the annual cap on foreign exchange purchases by individuals from 20,000 U.S. dollars to 50,000 U.S. dollars.
Stimulated by the prospects of a rising yuan and a buoyant stock market, however, many Chinese people have exchanged foreign currency for yuan, which has further increased the pressure on government foreign currency reserves.
'In the absence of suitable overseas investment channels, few Chinese are willing to hold foreign currency,' Ba said.
Since March, several high-ranking officials including deputy chief of the central bank Wu Xiaoling and director Hu Xiaolian of the State Administration of Foreign Exchange have emphasized the need to give Chinese individuals more flexibility in the way they use foreign currency assets.
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