Foreign Exchange News
- Rules liberalized on firms' FX holdings
Date: 14-Aug-2007 Sources: (Shenzhen Daily)
THE government yesterday scrapped rules requiring companies to convert part of their foreign exchange holdings into yuan, in a move aimed at promoting a better balance in the country's external accounts.
Previously, companies could hold foreign exchange equivalent to 80 percent of their revenues in the previous year and 50 percent of their expenses.
Under the old rule, a company with US$100 million in income and US$100 million in expenses in 2006 could retain only US$130 million in foreign exchange in 2007 and would have to sell the rest of its foreign exchange revenue for yuan - even if its 2007 revenue was much higher.
The rule change, which applies to companies' current-account transactions and not to their capital-account dealings, was announced by the State Administration of Foreign Exchange, the currency regulator and takes effect immediately.
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