China removes forex quota of domestic institutions

Updated: 2007-08-13 20:53

China's State Administration of Foreign Exchange (SAFE) has issued a circular to remove the foreign exchange quota of domestic institutions in their current account.

Being a key part of the country's forex reform, the move is aimed at giving domestic institutions more freedom and convenience in keeping and using foreign exchange, an official with the SAFE told Xinhua on Monday.

In the meantime, the administration will keep a close eye on forex revenue and expenditure activities and on transnational flow of funds so as to safeguard economic and financial stability, the official said.

Domestic institutions were allowed to keep a quota of 80 percent of their forex revenue with the deduction of 50 percent of forex expenditure under current account in the previous year.

With surging forex reserve, China has quickened the reform of traditional forex management system since its accession to the World Trade Organization at the end of 2001, easing the limit on forex purchase by individuals and raising the forex quota held by domestic institutions, according to the SAFE.

The domestic institutions cover central government departments, domestic businesses and non-profit institutions, social entities, military troops, and China-based foreign companies excluding financial agencies.

Official statistics show that China's forex reserve was 1,063.3 billion US dollars at the end of 2006, ranking the first in the world. The figure further increased by 266.3 billion US dollars in the first half of this year, up 41.6 percent over the same period of last year.

According to the central bank, the six-month increment was even higher than the whole-year increase of 247.3 billion US dollars in 2006.

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