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- Index number:
- 000014453-2012-00177
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- Dispatch date:
- 2012-06-07
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- Publish organization:
- State Administration of Foreign Exchange
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- Exchange Reference number:
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- Name:
- The Compulsory Foreign Exchange Settlement and Sales System Has Been Retired from the Stage of History, and Enterprises and Individuals May Keep Foreign Exchange Income on Their Own
In general, the Compulsory Foreign Exchange Settlement and Sales System refers to the administrative arrangement whereby the foreign exchange income obtained by residents shall be sold to financial institutions designated by the State and foreign exchange to be utilized shall be purchased from financial institutions designated by the State. Residents do not have autonomy to keep and utilize the foreign exchange. The System is mostly adopted by economies with a shortage of foreign exchange resources.
During the planned economy period, due to the shortage of foreign exchange,
Since entry into the WTO,
First, it relaxed the conditions for enterprises to open foreign exchange accounts and to retain foreign exchange. In 2001, enterprises which satisfied such conditions as the foreign exchange receipts from exports during the year were above the equivalent of USD 2 million and the foreign exchange payments of the year were above the equivalent of USD 0.2 million began to be allowed to open foreign exchange settlement accounts to retain their foreign exchange income from such matters as goods exports and trade in services within certain limits, subject to the approval of the foreign exchange authorities. In 2002, the restrictions on the conditions for account opening were lifted, and all enterprises with foreign trade operation rights or foreign exchange revenue under the current account were allowed to open foreign exchange accounts under the current account upon the approval of the foreign exchange authorities. In 2006, the ex-ante approval procedures for account opening were cancelled, and the enterprises may now open foreign exchange accounts under the current account directly with the banks without the approval of the foreign exchange authorities.
Second, it raised the limit on the foreign exchange allowed to be retained in foreign exchange accounts. In 2002, the limit was 20 percent of the enterprises’ foreign exchange revenue under the current account during the last year. In 2004, the limit was raised to 30 percent or 50 percent. In 2005, the limit was further raised to 50 percent or 80 percent. In 2006, the original method whereby the limit was ratified only on the basis of the revenue that was changed, the limit was ratified on the basis of the sum of 80 percent of the foreign exchange revenue under the current account and 50 percent of the foreign exchange payments under the current account of the enterprises during the last year, thus, further raising the limit of foreign exchange that may be retained by the enterprises. In 2007, management of the account on the basis of such limits was cancelled, and enterprises began to be allowed to the keep foreign exchange on their own based on their operating needs.
In 2008, the amended Regulations of the People’s Republic of China on Foreign expressly provided that the enterprises and individuals may retain the foreign exchange in accordance with the relevant provisions or sell the foreign exchange to the banks. Since 2009, in order to further promote facilitation of trade and investment and to improve policy transparency, the foreign exchange authorities have energetically carried out a cleaning-up of the regulations, and announced that a total of over 400 normative documents concerning foreign exchange administration were repealed and invalidated. It was announced that the normative documents concerning compulsory foreign exchange settlement and sales would be repealed, invalidated, or amended. At present, all the policies and regulations concerning compulsory foreign exchange settlement and sales are no longer in effect and are no longer implemented.
Overall, the Compulsory Foreign Exchange Settlement and Sales System, as an administrative arrangement in the era of a shortage of foreign exchange, played an important role in supporting the development of the real economy and safeguarding the economic and financial security of