China Eases Rules on Trade-Related Forex Advances

[2009-01-05 10:15:55]

Exporters will be able to increase their advances on foreign-currency payments to 25 percent from the current 10 percent, the China Securities Journal reported on Wednesday.

The decision came in a circular issued by the State Administration of Foreign Exchange (SAFE) on Tuesday night.

Importers' quota for deferred foreign-currency payments also rose to 25 percent from 10 percent.

Analysts said the move would help small and medium-sized enterprises raise funds and improve their cash flow.

A banker who asked to remain unidentified told Xinhua the financial crisis has caused difficulties for many enterprises and this move would give them more operating capital.

The State Council, or cabinet, urged a higher quota of foreign exchange advances to support trade during a standing committee conference on Dec. 3.

SAFE official Cai Qiusheng was quoted by Tuesday's Shanghai Securities Journal as saying that foreign exchange reserves were below their peak at 1.9 trillion U.S. dollars as of the end of September.

According to the paper, enterprises that have good credit and haven't violated any foreign-exchange regulations can qualify for the new limits.

To prevent "hot money" inflows through trade, SAFE, the Ministry of Commerce and the General Administration of Customs issued a joint circular on July 14 to step up supervision of cross-border capital flows.

The foreign exchange agency told administrative departments at all levels to step up inspection to prevent large-scale cash outflows.

Source: Xinhua