Read this last. This is the deal the USA and the world have been trying to implement for the last eight years.
ASIA MARKETS
China steps up forex reforms
9:22 AM ET Apr 14, 2006
HONG KONG (MarketWatch) -- China's financial regulators have eased state controls on capital outflows, in a regulatory overhaul that will make it easier to for individuals and local firms to buy foreign currency.
The rule change will make it easier to buy and sell foreign currencies at domestic financial institutions from May 1, according to the statement published on the People's Bank of China website Thursday evening in Beijing.
Another statement on the PBOC site referring to banks and financial institutions, including life insurance companies and local brokerages, said changes were in the works that would soon enable overseas investment in stocks and bonds using a qualified local financial intermediary. The statement was sketchy on details on when the changes would be implemented.
The rule changes, announced ahead of Chinese President Hu Jintao visit to the United States next week, come as Beijing is attempting to defuse trade tensions and pressure on its monetary policy and exchange rate.
The statement said the changes were launched "in order to further satisfy the foreign exchange demand of domestic institutions and individuals and to facilitate trade development."
After May 1st companies will no longer need to seek regulatory approval to open foreign currency accounts for trade. Businesses with no previous foreign currency dealings will be able to open foreign exchange accounts with a limit of $500,000, up from $200,000 currently.
Chinese citizens will be able to buy up to $20,000 of foreign exchange a year. Previously the limit was related to the amount of time an individual spent abroad. Individuals will need to seek state permission for purchases above $20,000.
The new rules will also boost limits on foreign exchange holdings in cash accounts used by trading companies.
The changes are a potentially significant step in liberalizing China's tightly controlled capital account. The move is also widely expected as the mainland opens its banking sector to international competition.
On Friday China also cleared 54 foreign and local members of the country's interbank foreign-exchange market to trade foreign-currency swaps from April 24.
China's foreign exchange reserves ballooned $21.4 billion in March to a new record high of 875.1 billion. China added $8.5 billion to its foreign reserve stockpile in February, to overtake Japan as the world's largest foreign exchange holder.
