China central bank says increases individual access to foreign exchange

BEIJING (XFN-ASIA) - China's central bank announced a series of rules designed to increase access for individuals and banks to foreign exchange.

The People's Bank of China, in a statement on its website, said that the new rules are designed "to improve the transparency of individuals' foreign exchange management, facilitate transactions and make it easier for banks and individuals to conduct foreign exchange business."

The rules make it easier for individuals to buy and sell foreign exchange for current account transactions and allow banks to offer customers a single unified foreign exchange account rather than a split facility for cash transactions and a separate one for inward remittances.

The central bank announcement, however, did not mention any increase in the 20,000 usd limit on foreign exchange that individuals may buy and take out of the country. Earlier this year, the bank raised the limit to that level.

The latest regulations are part of a process to take some of the upward pressure off the yuan as the nation's foreign exchange reserves climb.

China's foreign exchange reserves have already topped 1 trln usd, and this putting pressure on the domestic money supply and increasing calls from abroad for Beijing to let the yuan appreciate.

The central bank also said it set an annual quota on individuals selling foreign exchange to the banking system. Individuals had previously been given quotas for individual transactions.

While the central bank described this as an effort to simplify the process of selling foreign exchange, analysts said the move had other objectives as well.

Zhong Wei, a professor of finance at Beijing Normal University and an adviser to the government, said this regulation will actually limit sales of foreign exchange by individuals in an effort to curb the inflow of hot money speculating on an appreciating yuan.

The central bank also said it will step up monitoring of large cash withdrawals from the banking system, and this appeared to be aimed at preventing money laundering.

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