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China's foreign exchange regulator released a new regulation Thursday to clarify key forex procedure for the nation's growing ranks of individual traders.
The rule has been seen as a step forward by the authorities to enforce a legal framework which is needed to implement a new Foreign Trade Law. The law, which came into affect last month, will allow individuals to conduct foreign trade.
The State Administration of Foreign Exchange (SAFE) said Thursday qualified individual traders will also be subject to forex payment reporting requirements, similar to demands on corporate traders - a key element in the nation's forex management regime.
China still maintains capital controls as its local currency, the reminbi, is only partly convertible under the capital account.
Individual traders will be allowed to open special bank accounts for their trade-related settlement needs, SAFE said. Transfers of funds can be made freely between such accounts and the traders' personal non-cash forex savings accounts. But transfers from their cash forex savings accounts to the settlement accounts are forbidden.
The individual traders can make forex payments either through their special settlement accounts or with forex purchased with renminbi from designated banks. They can sell their forex earnings either directly or through the settlement or non-cash savings accounts.
Giving foreign trade rights to individuals marked the final move in turning the country's foreign trade sector from a planned-economy into a market-oriented one, analysts said. In the first some 10 days after the new Foreign Trade Law took effect on July 1, 66 individuals completed registration procedures in Beijing alone, which analysts say reflected the huge demand from individual Chinese for foreign trade rights.
But the foreign trade law only legalizes entry of individuals, while related regulations in such areas as customs, forex controls, product quality inspection and taxation need to be updated to facilitate transactions, analysts said.
SAFE's regulation also includes measures to ensure the authenticity of foreign trade deals by individual traders, requiring them to present necessary documents as they sell forex to the banks.
(China Daily August 20, 2004)
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