China Seeks to Spur Forex Activities with Simplified Regulations

June 15, 2015

As director of business development at Bforex, Pablo Soria de Lachica leads the provision of innovative tools for both novice and experienced investors in the foreign exchange (forex) market. Pablo Soria de Lachica leverages more than 15 years of financial-sector experience and up-to-date knowledge of global currency market developments to oversee all daily activities of the global firm, which has 18 offices around the world, including in Uruguay and Mexico.

In early March 2015, the State Administration of Foreign Exchange (SAFE), China’s foreign exchange regulating body, announced plans to simplify its rules regarding cross-border direct investments in an effort to encourage increased forex investment activities. Effective June 1, 2015, SAFE will no longer require government approval for foreign direct investment (FDI) and outbound direct investment (ODI) registrations. The relaxed regulations will allow cross-border direct investors to open foreign exchange accounts directly after submitting registration documents to qualified banks. Previously, these investors were required to obtain federal approval prior to registering.

Due to the current protracted nature of the administrative approval process, cross-border direct investors run the risk of missing investment opportunities while waiting for government approval. According to experts, such as Wang Yongzhong, a research fellow at the Chinese Academy of Social Sciences Institute of World Economics, China’s newly simplified rules are likely to spur both FDI and ODI.

While these regulatory changes are aimed at spurring investment activities, they also present the need for increased monitoring. Shanghai University of Finance and Economics professor Tan Ruyong notes that in order to prevent inflows of hot money, SAFE should bolster its foreign exchange market supervision efforts, and the regulatory body has stated its intentions to supervise investors’ bank registrations to monitor foreign currency inflow and outflow.

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