Chinanews, Beijing, Feb. 2 – In light of the huge trade surplus and excessive liquidity, China plans to radically reform its foreign exchange system in 2007, China Securities Journal reported.

 

Officials disclosed that China will take a set of measures to reform its foreign exchange system in 2007, in order to solve the huge trade surplus problem and curb excessive liquidity. The measures will include allowing more flexibilities in the Renminbi exchange rate regime, setting up a national foreign exchange investment company to expand the channels of forex reserve use, and raising the amount of investment by qualified foreign institutional investors (QFII) and expanding the range of investment for qualified domestic institutional investors (QDII). In addition, China will launch more derivatives in financial market.

 

In managing foreign currencies, China will lift restrictions on the purchase and use of foreign currencies by enterprises and individuals and curb the rapid increase of foreign debts. China will strengthen the management of trade credit and the inflow of capital by investment companies from abroad, and closely monitor any abnormal foreign capital that flows into China. Specifically, China will monitor the capital inflow and exchange settlement by foreign investment companies; verify the reality of foreign exchange collection and settlement in trade; pay attention to the inflow of foreign capital in property market; and check foreign exchange collection and settlement by individuals, and the business activities and return investment activities by securities and fund management companies. In addition, China will set up some companies to deal exclusively with Renminbi and foreign currency exchange business to offer convenience to individuals in their exchange for a small amount of foreign currencies.