Regulation of foreign exchange in multinationals relaxed

The State Administration of Foreign Exchange issued a notice on the use of foreign exchange in multinationals in China. The notice, which will take effect as of November 1, 2004, will improve the investment environment of the country and facilitate Chinese companies to go international by relaxing the policy.

Multinationals are allowed to mobilize foreign exchange between their subsidiaries within China. Their affiliates in China are also entitled to provide financial support to their overseas counterparts with foreign exchange if the parent company finds it necessary.

The notice offers multiple solutions to the internal operation of foreign exchange for multinationals which have businesses in China. Their manoeuver of foreign exchange can be either conducted by their own financial firms or through bank transfer.

Six principles are embedded in the regime to ensure that the internal allocation of foreign exchange between operations of multinationals are legal, safe and efficient. The principles have specified what foreign capital can be used, how much can be allowed to flow overseas, and how the account of foreign exchange to be offered to overseas operations should be managed. The prevention of speculation and credit risks are the core of the principles.

By People's Daily Online