To further improve the socialist market economy system, enhance the marketization level of foreign exchange rate formation and provide more risk management tools for banks and businesses, People's Bank of China on August 10 issued a circular on accelerating foreign exchange market development, resolved to further boost the development of China's inter-bank forex market by releasing relevant reform measures.

According to sources, China instituted reform on forex system in 1994, bringing RMB official exchange rate and rates at forex regulating markets onto one track and establishing a unified inter-bank forex market.

The circular mainly covers three aspects. The first is to expand the scope of participants in inter-bank spot forex market transactions, allowing qualified non-banking financial institutions and non-financial businesses to participate in inter-bank forex market transactions according to actual needs.

The second is to increase the variety of inter-bank market transactions and introduce enquiry transactions into the inter-bank forex market so that participants in the inter-bank forex market can independently choose between bilateral credit and bilateral clearing transactions, on the basis of original central credit and centralized price competition transaction mode. The enquiry transaction will first be used in forward transactions.

The third is to further enrich inter-bank forex market transaction variety, allowing qualified inter-bank forex market participants to conduct inter-bank forward forex transactions, and market members that have qualified for registration under forward transaction for more than six months to conduct inter-bank RMB/foreign currency swap transactions that combine spot and forward, forward and forward ones.

By People's Daily Online