China to increase supervision of trade finance

Source:Agencies-Global Times Published: 2013-12-8 23:08:01

China's forex regulator said Saturday that it will intensify supervision of commercial banks' trade finance businesses to curb fake financing activities and prevent abnormal cross-border forex movement.

The State Administration of Foreign Exchange (SAFE) said in a statement that its local branches should urge banks to enhance authenticity and compliance examinations for their trade finances.

Banks should "actively support authentic trade finance demands by the real economy, but prevent companies from getting trade finance by making up trade backgrounds," the statement said.

They should also enhance internal control and management and report suspicious transactions in a timely manner, SAFE said.

SAFE will strengthen the supervision and inspection of companies with abnormal trade balances - especially those with abnormal increases in long-term trade financing and that might be engaged in arbitrage - while continuing to provide convenience for companies complying with laws and regulations.

SAFE said it will also increase punishments for any violations by commercial banks and companies.

The statement did not specify the illegal activities being targeted in the clampdown. China is in the midst of an effort to quell currency speculation, however.

The foreign exchange reserves of China's central bank, the People's Bank of China (PBC), recently reached their highest level since January 2008 as a result of the rising value of the yuan, domestic policy reforms and market expectations that the US Federal Reserve will soon start curbing monetary stimulus.

The PBC purchased 449.5 billion yuan ($73.72 billion) in foreign currency in October, marking the highest monthly net purchase figure since January 2008, official data showed a week ago.

October was the fourth consecutive month of net purchases, an indication of continued capital flows into the country.

A broader assessment of foreign exchange purchases and sales among the country's financial institutions was announced by the central bank on November 15, showing the institutions and the central bank made a net purchase of 441.6 billion yuan for October.

The sharp rise in the October data was mainly due to growing signs of stabilization seen in China's economy, which helps continue its role as a global growth engine and therefore retain its attractiveness for foreign investment, said Xu Bo, an analyst with Bank of Communications in Shanghai.

Agencies - Global Times

Posted in: Markets

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