Road map for financial reform

Accelerating steps to realize the convertibility of RMB capital account

To push for RMB capital account convertibility is an essential requirement for building an open and new economic system. Its fundamental aims are to make trade and investment more convenient and create conditions for the expansion of outbound corporate and individual investment. It also remains a requirement for further developing various kinds of cross-border financial business, implementing the idea that the financial sector should support the real economy, promote the implementation of the country's "go global" strategy and accelerate its economic structural adjustments and industrial transformation and upgrading. The country should seize the favorable window emerging for promoting RMB capital account convertibility and speed up the target's realization on the basis of the overall domestic demands and international situations facing the country.

1. To change the management manner of cross-border capital flows to facilitate the implementation of the "go global" strategy.

Measures will be taken to push for the further transformation of the country's foreign exchange management manner to make outbound investment more convenient. Current administrative examinations and approvals in the foreign exchange management will be reduced to promote a shift from focusing on rigid administrative examinations and approvals to focusing on monitoring and analysis, from focusing on micro control to focusing on a prudent macro management, from focusing on positive lists to focusing on negative lists. Measures will also be taken to make it more convenient for enterprises to implement their "go overseas" strategy and gradually make it easier for domestic enterprises to offer to overseas ones RMB and foreign currencies credit and financing guarantees.

2. To push for two-way capital opening-up and raise the degree of cross-border capital and financial transaction convertibility in an orderly manner.

Practical measures will be taken to further expand the qualification range of qualified domestic institutional investors and qualified foreign institutional investors and increase investment quotas. The qualification and quota examination and approval for QDII and QFII will be cancelled when conditions are ripe, and steps will be taken to extend investment conveniences to all legitimate institutions at home and abroad. Studies will be made into establishing a connectivity mechanism between domestic and overseas stock markets and to gradually allow qualified foreign companies to issue shares in the domestic capital market to widen investment channels for domestic residents. Under the condition that a management system is set up, the qualification limitations on the domestic issuance of RMB bonds by foreign institutions will be relaxed. At the same time, measures will be taken to increase the convertibility of individual capital accounts, make it more convenient to undertake direct investment, direct investment liquidation and credit convertibility, and promote managed convertibility for financial derivatives trading.

3. To set up and make improvements to a foreign debt and capital flow management system under a prudent macro-management framework.

Efforts will be made to establish and improve a prudent macro-policy framework targeted at foreign debt and capital flows to raise the country's risk control capability at a time of capital convertibility. After matching conditions between the currency category of assets and liabilities and their terms are taken into comprehensive consideration, reasonable regulations will be exercised over the scale of foreign debts to optimize their structure, put in place effective monitoring and prevent foreign debt risks. Measures will be taken to strengthen anti-laundering and anti-financing management to ensure that a high-handed policy is in place over the cross-border flow of illegal funds and prevent excessive exploitation of tax havens. Monitoring over short-term speculative capital flows, especially the trading of financial derivatives, will be strengthened.

While encouraging reasonable financial innovations, measures will also be taken to limit the development of complicated financial derivatives that seriously deviate from the real economy to keep financial innovation in line with serving the real economy. At the same time, reforms of the country's monitoring regime over financial derivatives will be made in accordance with latest international standards. Some measures will also be taken for temporary management of capital flows in case of an emergency. At the same time, a sound monitoring system will be set up to facilitate cross-border capital flows and the unified collection of effective information.

(China Daily 12/18/2013 page8)