SAFE said the new rules would reduce the number of requirements and simplify some approval processes, among other things. Over the long term, China intends to push for full convertibility under the capital account, which would make its currency freely exchangeable.
SAFE will streamline the process whereby banks make foreign-currency dividend payments to their foreign shareholders, while foreign-owned banks will be able to convert into yuan, without prior regulatory approval, any amount that they need to fund their Chinese operations each month. Currently, the rules stipulate that foreign currencies can only be converted into yuan for individual transactions.
"The new regulations will reduce the number of requirements, simplify some approval processes and allow banks to gradually develop self-management of business activities that involve foreign exchange," SAFE said.
Also from July 1, any new lender that applies for a licence to conduct foreign-exchange business will be allowed to hold 10 per cent of its working capital in foreign currencies. Previously, applications were considered on a case-by-case basis.