The change of Chinese forex regulations
Due to the announcement made by the government China has revised main foreign exchange rules. This is the first alteration for the last 11 years. These changes are intended to increase the control over the fund flows and slow the forex reserves growth. As for the Chinese currency it is probably won’t be affected by the changes made. They will have only a psychological impact on the yuan.
According to the forex trader in Shanghai all these changes are nothing but the reflection of the positive situation occurred in the country at the beginning of the Olympics.
Therefore, now foreign companies in China are permitted to issue their securities. Furthermore, national companies now may keep their income of foreign exchange abroad. This was prohibited before. Another important changes made in the rules say that those violated the cross-border transfer regulations will be more strictly punished. Moreover as it is already said above new rules are to restrain the growing foreign exchange reserves of the country.
Here we should also add the comments front the central bank officials who said that the changes would contribute to the further change of the Chinese exchange rate mechanism. Still the experts underline the core aim of the changes that lies in the restraining speculative capital flows. Due to Goldman Sachs – the economist at Hong Liang the main reason of the forex reserves growth was the weak yuan. On the other hand according to Claudio Piron an economist at JPMorgan Chase the external inflows are caused mainly by the trade and investment inflows. Here we should add that the trade surplus since the beginning of the year was $99.04 billons and direct investments remained at the point of $52.4 billion.
Nevertheless the experts suppose that despite the approaching yuan to its convertibility the exchange rate mechanism will unlikely be changed. According to the statistics the Chinese currency added over 20 percent in relation to the USD since 2005.
