Foreign currency controls are strengthened
According to the announcement of the state media the government of the country strengthened the controls on the way the foreign companies spend the money they bring. This action was made with the aim to decrease the volume of inflation inflows. Due to this regulation the State Administration of Foreign Exchange will be responsible for the controls of the way foreign companies use foreign currency.
As the Shanghai Securities News newspaper said the foreign companies is the channel of speculative inflow of foreign currency into the country. The new rule imposes the banks the obligation to examine the documents provided by the foreign companies to secure their authenticity and legality.
Furthermore new rules prohibit foreign companies to exchange their currency into yuan with the aim of purchasing real estate for certain speculative purposes or investing them into equity. Such money is real problem for the government of the country that tries to pursue its monetary policy. According to average estimates the volume of the forex reserves is about $130 billion for the first half of 2008 without taking trade surplus and foreign direct investments into account.
