Updated: 2006-04-14 11:15
China's central bank announced on Thursday the relaxation of controls on foreign exchange accounts, simplifying approval procedures for foreign exchange payments in the service trade, and procedures for individuals to buy foreign currencies.

According to a document made public on Thursday by the State Administration of Foreign Exchange (SAFE), the three policy readjustments will be effective as of May 1.

They include the readjustments on foreign exchange accounts, simplifying approval procedures for foreign exchange payments in the service trade, and procedures for individuals to buy foreign currencies.

Under the aforementioned readjustments, it will be easier for corporate and private citizens to open foreign exchange accounts.

The ceiling of foreign exchange retained by enterprises under current account will be raised based on certain portions of their foreign exchange income and expenditure, the SAFE said.

The administration said each domestic resident may buy up to 20,000 U.S. dollars worth of foreign exchange from the State-owned banks each year, and they may apply to the banks for additional amount of foreign exchange with certificates that prove their needs.

The bank said it will also allow qualified banks to pool capital in Renminbi, the Chinese currency, from domestic institutions and individuals for overseas investment in products with fixed returns under an unspecified quota system.

It will allow fund management firms and other securities institutions to invest in a combination of stocks and other overseas securities using foreign currencies gathered from domestic institutions and private sources.

The bank said it would allow qualified insurance institutions to buy foreign currencies for investment in overseas products with fixed returns and money market instruments.

The amount of foreign currency purchased would be under a "certain portion" of the total assets of the insurance institution.

The bank said other new policies would be implemented in cooperation with other departments, while closely monitoring international payments, and readjusting policies to prevent risks and safeguard the country's economic and financial security.

The central bank said the new policies are designed to deepen the country's foreign exchange management system, boost trade facilitation and further cultivate foreign exchange market, and promote basic balance of international payment.