2011-01-04

China reduces capital controls

One weapon China can use to fight money coming into the country, is to balance it with money flowing out. Or in this case, not forcing exporters to repatriate foreign currency.

China Allows Exporters to Keep Foreign Earnings Overseas
The new measure signals loosening controls on foreign exchange and will help slow down the growing pace of China's already massive foreign exchange reserves.

Under the new rule, it is up to qualified Chinese exporters to decide how long they park their revenues in foreign currencies in a foreign country and when to transfer the funds to China, according to the State Administration of Foreign Exchange.

In the past, exporters were required to convert their revenues in foreign currencies into Chinese yuan with commercial banks.
As the story notes, this is a loosening of controls on foreign exchange. Currency reform continues, step by step.

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