Exchange Control Eased Ren Kan, journalist of the China Daily

    A senior financial official announced that China will make renminb
i convertible under the current account by the end of this year.
    To reach the target, starting on July 1 China will include oversea
s-funded enterprises in the existing foreign exchange selling-and-buyi
ng system, said Dai Xianglong, governor of the People¡äs Bank of China
.
    The central bank  issued the revised regulations governing the buy
ing, selling and payment of  foreign exchange, elimination controls on
 other items under the current accounts.
    The governor described the yuan¡äs convertibility under the curren
t account as a major reform in the country¡äs currency management syst
em.
     
    The move is a milestone indicating China is opening wider to the o
utside world, said Dai at eh opening ceremony of the national conferen
ce of the State Administration of  Exchange Control.
    He said the move will better improve the environment for the inves
tment and operation of overseas-funded vertures while enhancing domest
ic and overseas people¡äs confidence in the renminbi.
    Despite the convertibility in current account, China will continue
 to apply control over foreign exchange activities in capital accounts
 and individuals still cannot convert hard currency freely.
    The existing foreign exchange buying-and-selling system was adopte
d in 1994 when the country abolished the dual-rate system.
    Under the current system, domestic firms must sell all their forei
gn exchange earnings to designated banks. When they need foreign curre
ncy, they buy the money from banks by presenting import contracts and 
notification for payments issued by foreign financial insitutions. 
    In March, China incorporated oversea-funded ventures in Shenzhen, 
Shanhai, Dalian and Juangsu Province into the system on an experimenta
l basis.
    The successful experiment has created a sound environment for exte
nding the system to cover all  of the country¡äs overseas-funded ventu
res.
    Afer the reform, overseas-funded ventures can sell and buy foreign
 exchange to or from designated banks. Compared with the domestic firm
s, overseas-funded ventures still enjoy some preferential treatment. T
hey can still trade their foreign exchange at swap centres. 
    Meanwhile, overseas-funded ventures are allowed to open foreign ex
change settlement accounts for the transaction under current account a
nd special foreign exchange accounts for the transaction under capital
 accounts.
    The State Administration of  Exchange Control will set the ceiling
 amounts for the foreign exchange retained in the foreign exchange set
tlement accounts according to oversea-funded ventures paid-out capital
 and demands for fund circulation.
    Foreign banks, their branches and Sino-foreign joint ventures are 
allowed to act as designated banks, buying or selling foreign exchange
 from or to overseas-funded ventures.
    But Chen Yuan, deputy-governor of the central bank, pointed out th
at this does not mean foreign-funded banks have been allowed to conduc
t renminbi business mainly involving renminbi deposits and loans.
    China has been doing preparatory work for allowing foreign banks t
o conduct renminbi business and will start the experiment in proper ti
me, Chen said at a press conference held in Beijing.
    Although he said it is hard to give a timetable, he disclosed the 
experiment would probably start in Shanghai¡äs Pudong Area.
    Current accounts mainly cover trade, labour, transportation, touri
sm and internaitonal donations while capital accounts cover direct inv
estment, securities investment, loans from international organizations
 and governments, banks credits and leasing.