(Sept. 11, 2008) On August 5, 2008, the State Council of the People's Republic of China (PRC) published the revised Regulations on the Administration of Foreign Exchange, which took effect on the same day (Chinese text available on the PRC Central People's Government official website, http://22.214.171.124/zwgk/2008-08/06/content_1066085.htm (last visited Aug. 25, 2008)). The Regulations, first promulgated in 1996, had not been revised since 1997.
According to a government news release, the Regulations reflect the fundamental changes in China's economy and currency situation in the past decade. In response to the rapidly increasing foreign exchange reserve, the Regulations tighten control of the inflow of foreign exchange and its conversion into renminbi, China's currency, in order to achieve balance of payments. The old regulations, by contrast, focused on control of outflow of foreign exchange. In order to prevent financial crises and enhance the open economy, the Regulations seek to strengthen the monitoring of cross-border capital flow and establish an emergency mechanism for the balance of payments. (Waihui Guanli Tiaoli Da Jizhe Wen [Answering the Journalists' Questions: On the Foreign Exchange Administration Regulations], XINHUA, Aug. 6, 2008, available at http://news.xinhuanet.com/fortune/2008-08/06/content_9000392.htm.) Xinhua News Agency, citing statistics provided by the People's Bank of China (PBOC), the central bank of China, stated that China's cumulative foreign exchange reserve stood at US$1.809 trillion by the end of June, up 35.73 percent from June a year ago. (China's Forex Reserve Reaches $1.809 Trillion by June, XINHUA, July 14, 2008, available at http://news.xinhuanet.com/english/2008-07/14/content_8542785.htm.)
In July 2008, the National Development and Reform Commission (NDRC), China's top economic planner, issued a notice to strengthen administration of foreign investment and to prevent irregular foreign exchange inflow. The notice calls for stricter administration in approving foreign investment projects and strengthening credit examination of the foreign investors, to prevent foreign exchange inflow without real investment projects. (Chinese text of the Notice available on the NDRC official website, http://www.ndrc.gov.cn/zcfb/zcfbtz/2008tongzhi/t20080718_226080.htm (last visited Aug. 25, 2008).)