China tells banks to step up forex checks in special zones

Business & Markets 2013
Written by Reuters
Thursday, 23 May 2013 19:49
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SHANGHAI (May 23): China's foreign exchange regulator has told
banks to step up checks of companies operating in special economic
zones, including bonded areas, as part of efforts to crack down on hot
money inflows.
Banks must not provide cross-border loan services to firms that have
not been registered with the foreign-exchange authority but are
operating in the special economic zones, the State Administration of
Foreign Exchange (SAFE) said in a statement on its website.
(http://www.safe.gov.cn/)
Registered companies working within special economic zones would be
able to take legal profits derived from exports out of the country, SAFE
said, but banks must know the size, duration and remittance
arrangements.
China has vowed to crack down on fake trades amid signs that hot
money inflows have helped push the yuan to a series of record highs in
recent weeks.
Amid the crackdown, a raft of companies, including commodity
importers, have been struggling to get trade loans as banks scrutinise
their activities and hold back credit as they await further regulatory
details.
The latest crackdown mainly targets companies that are heavily involved
in buying and selling imported goods stored in bonded warehouses within China's tariff-free areas.
Banks should also make sure that companies applying for trade loans should bear the same name as cargo receivers labelled
in import documents, SAFE said, a move which industry sources said would help stamp out fake trades.
The country's currency regulator has said it will issue warnings or even blacklist firms that are unable to provide satisfactory
explanations for the gaps in their trade activities.
China ran a capital and financial account surplus of $102 billion in the first quarter, up from $20 billion in the fourth quarter of
last year, reflecting the heavy capital inflows.