In order to properly direct the flow of cross-border funds, to prevent the inflow of illegal funds, and to maintain the security of the foreign-related economy and finance, the State Administration of Foreign Exchange recently promulgated the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Further Strengthening the Administration of Foreign Exchange Business (Hui Fa [2011] No.11, hereinafter referred to as the Circular).

The Circular mainly covers four areas: (1) further strengthening administration of the bankscomprehensive positions for foreign exchange settlement and sales and reducing the lower limit of the negative positions of the bankssettlement and sales of foreign exchange on a cash basis based on the various circumstances; (2) strengthening administration of foreign exchange for transit trade, and incorporating the proceeds from transit trade into the administration of the to-be-verified accounts; (3) appropriately reducing the basic proportions of enterprise quotas for foreign exchange receipts and payments in terms of advances on sales under trade in goods and deferred payments for a term of over 90 days; (4) further reducing the aggregate quota for short-term external debts of domestic financial institutions, and appropriately reducing the quotas for the outstanding short-term external debts of banks with relatively large amounts of inter-bank deposits and lending.