A briefing on policies for inspections of trade financing by banks was recently held by the State Administration of Foreign Exchange. The heads of the relevant business in thirty-six Chinese and foreign banks attended the meeting.

The meeting provided information about the special campaign to combat false intermediary trade (the special campaign) launched in 2013. By the end of November 2013, 1,076 documents had been inspected for false intermediary trade, involving 112 enterprises and a total amount in excess of USD2.5 billion. Forty-one enterprises were subject to the procedures for administrative penalties, with the twelve enterprises that were suspected of committing crimes transferred to the public security organs.

The meeting, providing information on the recently adopted foreign exchange administration policies for trade financing, urged banks to carry out the policies earnestly, to actively support the authentic trade financing demands of the real economy, and to prevent the defrauding of bank loans by enterprises with fictitious trading activities. The SAFE will intensify monitoring of the authenticity and compliance of trade financing by banks, evaluate the due diligence of bank transactions, and when necessary carry out on-site verifications or inspections.

Emphasis was placed on the relaxation in the banks’ procedures for the handling of foreign exchange business, as was identified in the “special campaign.” It was stressed at the meeting that banks should follow the correct operating philosophies, bring into full play the role of finance in serving the real economy, and promote the healthy development of trade financing. Banks should follow the prudential operating principle of “understanding your client,” strengthen verification of the authenticity and compliance of trade financing, improve the mechanism for risk prevention and internal control, and control funding risks. Banks should provide trade financing services to serve the needs of the real economy, strictly examine the authenticity of trading activities to prevent operations of fictitious funds, and guard against speculation and arbitrage of foreign exchange funds. Banks should implement the foreign exchange administration policies in an earnest manner and should prevent non-compliance in implementation of the relevant rules or in the provision of assistance to evade the foreign exchange administration regulations.

It was stressed at the meeting that the SAFE will actively carry out the spirit of the Third Plenary Session of the Eighteenth Party Congress, vigorously promote facilitation of trade and investment, and intensify efforts to support and facilitate operations of law-abiding and compliant enterprises. Efforts will be made to enhance analysis and monitoring of cross-border fund flows, to crack down severely on illegal and non-compliant foreign exchange transactions in accordance with the law, to guard against the risks of cross-border flows of abnormal foreign exchange funds, and to ensure the security of the foreign-related economy and finance.