The State Administration of Foreign Exchange (SAFE) recently held in Beijing the 2014 high-level seminar for branch heads to convey the spirit of the Seminar for Presidents of the PBC Branches and Sub-branches, summarize and study foreign exchange administration practices in recent years, and open a new chapter in the foreign exchange administration reforms. Yi Gang, administrator of the SAFE, delivered a speech at the opening ceremony of the seminar. Also present were the deputy administrators, the head of the discipline inspection group, the chief economist, and the chief accountant from the SAFE, as well as the principals from the SAFE branches (Foreign Exchange Departments) and other departments of the SAFE.

According to Yi Gang, as the economic and financial situations have undergone changes both at home and abroad, and the domestic reforms have deepened and been implemented in an all-round way since the first half of 2014, net inflows of foreign exchange receipts and payments have come within a balanced range, the supply and demand of foreign exchange have been improved, the capability to actively balance the BOP has been enhanced, and all foreign exchange administration reforms have been steadily promoted, thus creating a favorable environment for stimulating economic restructuring and transformation and upgrading.

Yi Gang pointed out that since the "five changes" in the concepts and approaches to foreign exchange administration were first proposed by the SAFE Party Leadership Group in 2009, a series of fruits of reform that can withstand the test of time have been achieved through exploration and practice during the past five years . First, the change from administrative approval to monitoring and analysis has produced positive results. A substantial number of administrative approval items have been slashed. Since 2002 65 foreign exchange administration approval items, or nearly 80 percent of all approval items, have been removed, of which 27 have been canceled during the past five years. Regulatory integration, streamlining, and the delegation of powers have been accelerated, with more than 700, or over 60 percent, of the regulatory documents cancelled or declared invalid in recent years. The monitoring systems and institutions have been optimized, monitoring and capability building for analysis have been improved significantly, and monitoring and analytical products have been enriched. Second, there have been breakthroughs in the change from prior regulation to interim and ex post management. A multifaceted approach has been introduced to improve regulatory effectiveness through the use of multiple means and mechanisms. By introducing  the system of interviewing company heads, a risk notification system has been implemented, classified management has been adopted, and the focus of regulation has been changed from more than 500,000 import and export companies to 80,000　90,000 key companies, especially the more than 4,000 class　B and class　C companies since the implementation of the reform of trade in goods. Special inspections have been carried out of key channels and players, such as entrept trade and banks, to clamp down on illegal behavior such as underground banks.  Between 2011 and 2013 9,617 cases were investigated and dealt with, and fines in the amount of RMB 1.35 billion were imposed, more than double the amount between 2008 and 2010. Third, progress has been achieved in changing behavioral regulation to regulation of market players. Efforts have been made to explore new concepts, such as centralized receipts and payments of foreign exchange under the current account and centralized use of external debt limits via pilots for the centralized operation of MNC foreign exchange funds, to accumulate experience in regulating market players in an all-round way. The pilot program was promoted to regulate market players in good order in the branches and sub-branches of the SAFE, and "one-stop" services in the front office with comprehensive monitoring and inspections, integrated assessments and classified management in the middle and back offices, were introduced to build a regulatory service model that integrates analysis, regulation, and services for key players within the jurisdiction. Fourth, the positive list was changed to a negative list and "presuming guilty" was changed to "presuming innocent" and this has achieved preliminary results. An innovative "compliance confirmation" system was introduced, requesting that enterprises make commitments to operate according to the law, with the SAFE providing adequate ex ante conveniences. In recent policies, efforts have been made to explore and practice the management approach of a "negative list," such as for settlement of foreign exchange under capital funds and external debts, cross-border guarantees, and centralized operations of MNC foreign exchange funds.

Yi Gang stressed that the entire society has reached a consensus to promote reform with respect to the direction and approaches of the foreign exchange administration reform to be well aligned with the requirements of the central government, and the reform concepts, such as slashing the administrative approval items and enhancing the interim and ex post regulation as well as the negative list. With liberated minds, we are less passive and more proactive in conducting the reform, thus laying a solid theoretical and practical foundation for deepening the reform. However, we should be clearly aware that the current accomplishments do not mark the end of the reform, but a new start for a further deepening of the reform. In face of the arduous task to reform foreign exchange administration, we must calmly and carefully think over the conditions and environment for foreign exchange administration from an international and holistic perspective and continue to deepen the challenging reforms by implementing the strategies and plans of the CPC Central Committee and the State Council. As the foreign exchange administration reform enters a "deep water zone," we should first promote the overall reform while making breakthroughs in key links. The overall reform plan and the top-level design, with a clear logic and definite measures, should be developed and implemented scientifically. Starting from in-depth issues such as the systems and mechanisms and based on the BOP situation, the priorities of the reform should be promoted step by step so as to unleash institutional bonuses via the overall reform. Second, regulation and deregulation should be carried out based on the market so as to enhance the effectiveness of foreign exchange administration, primarily by intensifying statistical monitoring and interim and ex post regulation. Third, we should systematically streamline and summarize the lessons from the previous reforms, based on the principle of practice being the sole criterion of truth, so as to identify a reform model that can be reproduced and promoted.

As Yi Gang proposed, motivated by implementation of the spirit of the 18th CPC National Congress and the Third Plenum of the 18th CPC Central Committee and guided by the "five changes," efforts should be made to steadily promote an institutional reform and mechanism innovations, vigorously advance trade and investment facilitation, and enhance the ability of the foreign exchange administration to guard against risks and to serve the real economy during the next stage, with the aim of promoting an equilibrium in the BOP. First, deepening the reform, streamlining administration, and delegating more power to lower-level governments, promoting interim and ex post management, vigorously developing the foreign exchange market, and effectively managing and using the foreign exchange reserves. Second, guarding against risks, accelerating improvements in the monitoring, warning, and risk response mechanisms for cross-border capital flows, establishing a cross-border capital flow management system under a macro-prudential framework, and increasing the relevance and effectiveness of the foreign exchange inspections. Third, strengthening the foundation, improving the collection and comprehensive use of data, accelerating the construction and integration of the monitoring and analysis system, enhancing the development of officials and personnel to promote a management transformation, improving system building, and performing the administrative duties according to the law.

At the seminar, four modules, including reform of the current account, reform of the capital account, regulation of market players, and integration of data, were specifically discussed and relevant experts and scholars were invited to present lectures.