Chinese regulators have lifted the restrictions on cross-border renminbi payments as the downward pressure on the currency’s exchange rate has eased and foreign exchange reserves rebounded.
A source familiar with the matter told the Paper on Thursday that the People’s Bank of China, China’s central bank is now no longer requiring financial institutions to maintain a balance of inflows and outflows when processing cross-border renminbi payments.
The restriction was imposed on January 11, which requires all financial institutions to gain at least the same amount of renminbi inflow after they make overseas payment with the currency.
China’s central bank confirmed on January 25 through its official Weibo that the practice of cross-border renminbi payment would always aim to benefit the real economy and facilitate trade and investment. “There are no quotas or proportion limit on those cross-border renminbi payments as long as they comply with the regulations,” said the statement.
It was reported by some international media that some surveys showed that when renminbi exchange rate was under a downward pressure, some capital had flowed outside the country in disguise as trade settlement. When the capital was used to purchase foreign currencies, the renminbi exchange rate came under further pressure.
It is known that China’s foreign exchange reserves fell below USD 3 trillion in January while February saw a slight increase of USD 6.92 billion and so edged up the threshold again, indicating the first positive increase since last June. In March, the foreign exchange reserves further picked up.
An average USD 28 billion per month exited China through renminbi payments in the first 11 months of 2016, but the monthly average fell to USD 6 billion in the three months to the end of February, according to data from the State Administrative of Foreign Exchange.