As a late starter, China hasn't completely opened its FX market to the international community. RMB transactions in the retail market is still under strict regulation of the central government in order to maintain economic stability. Many brokers, however, still turn their eyes to China because of its huge potential. According to the State Administration of Foreign Exchange, the transaction value in China's FX market In April (excluding foreign currency pairs) totaled 16.27 trillion yuan (equivalent to 2.30 trillion dollars). From January to April 2020, a total of RMB 59.29 trillion (equivalent to 8.47 trillion dollars) was traded in the Chinese FX market.As a broker, how can you tap China's market potential without knowing the regulatory framework of China? This passage would be great help if you want to expand your business. I. State Administration of Foreign Exchange (SAFE)As a deputy-ministerial-level state government organ, SAFE is the major actor in regulating China's FX market. All FX-related business, transactions, and applications shall be done under the guidance and rules of SAFE. It is also in charge of the management of FX reserves, gold reserves, and other FX assets of the state.Its official statistics show that 152 Qualified Domestic Institutional Investors (QDIIs) and 295 Qualified Foreign Institutional Investors (QFIIs) are under the supervision of SAFE.68 banking institutions have been allowed to launch FX futures products, and 104 have been authorized to engage in business of forward purchases and sales of FX and swaps of RMB against foreign currencies.38 banks are listed as market makers (including spot, forward-swap, spot trial and forward-swap trial) in the trading of RMB-FX on the interbank FX market, such as JPMorgan Chase Bank (China) Company, Ltd, Standard Chartered Bank (China), Ltd, Deutsche Bank (China) Co., Ltd, and BNP Paribas (China), Ltd.SAFE has set 470 branches in 31 provinces, municipalities, and autonomous regions, all of which are in charge of the supervision of local FX market and transactions. II.China Foreign Exchange Trading System (CFETS)Also known as the National Interbank Funding Center, CFETS is a sub-institution directly affiliated to the People's Bank of China (PBC). CFETS publishes market benchmarks, including RMB central parity rate, Shanghai Interbank Offered Rate (Shibor), CFETS RMB index, loan prime rate (LPR), RMB reference rate, bond indices, yield curves, and market data, offering reference prices for the market.Any foreign financial institutions who want to access China’s market need to apply for the membership and wait for the approval of CFETS as required by the process published on its official website. III. China Banking and Insurance Regulatory Commission (CBIRC)CBIRC is a ministerial-level government organ under the direct administration of the State Council. As the name suggests, it mainly supervises the banking and insurance industry to maintain financial stability. Its major obligations include licensing banking and insurance institutions and their business scope, reviewing the qualification of senior management of relevant institutions, supervising banking and insurance institutions in terms of corporate governance, risk management, capital adequacy, solvency, information disclosure, etc.Its regulations cover almost every aspect of China's financial sector (except for securities and futures), from bank and non-bank institutions to policies, and from trust to legislation. IV. China Securities Regulatory Commission (CSRC)CSRC is also a ministerial-level administration which supervises China's securities and futures market. It should be noted that it has set up an international cooperation department to deal with international exchanges and communication. The department, on behalf of CSRC, regularly releases the lists of MOUs signed between CSRC and regulatory authorities of other countries,QFII custodian banks, security companies with foreign investment, foreign-invested enterprises with offices set in China, and other Sino-foreign cooperative activities. As mentioned above, China's huge market potential and profitability outweigh its strict regulations, thus attracting many international investors and brokers to start operation in China. In the foreseeable future, China will open its market wider to the outside world by developing a clean and well-regulated FX market, which creating more favorable conditions for foreign investment.
Subscribe Now
