ANALYSIS: China's new cross-border FX rules
Rocky Lee (pictured), Asia managing partner at Cadwalader, Wickersham & Taft and the firm’s Jerry Zhang explain the significance of SAFE's recent rule changes.
What: SAFE Circular 167
Effective Date: September 12, 2012
Relevance: Related to SAFE pilot on foreign currency cross-border sweeping, FX cross-border cash netting and current account centralised payment and collection. The focus of this circular is on FX cross-border sweeping, a capital account issue; while the latter two concern current account items, which are mentioned briefly in this new rule.
Significance:This is probably the best tool currently available to manage liquidity. It introduces two important new concepts: International Foreign Exchange Master Account (“International Master Account”), and Domestic Foreign Exchange Master Account (“Domestic Master Account”). Both accounts must stay with a bank in China.
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