BEIJING, Sept. 8 (Xinhua) — China’s new measure requiring commercial banks to pay risk deposit for forward foreign exchange sales aims to raise the cost of forex speculation and avoid excessive fluctuation, the central bank said Tuesday.
The People’s Bank of China (PBOC) announced last week that commercial banks will have to pay a 20 percent deposit for their forward forex sales to companies as of Oct. 15.
In forward exchange sales, commercial banks agree to sell a foreign currency to a company at a specific time in the future to help the company ward off risks from exchange rate fluctuations.
The new move is conducive to curbing excessive fluctuation on the forex market, preventing financial risks and promoting prudent operation of banks, the PBOC said in an online statement.
This measure was rolled out as forward exchange sales from commercial banks surged to three times as high as the monthly average of the first seven months in August. “It shows there were speculative transactions,” the PBOC said.
On Aug. 11, the central bank decided to let the market have a greater say in forming the yuan’s central parity rate against the U.S. dollar, leading to a depreciation of more than 4 percent last month.
The measure is not capital control as it does not restrict transaction volume, nor does it require approval for each single transaction, the PBOC said.
The deposit allows banks to make preparations for their possible losses in the future, curbing speculative transactions and raising the overall cost, the central bank said. Enditem
BEIJING, Sept. 8 (Xinhua) — China remains attractive to European companies, the European Union Chamber of Commerce in China (European Chamber) said, though rising wages and slower growth have led to worries about the emerging economy.
“Despite a challenging business environment, China still offers significant potential to European companies, including small and medium-sized enterprises,” said the chamber’s position paper released Tuesday.
Twenty-five percent of European firms have a research center in China, and 85 percent of those are likely to increase their presence in the near future, demonstrating China’s importance to the long-term strategies of European companies, the report said.
Facing downward pressure and pains from an economic overhaul, China’s economy expanded 7 percent in the first half of the year, the lowest reading since the 2008 global financial crisis.
The chamber said China should stick to bold reform pledges in a bid to tackle challenges from lower growth and ensure a successful rebalancing of the economy.
The European Chamber, founded in 2000, is an independent non-profit organization and has nearly 1,800 members in China. Enditem