China cracks down on currency flow

CHINA IS bolstering its currency by ordering mainland companies to remit all foreign currency earnings held abroad to China by tomorrow.

The move is part of a crackdown on foreign exchange abuses that are putting pressure on the Chinese yuan.

Wu Xiaoling, director of the State Administration of Foreign Exchange, said yesterday that foreign currency fraud and "disorderly capital flow" had increased this year, prompted by "psychological expectations" of a devaluation of the yuan.

The government in Peking is standing firm that there will be no devaluation this year, but Chinese companies and individuals have been increasingly keen to hoard dollars. It has always been illegal for Chinese firms to hold foreign earnings abroad, but previously this has not been a big issue.

Ms Wu also revealed yesterday that private foreign exchange holdings inside China had reached about $80bn, compared with the government's forex reserves of $140bn.

The rest of the world will support any moves to shore up the Chinese yuan, whose stability is seen as a lynch-pin in preventing further economic turmoil in Asia. Ms Wu reaffirmed yesterday that the economic fundamentals did not support the need for a devaluation, and that "devaluing the yuan will bring more disadvantages than advantages". However, she added: "Noone can promise whether a currency will devalue or not."

China's economy and rate of export growth have both suffered because of the crisis in Asia, but the trade surplus for the first eight months of 1998 was still US$31.4bn.

Yesterday's crackdown was aimed at businesses, not individuals, and may inconvenience foreign-invested enterprises in China as trade documents for customs declaration forms above $100,000 are scrutinised for irregularities. The Chinese yuan is convertible on the current but not the capital account, so trade deals are a means to circumvent currency controls.

Ms Wu said that "billions" of US dollars of false customs declaration forms had already been discovered, as people used false import documents to obtain foreign currency. "It is not beneficial to a country's economy if it is under attack by illegal capital flow," she said.

Ms Wu's measures are aimed at defensive moves by Chinese companies, who fear a devaluation. These include paying for imports in advance, delaying taking payment for export earnings, and paying off forex loans early. Inside China, the yuan has been weakening on the resurging black market, with up to 9 yuan to the US dollar in the south, compared with 8.28 for trade transactions.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones