A foreign exchange system suitable for a socialist market economy

Since opening up and reform, especially the 1994 reform, distinct achievements have been made in the foreign exchange system. The convertibility of the RMB on current account was realized. A foreign exchange system suitable for a socialist market economy was set up, thereby boosting the healthy and sustainable development of the national economy and promoting the degree of opening up.

In December 1980, the Provisional Ordinance of Foreign Exchange Control of P R China was promulgated, and a series of regulations and measures were issued subsequently. Following the 1994 reform, the Provisional Ordinance was revised and then the Ordinance of Foreign Exchange Control of P R China was enacted in February of 1996. At the end of 1996, the Ordinance was adjusted after convertibility of the RMB on current account was realised. The Ordinance is one of the important and basic regulations in the legal system of foreign exchange administration in China. An across-the-board review and revision of regulations, measures and policies was carried out in recent years , and new regulations were formulated and promulgated. These new regulations embody outputs of the reforms since 1994. To sum up, it is important to enrich continuously and perfect the foreign exchange administration system, based on the country's situation and practical experience, and to establish gradually a scientific, rational and effective legal system of foreign exchange administration. All these efforts will form the legal safeguard to ensure real convertibility on current account and effective control of transactions on capital account, to strengthen the macro-management of external balances and to maintain a well-balanced foreign exchange market.

On the basis of the current administration system, China will continue to push forward foreign exchange administration reform step by step. The achievements gained in realizing convertibility on RMB current account will be maintained and amplified. Greater efforts will be exerted to achieve capital account convertibility gradually so that full RMB convertibility can be accomplished. The Chinese government will take a prudent and pragmatic attitude towards implementing convertibility of the RMB on capital account gradually. Reform of foreign exchange administration will be deepened in order to adapt to the new situation after China's entry into the WTO, providing better service to enterprises and investors and ensuring healthy and stable development of the national economy.