Circular of the People’s Bank of China and the State Administration of Foreign Exchange of the People’s Bank of China on Supporting Foreign Trade and Economic Enterprises in Improving their Ability to manage Exchange Rate Risk

In accordance with the decisions and arrangements of the CPC Central Committee and The State Council, in order to further support foreign economic and trade enterprises in improving their exchange rate risk management capabilities and promoting their stable operation, the relevant work notice is as follows:

        I. Fully understand the significance of exchange rate risk management, focusing on “urgent and anxious” to introduce targeted measures.Exchange rate changes are directly related to the bargaining power and cost efficiency of foreign economic and trade enterprises, and have a multidimensional impact on the production and operation of enterprises. It is of great significance to support enterprises to learn how to make good use of hedging tools of exchange rate and improve hedging ability of exchange rate, which is an important part of financial services to the real economy. It is also a practical action to stabilize the “six guarantees” and “six guarantees”, especially to stabilize foreign trade and protect market players. Local commerce departments, pboc and safe branches to timely MoPai exchange rate change on the influence of enterprise production and business operation, serious study to solve the enterprise to carry out the exchange rate risk aversion and cross-border yuan settlement “distress sorrow to” problem, in combination with the practical elaboration of around a specific measures to increase effective supply policy, for bank acquisition, enterprise would like to create a good policy environment.

        II. Strengthen publicity and training to help enterprises establish the “risk neutral” concept of exchange rate.Various regions should actively develop various effective publicity and training activities, continue to make good use of various open resources, through lectures, seminars and exchanges by experts, and through new media, print media, bank outlets and other channels, innovate short videos and illustrations to expand the scope of publicity and training. Banks are encouraged to provide enterprises with foreign exchange derivatives businesses that are in line with their risk tolerance and hedging needs. By signing risk-neutral statement letters and regularly pushing information, enterprises are reminded to follow the principle of exchange rate risk management with “preservation” rather than “appreciation” as the core. We will promptly correct the mentality of “gambling” and “speculation”, guide enterprises to focus on production and operation, and strengthen their capacity to withstand risks.

        III. Improve exchange rate hedging products and services to further improve the convenience of RMB cross-border settlement.Local people’s banks and branches of safe bureaus should encourage banks to take measures tailored to the characteristics of enterprises on the basis of the “three principles of industry promotion” and provide products and services that meet market demand. We will encourage banks to continuously improve the capacity of grassroots institutions to provide RMB derivatives services, innovate products and service channels, support small and medium-sized banks to cooperate in providing RMB derivatives services, and meet the diversified exchange rate hedging needs of enterprises. It will further facilitate the use of RMB by enterprises in cross-border trade and investment, and encourage them to avoid exchange rate risks through cross-border RMB pricing and settlement. We will support banks in simplifying the settlement process by electronically reviewing documents and other means, and improve the efficiency of cross-border RMB settlement of new forms of trade. We will carry out in an orderly manner trials to facilitate cross-border RMB centralized collection and payment under current accounts by multinational enterprise groups and cross-border RMB settlement by high-quality enterprises, and support banks in providing convenient and efficient cross-border RMB investment and financing services to enterprises based on the needs of the real economy.

        IV. Establish a mechanism for connecting government, banking and enterprises to provide targeted services to micro, small and medium-sized foreign economic and trade enterprises.Local commercial authorities should strengthen cooperation with bank branches and promote the exchange rate hedging business between banks and enterprises by holding matchmaking meetings, building public service platforms and field visits. Where conditions permit, enterprise information can be sorted out to provide support for banks’ “one-to-one” precise services. We will encourage banks to expand the number of first-time accounts and expand the coverage of exchange rate hedging and cross-border RMB settlement services. Local people’s banks and branches of safe offices should encourage banks to carry out foreign exchange derivatives business in an innovative way according to the characteristics of small, medium and micro foreign economic and trade enterprises, and guide them to increase support by means of internal assessment, evaluation, comparison and incentive. Small and medium-sized banks are encouraged to give full play to their advantages of proximity and familiarity by cooperating with qualified banks to provide refined, professional and personalized services to local micro, small and medium-sized enterprises.

        V. Give full play to the guiding role of government funds to reduce the overall cost of enterprises.Local competent commercial departments should make good use of the special funds for foreign trade and economic development and, in accordance with WTO rules, provide enterprises with public services such as business training and information services for avoiding exchange rates. Local people’s banks and branches of safe offices should encourage banks and guarantee institutions to transfer benefits to the real economy and reduce the cost of hedging for enterprises, especially micro, small and medium-sized enterprises. Where conditions permit, we can explore ways such as special credit granting, data credit enhancement and public security deposit to reduce the occupation and capital occupation of enterprise credit granting. Banks are encouraged to optimize online banking, mobile banking and other online platforms to make business handling more convenient and reduce the “bottom cost” of enterprises. Local commercial administrations, the People’s Bank of China and the branches of the safe bureaus should strengthen coordination, promote the better functioning of the China Foreign Exchange Trade Center and the self-regulatory mechanism of the foreign exchange market, and jointly support foreign economic and trade enterprises in enhancing their ability to hedge the exchange rate. Please timely submit the important information, experience, practices, opinions and suggestions in the work of each place to the Ministry of Commerce (Department of Finance), the People’s Bank of China (Macro-prudential Administration) and the Safe (Department of Balance of Payments).

Article source：Department of Finance, Ministry of Commerce, PRC