China’s FX regulator just announced that it will strengthen supervision of the foreign exchange market in 2017, while improving policy transparency and promoting the further opening of financial markets, as reported by Reuters.
Chinese authorities are working recently on supporting the weakening yuan currency, while trying to attract more foreign investment.
Pan Gonsheng, head of the State Administration of Foreign Exchange (SAFE) said that China’s foreign exchange market is relatively stable and cross-border capital flows are becoming more balanced, according to a statement posted on its website.
The SAFE uncovered a underground bank in the southern Chinese city of Shenzhen involving 50 billion yuan ($7.27 billion), and cases of firms’ using fake documents and fake trade deals to transfer foreign exchange overseas.
SAFE spokes-person said in a statement that the regulator had investigated six companies suspected of illegal forex transfers in the southern city of Shenzhen.
An unspecified number of other firms were found to have used false documentation, fabricated trades, and other methods to funnel money out of the country, the forex regulator spokes-person added.
China’s foreign exchange reserves unexpectedly fell below the closely watched $3 trillion level in January for the first time in nearly six years.
But the January decline was the smallest in seven months, indicating China’s renewed crackdown on outflows appears to be working, at least for now.
A recent pullback in the dollar after a multi-month rally has also helped ease pressure on the yuan and other emerging currencies, though most analysts expect depreciation pressure to resume soon as the U.S. central bank positions for what could be several interest rate hikes this year.