People's Bank of China, Circular on Further Improving Administration of the Exchange Rates for Transactions on the Inter-bank Foreign Exchange Market and the Posted Exchange Rates of Designated Foreign Exchange Banks

Issued: September 14 2005
Effective: as of date of issue
Applicability: In case of a conflict between previous provisions and this Circular, this Circular shall prevail (Item Eight).

Main contents: The Circular states that the transaction price of a non-US currency against renminbi on the inter-bank foreign exchange spot market may fluctuate within a band of plus or minus 3% per day from the median transaction price against that particular currency as announced by the People's Bank of China on the same day (Item One). For designated foreign exchange banks, the gap between the posted spot selling and buying rates of US dollar against renminbi shall be no more than 1% of the median transaction price against the US dollar as announced by the People's Bank of China, and the gap between the selling and buying notes exchange rates shall be no more than 4% of the median transaction price against the US dollar. Designated foreign exchange banks may, within the gap ranges as specified above and at their own discretion, adjust the US dollar buying and selling spot rates and notes exchange rates for the same day (Item Two). The limits on the gap ranges between the posted buying and selling spot rates and notes exchange rates of non-US currencies against renminbi will be abolished. Designated foreign exchange banks may decide at their own discretion the posted buying and selling spot rates and notes exchange rates of non-US currencies against renminbi (Item Three). Designated foreign exchange banks may negotiate with their clients on the buying and selling spot rates and notes exchange rates. The agreed buying and selling spot rates and notes exchange rates of US dollar against renminbi may not exceed the specified gap ranges (Item Four).