Fight against hot money creates new risks for traders

The Circular on Issues Concerning the Implementation of Registration and Administration of Foreign Claims Related to Goods Trade Items of Enterprises (Document No. 56) was recently issued by the State Administration of Foreign Exchange (Safe) and reflects the Chinese government's further strengthening of control and administration over the flow of funds involved in the trade of goods. It lays out specific formality requirements that business players should be aware of when complying with both the Operation Guidance for Administration of Trade Credit Registration (Advance Payment Part) and the Operation Guidance for Administration of Trade Credit Registration (Deferred Payment Part), also issued by Safe.

    On July 14 2008, Safe promulgated its Circular on the Issues Concerning the Implementation of Registration of Foreign Debts under the Goods Trade of Enterprises (Document No. 30) to clarify the relevant issues involved with the registration of foreign debts. Four months later, Document No. 56 went into effect. It requires foreign-related credit rights under the trade in goods to be registered, too. Document No. 56 and Document No. 30 are like two sides of the same coin, reflecting the Chinese government's intention to regulate not only the inflow, but also the outflow of funds under trade of goods so as to try to balance international payments within China and especially restrain the flow of refugee capital.

Two weapons against hot money