China's State Administration of Foreign Exchange (SAFE) announced yesterday that starting from July 1, overseas investors can settle capital stock accounts directly with authorized local banks.

Prior to the reform, every settlement of foreign investors' capital stock accounts had to be first approved by SAFE before being submitted to banks.

Now individual banks will be responsible for checking settlements and SAFE will oversee bank operations.

A SAFE spokesman said the change is aimed at improving the investment environment in China by improving efficiency of foreign funded enterprises. The current approval system has hindered the capital flow of foreign investors.

The national reform was led by a trial program launched last August.

The pilot program, carried out at 200 authorized banks in 20 cities and provinces including Shanghai, Guangdong and Zhejiang, received positive feedback from foreign-funded enterprises.

The spokesman said the adjustment shortens settlement time for foreign investors who can finish up all procedures at bank counters.

The necessary documents for settlement remain unchanged and the reform is only limited to the settlement of investment accounts, the spokesman stressed.

He refuted the idea that the reform means SAFE is abandoning or weakening control of the settlements of capital stock accounts, adding that it has just shifted its monitoring focus from foreign investors to authorized banks.

Only banks that have had no big faults in capital account settlements in the past three years will be authorized by SAFE.

Banks involved should report settlement data to the administration every working day and those without networks are asked to submit monthly reports.

SAFE has made continuous efforts to improve the management of foreign exchange under the standards of the World Trade Organization.

China's foreign reserves reached US$233.8 billion in April.

(China Daily June 29, 2002)