1970-01-01 08:33:27
China has scrapped a reward scheme set up eight years ago that gave preferential treatment to domestic companies which earned the largest amounts of foreign currency in the latest attempt to keep tabs on its soaring trade surplus and foreign exchange reserves.
The State Administration of Foreign Exchange and the Ministry of Commerce on Monday told local foreign exchange and trade departments in a joint statement to stop grading local companies based upon their previous year's foreign currency revenue. The regulation took effect on July 1.
The annual grading, which began in 1999, divided export companies into three categories: honorary foreign exchange earners, the average and the high risk.
Companies rewarded with distinctions would then enjoy preferential interest rates for loans, more access to foreign trade development funds, higher export tax rebates and greater freedom in the management of their own foreign currency revenue.
They were allowed to keep a maximum of 30 percent of their annual foreign trade volume in their current accounts, double the figure allowed for average companies.
Export firms that were deemed "high risk" and failed to report their foreign exchange revenue correctly to local authorities, or had been ranked high risk for two consecutive years, had their imports and exports licenses revoked.
"The system played a significant role in encouraging firms to declare their export revenue in full, strengthening foreign exchange controls and preventing arbitrage," said the joint statement.
"Ending the grading system was a decision made in line with the current trade situation," it said.
The past ten years has seen China develop from a country facing foreign exchange shortages to a global trade power with a trade surplus for the first five months of this year of 85.7 billion U.S. dollars, up 84 percent over the figure of the same period last year.
By the end of March, China's foreign exchange reserves had surged by 37 percent to exceed 1.2 trillion U.S. dollars, the world's largest.
The Ministry of Finance imposed extra export tariffs and cut import duties on June 1 to narrow China's widening trade surplus and recently issued special bonds for foreign exchange investment to absorb excess liquidity.
Source: Xinhua