Increasing forex quota boosts forex trades

Chinese residents more than tripled their forex buys because of the sharply increasing of the forex quota for individuals, aiming in reducing the soaring reserves, a senior government official said yesterday.

Deng Xianhong, deputy head of the State Administration of Foreign Exchange, said demand by individuals to convert RMB into foreign currency rose 259% in the four months through June from a year earlier, without disclosing specific figures.

Deng said the government was planning a series of reforms either in personal direct investment overseas or in securities investment overseas, which mainly depend on effective supervision.

The forex regulator raised the annual quota in foreign exchange transactions by private citizens from US$20,000 to US$50,000, starting in February.

The new rules allowed individuals buy more than quota as they show their specific needs, such as an extended educational trip abroad.

"We've been receiving positive response since we eased foreign exchange rules for residents in February," said Deng.

Besides overseas trips, residents are also allowed to use foreign exchange to invest in foreign-currency products introduced by commercial banks, products from qualified domestic institutional investors, gold and US dollar-dominated B shares, which jumped 141% so far this year.

China's foreign exchange reserves climbed to US$1.2 trillion in the first quarter this year.