Foreign exchange concept

Foreign exchange (or Forex) is the abbreviation of international exchange. In essence, it is to convert the domestic currency into foreign currency, thus transferring this part of the funds abroad accordingly.

As an international means of payment, foreign exchange must have three characteristics: affordability, availability and convertibility.

China's foreign exchange refers to the means of payment and assets expressed in foreign currency that can be used for international settlement, including the following five contents: (1) foreign currency, including banknotes and coins;

(2) Foreign currency payment vouchers, including bills, bank deposit vouchers and postal savings vouchers;

(3) Foreign currency securities, including government bonds, corporate bonds and stocks; (4) Special Drawing Rights, European monetary units; 5] Other foreign exchange assets.

According to the different sources and uses of foreign exchange, it is divided into:

(1) Trade foreign exchange. Refers to the foreign exchange of import and export trade, including goods and related supporting expenses, which is the main source and use of a country's foreign exchange.

(2) Non-trade foreign exchange. Refers to the foreign exchange received and paid by other parties except import and export trade and capital import and export, including labor foreign exchange, remittance, donation and assistance foreign exchange.

According to the delivery period of foreign exchange, it is divided into:

(1) spot foreign exchange, also known as spot foreign exchange. Refers to the foreign exchange delivered on the same day or within two business days after the completion of foreign exchange transactions.

(2) Forward foreign exchange, also known as forward foreign exchange. It refers to the foreign exchange that the buyer and the seller do not need to deliver immediately, but only need to sign a sales contract and agree to deliver at a certain time in the future (two business days).

Common sense of foreign exchange

The foreign exchange rate is the rate or price at which one country's currency is converted into another country's currency, which can also be said to be the price of another country's currency expressed in one country's currency.

Foreign exchange quotation method of exchange rate:

Direct quotation (direct quotation). Is based on a unit (1 or 100, 10000 units, etc. ) foreign currency, converted into a certain amount of domestic currency to represent the exchange rate. That is, how much domestic currency is calculated based on a certain unit of foreign currency, so it is also called the payable price method. Such as the RMB market exchange rate.

Indirect quotation method. It represents the exchange rate by converting a certain unit of domestic currency into a certain amount of foreign currency. That is, how much foreign currency should be earned is calculated according to the domestic currency of a certain unit. Therefore, it is also called the valuation method of accounts receivable. Such as new york's foreign exchange market.

According to the angle of buying and selling foreign exchange by banks, it can be divided into:

(1) bid price, also known as bid price.

(2) Selling exchange rate, also known as selling price.

(3) The intermediate exchange rate, also called the middle price, is the average of the buying price and the selling price.

(4) Cash exchange rate refers to the exchange rate used by banks to buy and sell foreign exchange cash, and there is also the difference between the buying price and the selling price.

According to the way of bank foreign exchange remittance, it is divided into: wire transfer exchange rate; Wire transfer rate; Draft remittance (D/D exchange rate)

Two. Foreign exchange management of current account and capital account

Foreign exchange management, also known as foreign exchange control, refers to a restrictive policy measure for foreign exchange receipts and payments, trading, lending, transfer, international settlement, foreign exchange rate and foreign exchange market.

China's current foreign exchange management system basically belongs to partial foreign exchange control, that is, foreign exchange transactions in current account are not controlled or basically controlled, but foreign exchange transactions in capital account are restricted to some extent.

The goal of China's foreign exchange system reform is to create conditions to gradually liberalize and promote capital account convertibility on the basis of current account convertibility, so as to realize the full convertibility of RMB.

I. Current account foreign exchange management

It mainly includes: current account convertibility, current account foreign exchange income management and import and export verification system.

Current account convertibility

Refers to all kinds of transactions under the current account, including import and export of goods, payment of transportation fees, insurance premiums, labor services, outbound tourism, investment profits, loan interest, dividends, bonuses, etc. There is no restriction when purchasing foreign exchange from banks or paying from foreign exchange accounts.

1997 the State Council made it clear that China has realized the convertibility of RMB under current account through legislation, in which provisions have been added that the state does not restrict the international payment and transfer of current account.

(2) Bank settlement system

At present, China implements the system of bank settlement of foreign exchange income in current account. From1June 5, 1997 to1October, Chinese-funded enterprises were gradually allowed to open foreign exchange accounts and keep a certain amount of foreign exchange income.

A foreign exchange settlement account may be opened for foreign exchange income in the current account of a foreign-invested enterprise, and the State Administration of Foreign Exchange and its branches shall determine the maximum amount of foreign exchange that can be retained in the foreign exchange settlement account of a foreign-invested enterprise. Foreign exchange within the maximum limit can be retained or sold to designated foreign exchange banks or foreign exchange adjustment centers, and the part exceeding the maximum limit must be sold to designated foreign exchange banks or foreign exchange adjustment centers.

(3) The verification system of export receipts and payments

Write-off of export proceeds refers to the write-off of the corresponding foreign exchange income after the goods are exported.

The verification of import payment refers to the verification of the corresponding arrival after import payment.

The purpose of implementing these two systems is to supervise that enterprises must recover the payment in full and on time after exporting goods, and receive the goods in full and on time after paying the payment, so as to stop illegal acts such as arbitrage and evasion.

Two. Foreign exchange management of capital account

At present, the capital items in China's balance of payments are mainly foreign direct investment in China, foreign direct investment and borrowing foreign debts. The first two forms are mainly introduced here:

(A) foreign exchange management of foreign direct investment

It is divided into two aspects: foreign exchange revenue and expenditure management.

The foreign exchange income of enterprises with foreign investment in capital account is mainly foreign exchange investment funds, foreign exchange loans at home and abroad or foreign currency bonds issued overseas, and its management mainly includes the following links:

The first is the foreign exchange registration system.

The second is the management of special foreign exchange accounts.

The third is foreign debt registration.

The foreign exchange expenditure under the capital account of foreign-invested enterprises is mainly the repatriation of investment funds and repayment of foreign debt principal. The transfer or remittance of investment funds must be approved by the State Administration of Foreign Exchange. Repayment of foreign debt principal must be approved by the State Administration of Foreign Exchange before it can be handled in banks or foreign exchange swap centers.

(2) Foreign exchange management of overseas investment

At present, the competent authorities responsible for the examination and approval of overseas investment projects are the State Planning Commission and the Ministry of Foreign Trade and Economic Cooperation and their authorized departments; The foreign exchange administration organ for overseas investment is the State Administration of Foreign Exchange.

Before a domestic institution submits an application for overseas investment, the foreign exchange administration department shall review the following contents:

I. Qualification examination of investors

Two. Review the investment risks of overseas investment

Three, review the foreign exchange sources of overseas investment

After an overseas investment project is approved by the relevant department, the investor shall register with the State Administration of Foreign Exchange and deposit a deposit for the repatriation of overseas investment profits.

Third, foreign debt management.

The scope of China's foreign debt management includes: borrowing from abroad, issuing foreign currency bonds, international financial leasing, deferred payment of trade items, buyer's credit, overseas deposits absorbed by domestic financial institutions, and compensatory debts repaid in cash in trade; Borrow foreign exchange funds from foreign banks and Sino-foreign joint venture banks registered in China.

To achieve good economic benefits, a country must first maintain a moderate scale and growth rate, not the more the better. To measure the appropriateness of a country's foreign debt, international economic indicators such as debt service ratio, debt ratio, debt ratio and long-term and short-term debt ratio are usually used to judge.

External debt risk management

(1) Type of foreign debt risk: exchange rate risk; Interest rate risk; Accounting risk

(B) How to control and prevent foreign debt risks

In the financing stage:

1. Generally speaking, try to make the currency of foreign debt consistent with the currency of domestic export income and foreign exchange reserves.

2. Choose a convertible currency with strong liquidity.

3. In principle, choose "soft currency" and diversify the fund-raising currencies.

4. Consider the exchange rate and interest rate together.

5. Reasonable arrangement of financing interest rate structure

6. We should try our best to include the prepayment clause in the loan agreement.

7. Pay attention to adding protective clauses in the loan agreement.

8. Pay attention to diversifying the market structure and country structure of financing.

9. Pay attention to the reasonable term structure, control the proportion of long-term and short-term foreign debts, and avoid borrowing.

A large number of foreign debts with the same maturity can prevent excessive concentration and peak of debt repayment.

(C) the use of financial instruments to resolve foreign debt risks

Commonly used are debt swap (interest rate swap, currency and interest rate cross swap), forward contract (forward foreign exchange contract and forward interest rate contract) and futures (interest rate futures and foreign exchange).

Foreign exchange futures), options (interest rate options and foreign exchange options), currency indexation and debt currency diversification.

Four, foreign exchange deposit and loan business management

Financial institutions engaged in foreign exchange deposit and loan business must apply separately and obtain the approval of the State Administration of Foreign Exchange. Non-bank financial institutions may absorb foreign exchange trust deposits or foreign exchange deposits of specific enterprises upon approval.

In addition to the effectiveness, safety and liquidity of RMB loans, foreign exchange loans also have the following special requirements:

1. What currency to borrow, what currency to return.

2. Implement floating interest rate and charge the undertaking fee.

3. The focus of loan issuance should be the technological transformation projects to earn foreign exchange through export.

4 loan projects must be approved by the relevant departments according to procedures.

5 domestic supporting equipment and funds should be implemented.

6. The borrower must have a reliable source of foreign exchange and the ability to repay the principal and interest on schedule, and

A reasonable plan to repay the loan principal and interest.

At present, foreign exchange loans handled by Chinese banks include cash loans and special loans.

Foreign exchange loans, foreign-funded foreign exchange loans (buyer's credit, government loans and mixed loans)

Abbreviation), international commercial loans and international syndicated loans.

Verb (abbreviation of verb) RMB exchange rate management

1973- 1980 RMB exchange rate system pegged to a basket of currencies.

1973 determines the exchange rate of western currencies according to the principle of "a basket of currencies", that is, several currencies that are often used in China's foreign economic and trade exchanges are selected, and the weights are determined according to their importance and policy needs, and the RMB exchange rate is weighted according to the fluctuation range of these currencies in the international market. From 1973- 1984, the selected currency and weight have been adjusted seven times. Because the purpose of RMB pricing and settlement in China is to preserve value, the fixed value of RMB is higher in the guiding ideology of formulating RMB exchange rate.

198 1- 1984, the internal settlement price of trade is implemented.

Since 198 1, China has implemented two kinds of exchange rates: one is the announced exchange rate of non-trade foreign exchange receipts and payments; The other is the internal settlement price of trade foreign exchange for trade foreign exchange receipts and payments.

During this period, there are actually three kinds of exchange rates in China: one is the official quotation for external and non-trade income and expenditure; Second, the internal settlement price applicable to the trade balance; The third is to adjust the foreign exchange swap price in the foreign exchange market.

1985-1at the end of 1993, a limited flexible exchange rate system based on the US dollar was implemented.

1 985 65438+1October1day, China stopped using the internal settlement price of trade, and the trade revenue and expenditure and non-trade revenue and expenditure were settled according to the official quotation. Although the internal settlement price is consistent with the official quotation, the swap foreign exchange market still exists. In fact, besides the official quotation, there is also a swap foreign exchange price.

After April of 199 1, SAFE often makes fine adjustments according to the domestic price increase level and the fluctuation of the US dollar exchange rate. During the period of 1992- 1993, it remained at the level of 1 USD = around 5.8 yuan.

During this period, due to the increasing demand and other factors, by the end of 1993, the difference between the official quotation and the foreign exchange swap price was 3 yuan, that is, the official quotation was about US$ 65,438 +0 = 5.8 yuan, and the foreign exchange swap price was about US$ 65,438 +0 = 8.7 yuan.

Since 1994, China has implemented a new foreign exchange management system. Under this new system, the RMB exchange rate has the following characteristics:

(1) The RMB exchange rate is no longer determined directly by the official administrative authorities, but by the people of China.

The People's Bank of China announces the RMB exchange rate of the day according to the price formed in the inter-bank foreign exchange market the day before, and the designated foreign exchange banks independently determine and adjust the buying and selling prices for customers according to the exchange rate announced by the People's Bank of China and the specified floating range.

The designated foreign exchange banks determine the exchange rate according to market supply and demand. this

Because: first, the new system implements the foreign exchange settlement system, and all foreign exchange supplies under the current account enter the foreign exchange market; Second, the implementation of the bank's foreign exchange sales system, the cancellation of the regular plan for the payment and use of foreign exchange in the current account, and the cancellation of the mandatory plan for foreign exchange receipts and payments mean that most of the foreign exchange demand in the current account can and must be met through the foreign exchange market.

⑶ The exchange rate based on market supply and demand is unified. After the implementation of the new system, under the foreign exchange settlement system and the foreign exchange sale system, foreign exchange supply and demand are mediated by designated foreign exchange banks, and enterprises are not allowed to buy or sell foreign exchange directly. Therefore, the foreign exchange swap market has completed its historical mission, and the foreign exchange swap price has correspondingly evolved into the market exchange rate, which is called "exchange rate consolidation". Because the exchange rate is determined by the designated foreign exchange banks, but the distribution of foreign exchange supply and demand within the business scope of each bank is inconsistent, it is necessary to realize the national unification of RMB exchange rate by establishing a foreign exchange trading market among interbank banks.

Six, foreign exchange and gold reserve management related topics

I. Management of foreign exchange reserves

Foreign exchange reserve refers to the official reserve currency held by various countries, which can be freely controlled and freely convertible. It is the main component of a country's international reserves and an important symbol of the country's macro-control strength. The People's Bank of China is responsible for holding, operating and managing China's foreign exchange reserves.

The main functions of foreign exchange reserves:

1. Adjust the balance of payments to ensure external payment.

2. Intervene in the foreign exchange market and stabilize the local currency exchange rate.

3. Maintain international reputation and improve external financing capacity.

4. Enhance comprehensive national strength and ability to resist risks.

The operating principle of foreign exchange reserves is to consider safety, liquidity and appreciation. But it is impossible to have all three, so when managing foreign exchange reserves, countries often have their own emphasis. Generally speaking, these three principles should be taken into account as much as possible, and the strategies of "combination" and "not putting all eggs in one basket" should be adopted to realize diversified management of foreign exchange reserves, reduce risks and realize appreciation.

China's foreign exchange reserves are mainly invested and increased by the foreign exchange management center. In the past, the investment strategy was conservative, mainly investing in American bonds. Until recent years, China only invested and increased its foreign exchange reserves, mainly concentrated in the low-risk US bond market, while the investment ratio in higher-risk foreign exchange transactions was very low.

At present, China is the second largest buyer of the US bond market, second only to Japan. 1997, China sold a lot of American long-term bonds in the American market and bought a lot of short-term bonds instead. China's action has attracted the attention of the US bond market, which reflects that his investment strategy has become more flexible and enterprising. At the same time, with the increasing participation of China in the international financial market, China has also trained a number of international business talents in recent years, which has increased its grasp of the rapidly changing international financial market, thus making its investment strategy more flexible.

Second, the gold reserve management

Gold reserve refers to the gold held by a country's monetary authorities as a financial asset in order to balance the international payments and maintain or influence the exchange rate level. It plays a special role in stabilizing the national economy, curbing inflation and improving international reputation. Golden Chu

The significance of reserve management lies in realizing the greatest possible liquidity and profitability of gold reserves. As one of the main forms of international reserves, gold reserve has its own limitations in liquidity, and its moderate scale should be considered.

Reference factors for determining the scale of gold reserves;

1. Balance of payments situation

2. External debt level

3. Level of foreign exchange reserves

The application forms of gold reserves are mainly divided into direct operation, indirect turnover and asset portfolio.

1. Direct operation-A country's monetary authorities take advantage of various opportunities in the international financial market and adopt various operational means to directly participate in trading activities in the gold market.

2. Indirect turnover-a country's monetary authorities indirectly realize the purpose of maintaining and increasing the value of gold reserves by manufacturing and selling gold coins, leasing gold and lending gold.

3. Portfolio-A certain amount of gold reserves will be converted into foreign exchange reserves with high profitability and strong liquidity in time according to the principles of liquidity and profitability, and then adjusted appropriately according to the changes of market exchange rate.

There are two main forms of using gold reserves in China:

(a) through the international gold market, adopt spot, futures and options trading methods, improve the rate of return of gold reserve operation.

(two) through the issuance and distribution of various gold coins, to achieve the appreciation of gold in stock.