Foreign exchange administration represents a series of administration measures adopted by the state currency and finance administration authority or other government bodies as entrusted by the state to implement control upon foreign exchange regarding its income and expenditure, purchase and sales, borrowing and lending, transfer, settlement of international balance, foreign exchange rate and foreign exchange market.
Chinese foreign exchange administration mechanism has experienced three economic periods since the establishment of People’s Republic of China. The time frame and main features of each period are illustrated in the following table:
| Economic Period | Time frame | Main Features |
| Planned Economy Period | 1953-1978 | a) Short of foreign exchange
b) Highly centralized and strictly planned foreign exchange control mechanism c) Rejected foreign investment and debt d) Foreign exchange rate being overvalued due to not linking to the real situation of international trade |
| Economy Transform Period | 1979-1993 | a) Changed from a highly centralized administration mechanism to one that is adapt to socialism market economy
b) Allowed certain reserve of foreign exchange for local government and enterprises to meet their needs of foreign exchange in developing and enlarging business c) Allowed unused foreign exchange in one enterprise being transferred to others in need d) Adjusted foreign exchange rate step by step (1981-1:1.28; 1990-1:5.22; 1993-1:8.72 $/RMB ) e) Approved many financial institutions to do foreign exchange business f) Allowed individual to deposit foreign exchange g) Issued foreign exchange bills |
| Socialism Market Economy Period | 1994-Present | a) Set up a foreign exchange administration mechanism that is adapt to socialism market economy
b) Allow current account to be exchangeable c) Strictly control capital account, which include lending abroad, foreign investment in China, directly investing abroad d) Allow floated foreign exchange rate determined by market demand with due administration by the state e) Strengthen the supervision and management of financial institution f) Set up legal system of foreign exchange |
Since the reform and opening of China, Chinese government has been making significant progress in foreign exchange administration. The future objective of foreign exchange administration is to allow capital account totally to be exchangeable step by step and to establish a healthy and favorable economic environment for foreign investments in China.
