As we have observed the recent rise in the number of Chinese individuals who are opening up new financial institutions for the purpose of facilitating trade of financial products, especially financial products, the government of the People’s Republic of China has now stressed the need for greater protection and regulation of foreign currency exchange. According to some sources, the government has already proposed legislation to tighten currency exchange regulations and has also sought assistance from the United States government in this regard.
In a meeting held in Washington D.C. in January 2020, a high-ranking official of the Chinese Government explained that China has long been concerned about the issues involved in establishing an effective system of foreign exchange. He stated that, at present, China’s economy is heavily dependent on the foreign trade and that maintaining stable trade relations with its trading partners has become of utmost importance to the government. He explained that China is deeply interested in making its currency more open to trade and commerce, as this would encourage more foreign companies to operate in China and increase the flow of goods and capital to the country.
During the discussion, the senior Chinese official explained that the government of China considers foreign currencies as a very important part of the nation’s economy, and that without their help, China would be unable to sustain itself. He stated that, in the past decade, China has successfully established a number of interbank lending institutions and developed a number of trade and investment relationships with many countries. This has been greatly beneficial to the growth of the Chinese economy, but it has also created great difficulties for those who wish to invest their own funds in the country, for example, individuals who wish to invest in the stock market.
The senior Chinese official continued, explaining that he hoped the United States and other Western countries will continue to realize the importance of maintaining the free flow of capital to China, and that they would be able to provide a stable environment for investors to place their funds in the country. At the same time, he stressed the importance of the United States as a trading partner and an economic partner for China.
According to a former high-ranking Chinese official, it was clear that China would like to see greater regulation of foreign currency exchange, and this would be part of the package they were offering during the discussions with the United States. However, this does not mean that the Chinese government has completely closed the door on financial development. In fact, according to them, China is keen on pursuing a partnership with the United States in the area of fintech regulation, in order to foster greater cooperation among various foreign companies and institutions involved in the exchange market.
One of the issues discussed at the meeting between President Hu Jintao and his U.S. counterpart, Barack Obama, was the possibility of expanding the existing FDI policy in the country and creating an opportunity for foreign corporations to invest in China through the use of credit facilities that are available to them. In the same way, the Chinese government is also keen on attracting investment from the United States government and other countries by introducing a series of initiatives aimed at attracting and supporting foreign business.