Payment and Receipt Arrangement for FX in China

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Payment and Receipt Arrangement for FX in China
China’s currency is RMB (Renminbi), and the unit is Yuan (IMF 855). The country has a de jure managed floating exchange rate arrangement to ensure stability for the RMB exchange rate as per the equilibrium based on demand and supply of basket of currencies (IMF 855).
The Central Bank in China, People’s Bank of China (PBC), has fixed the RMB’s trading price floating band at 2% against the USD in the interbank FX market under its Foreign Exchange Trading System (CFETS). According to PBC, the floating rate will be expanded in an orderly manner according to market and economic situations (IMF 856).
While there are no limits on purchase and sales price of spot exchange and cash, the CFETS publishes an exchange rate index based on the Bank of International Settlement currency basket, thereby having an ‘other managed’ arrangement (IMF 856). The daily mid rates are published against various currencies to serve as interbank spot FX rates (IMF 856).
China has a robust arrangement for payment and receipt as the Central Bank has currency swap agreements with over 40 countries and regions (IMF 866). For all cross-border trade, there are no restrictions on the currencies that can be used. In cross-border transactions, contractual parties may be free to use convertible currencies or RMB. Also, businesses and individuals may settle cross-border transactions for current account items in RMB (IMF 861). For inward and outward FDI transactions, RMB may be used, and eligible institutions for FDI include commercial banks, insurance companies, fund management companies, securities companies, an...