What is inflow i forex

What is inflow i forex

A foreign exchange gain or loss accounting example is when the EUR customer pays the invoice to the US seller. Let seller from the US posts an invoice for EUR to a German customer. Let on the invoice date, EUR is worth USD, and on the payment date value of EUR The foreign exchange (Forex) is the conversion of one currency into another currency The money that goes into the business is known as the cash inflow. It is not restricted only to your capital and investment; it could come from several sources such as sales. And/or financing. It is the opposite of what cash outflow stands for. Cash outflow is the money that leaves the business

What is Cash Inflow and Outflow? - Forex Education

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China promulgated its first Regulations on the Administration of Foreign Exchange "Original Regulations" inwhich were last updated in One major purpose China promulgated the Original Regulations was to increase its foreign exchange "forex" reserve, what is inflow i forex. The past decade has witnessed the rapid development of China's economy, including a dramatic change in China's financial situations.

Nowadays, China's forex reserve has swung from scarcity to superabundance. The size of the reserve could be partly attributed to the country's continued trade surplus and sustained foreign what is inflow i forex into China.

The arrival of speculative funds, well known as "hot money," is also regarded as one reason for China's enlarged pool of forex reserve. The Original Regulations seem no longer compatible with China's current needs. On August 5,the State Council of China revised the Original Regulations by promulgating the new version of the Regulations on the Administration of Foreign Exchange "Revised Regulations"which became effective the same day.

This article highlights some of the changes in the Revised Regulations to demonstrate China's new attitude towards forex control and what difference these changes will bring. The Original Regulations required that forex income from current account items and capital account items 1 of domestic persons not only entities but also individuals must be repatriated back to China 2and also set forth a mandatory settlement requirement that domestic persons must sell what is inflow i forex to or deposit forex with domestic banks, with limited exceptions.

Under the Revised Regulations, domestic persons can now choose to either deposit forex income overseas or have it repatriated into China, what is inflow i forex.

However, this change is not as radical as it first appears. Prior to adoption of the Revised Regulations, the State Administration of Foreign Exchange "SAFE" already provided relief to domestic entities from the mandatory settlement requirement under the Original Regulations.

That circular ended the earlier requirement of making the amount of forex income from transactions of current account items a domestic person may keep a specified percentage of the amount of forex it had used in the previous year. Thus, with the change, it seems that domestic persons can now open and maintain bank accounts overseas, which were not allowed originally except for listing on a foreign exchange or for overseas construction projects.

The way to deter "hot money" cannot focus on a single front, what is inflow i forex, and the Revised Regulations are tackling the problem on several fronts. In the Chapter I - General Provisions, an added provision endows the government with right to take necessary safeguard or control measures to balance between inflow and outflow of forex in case there is or could be serious imbalance or national economy falls or could fall into crisis. In effect, the government has the liberty to take any radical measures as long as it thinks the situation warrants.

In reality, to cool down investments in the real estate sector, Chinese government has already adopted certain rules blocking foreign funds into the Chinese real estate market. Foreign invested real estate companies have not been allowed to borrow money offshore regardless of the conventional forex regime pursuant to which a foreign invested enterprise can incur foreign debt up to twice its paid-in capital.

Nevertheless, it remains to be seen how this stipulation in the Revised Regulations will increase compliance without interfering with or causing delay to regular trade.

As to forex inflow through capital account items, the Revised Regulations have provided that approval of SAFE is required when forex is deposited with or sold to domestic banks unless otherwise provided by the state. Furthermore, the Revised Regulations have a strict prescription that forex from capital account items must be spent with what is approved by SAFE and SAFE will supervise the use of capital account funds, including RMB converted from forex, and the changes in capital accounts.

The Revised Regulations have a new chapter specifically dedicated to the supervision and administration of forex operations.

We would anticipate that practically SAFE will be difficult to compel someone to cooperate with the investigation. The regime of intensified supervision of forex operations imposed filing obligations on domestic entities engaging in the forex business. These what is inflow i forex must submit their financial and accounting statements and other statistical data to SAFE.

The Revised Regulations take a favorable approach towards outbound forex. Firstly, the Revised Regulations explicitly allow domestic persons to invest in securities or derivatives oversea as well as make direct outbound investments. Secondly, the Revised Regulations abolish the verification procedures to certify the source of forex used in outbound investments, which was required under the Original Regulations.

Domestic persons' capacity to provide guarantee in favor of foreign persons is also increased. The Revised Regulations delete the restrictive stipulation that only financial institutions or enterprises meeting state-imposed requirements can provide outbound guarantee, but only state that SAFE will approve applications for outbound guarantee based on an applicant's asset-liability ratio status unless the state requires special approval.

While the change is welcomed, how it will work out in reality is subject to implementation rules yet to be made or updated. The major regulations now governing outbound guarantee have been in place for more than ten years without change and certainly need to be updated to accord with the Revised Regulations.

Another way forex flows out is through extension of credit by domestic persons to overseas persons, what is inflow i forex, and such lending is explicitly permitted in the Revised Regulations.

Unless where the state requires specific approvals, SAFE will "green light "and register outbound lending by domestic financial institutions as long as their business scopes cover this operation; for other domestic entities, SAFE will give its consent based its evaluation of the applicant's assets-liability ratio.

The Revised Regulations reflect China's current priority to balance between inflow and outflow of forex by deterring inflow of destabilizing "hot money" and encouraging outflow of forex surplus. The Regulations, however, serve only as a framework and the language therein are general and abstract. The Revised Regulations are thus most reasonably to be understood as a starting point for promulgation of further detailed implementation rules. How the changes we have discussed above can be carried out to the fullest extent depends on those rules yet to be made.

We would not expect the Revised Regulations to bring instant changes, but we still need to understand these Regulations so that we can anticipate what actual changes are in store for the future, what is inflow i forex.

Circular concerning Retaining Foreign Exchange Income under Current Accounts by Domestic Entities. Chapter Six. Supervision and Administration, Article 33 to Article 38 of the Revised Regulations. Article 33 1Article 33 2and Article 33 3 of the Revised Regulations. Pilot Projects for Investment in Overseas Stock Markets by Domestic Individuals, issued by SAFE on August 20, The pilot plan was limited to Tianjin Binghai New District.

Regulatory Procedures for Provision of Outbound Guarantees by Domestic Entities, issued by People's Bank on September 25, ; and Detailed Implementation Rules for the Regulatory Procedures for Provision of Outbound Guarantee by Domestic Entities, what is inflow i forex, issued by SAFE on December 11, The content of this article is intended to provide a general guide to the subject matter.

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Learn More Accept. China: Forex Regulations - Changes That Impact Inflow And Outflow Of Forex. by David TangJun Li and Bill Zhang. To print this article, all you need is to be registered or login on Mondaq. Background China promulgated its first Regulations on the Administration what is inflow i forex Foreign Exchange "Original Regulations" inwhat is inflow i forex, which were last updated in Repatriation And Settlement Of Forex Not Required The Original Regulations required that forex income from current account items and capital account items 1 of domestic persons not only entities but also individuals must be repatriated back to China 2and also set forth a mandatory settlement requirement that domestic persons must sell forex to or deposit forex with domestic banks, with limited exceptions.

Deterring Hot Money Entry Into China "Hot money" is seen as a driving force for inflation in China, and setting up a firewall against "hot money" is on the top action list in the Chinese regulator's mind. Conclusion The Revised Regulations reflect China's current priority to balance between inflow and outflow of forex by deterring inflow of destabilizing "hot money" and encouraging outflow of forex surplus.

Footnotes 1. Articles 9 and 19 of the Original Regulations. Articles 10 and 20 of the Original Regulations.

Article 13 of the Revised Regulations. Article 9 of the Revised Regulations 6. Article 11 of the Revised Regulations. Article 12 of the Revised Regulations. Article 21 of the Revised Regulations. Article 23 of the Revised Regulations. Article 33 4 and Article 33 5 of the Revised Regulations. Article 33 6 of the Revised Regulations.

Article 35 of the Revised Regulations. Article 36 of the Revised Regulations. Article 17 of the Revised Regulations. Article 21 of the Original Regulations. Article 19 of the Revised Regulations. Article 20 of the Revised Regulations. David Tang. Jun Li. Bill Zhang. ARTICLE TAGS. POPULAR ARTICLES ON: Strategy from China. Every right comes with its own duties, what is inflow i forex. Most powerful rights have more duties attached to them.

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Foreign exchange inflow/outflow in director's report

The foreign exchange (Forex) is the conversion of one currency into another currency The money that goes into the business is known as the cash inflow. It is not restricted only to your capital and investment; it could come from several sources such as sales. And/or financing. It is the opposite of what cash outflow stands for. Cash outflow is the money that leaves the business Foreign exchange inflow/outflow in director's report An Indian private company receives payment for online services from foreign customers by paypal / swift transfer. The swift transfer in USD is handled by Indian bank that is authorized by RBI. Similarly paypal