Keep Us Strong WikiLeaks logo

Currently released so far... 97115 / 251,287

Articles

Browse latest releases

Browse by creation date

Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z

Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
ETRD EAGR ETTC EAID ECON EFIN ECIN EINV ELAB EAIR ENRG EPET EWWT ECPS EIND EMIN ELTN EC ETMIN EUC EZ ET ELECTIONS ENVR EU EUN EG EINT ER ECONOMICS ES EMS ENIV EEB EN ECE ECOSOC EK ENVIRONMENT EFIS EI EWT ENGRD ECPSN EXIM EIAD ERIN ECPC EDEV ENGY ECTRD EPA ESTH ECCT EINVECON ENGR ERTD EUR EAP EWWC ELTD EL EXIMOPIC EXTERNAL ETRDEC ESCAP ECO EGAD ELNT ECONOMIC ENV ETRN EIAR EUMEM ENRGPARMOTRASENVKGHGPGOVECONTSPLEAID EREL ECOM ECONETRDEAGRJA ETCC ETRG ECONOMY EMED ETR ENERG EITC EFINOECD EURM EENG ERA EXPORT ENRD ECONEINVETRDEFINELABETRDKTDBPGOVOPIC EGEN EBRD EVIN ETRAD ECOWAS EFTA ECONETRDBESPAR EGOVSY EPIN EID ECONENRG EDRC ESENV ETT EB ENER ELTNSNAR ECHEVARRIA ETRC EPIT EDUC ESA EFI ENRGY ESCI EE EAIDXMXAXBXFFR EETC ECIP EIAID EIVN EBEXP ESTN EING EGOV ETRA EPETEIND ELAN ETRDGK EAIDRW ETRDEINVECINPGOVCS EPEC ENVI ELN EAG EPCS EPRT EPTED ETRB EUM EAIDS EFIC EFINECONEAIDUNGAGM EAIDAR ESF EIDN ELAM EDU EV EAIDAF ECN EDA EXBS EINTECPS ENRGTRGYETRDBEXPBTIOSZ EPREL EAC EINVEFIN ETA EAGER EINDIR ECA ECLAC ELAP EITI EUCOM ECONEFINETRDPGOVEAGRPTERKTFNKCRMEAID EARG ELDIN EINVKSCA ENNP EFINECONCS EFINTS ECCP ETC EAIRASECCASCID EINN ETRP EAIDNI EFQ ECOQKPKO EGPHUM EBUD ECONEINVEFINPGOVIZ ENERGY ELB EINDETRD EMI ECONEFIN EIB EURN ETRDEINVTINTCS EIN EFIM ETIO ELAINE EMN EATO EWTR EIPR EINVETC ETTD ETDR EIQ ECONCS EPPD ENRGIZ EISL ESPINOSA ELEC EAIG ESLCO EUREM ENTG ERD EINVECONSENVCSJA EEPET EUNCH ECINECONCS ETRO ETRDECONWTOCS ECUN EFND EPECO EAIRECONRP ERGR ETRDPGOV ECPN ENRGMO EPWR EET EAIS EAGRE EDUARDO EAGRRP EAIDPHUMPRELUG EICN ECONQH EVN EGHG ELBR EINF EAIDHO EENV ETEX ERNG ED
KMDR KPAO KPKO KJUS KCRM KGHG KFRD KWMN KDEM KTFN KHIV KGIC KIDE KSCA KNNP KHUM KIPR KSUM KISL KIRF KCOR KRCM KPAL KWBG KN KS KOMC KSEP KFLU KPWR KTIA KSEO KMPI KHLS KICC KSTH KMCA KVPR KPRM KE KU KZ KFLO KSAF KTIP KTEX KBCT KOCI KOLY KOR KAWC KACT KUNR KTDB KSTC KLIG KSKN KNN KCFE KCIP KGHA KHDP KPOW KUNC KDRL KV KPREL KCRS KPOL KRVC KRIM KGIT KWIR KT KIRC KOMO KRFD KUWAIT KG KFIN KSCI KTFIN KFTN KGOV KPRV KSAC KGIV KCRIM KPIR KSOC KBIO KW KGLB KMWN KPO KFSC KSEAO KSTCPL KSI KPRP KREC KFPC KUNH KCSA KMRS KNDP KR KICCPUR KPPAO KCSY KTBT KCIS KNEP KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG KNNB KGCC KINR KPOP KMFO KENV KNAR KVIR KDRG KDMR KFCE KNAO KDEN KGCN KICA KIMMITT KMCC KLFU KMSG KSEC KUM KCUL KMNP KSMT KCOM KOMCSG KSPR KPMI KRAD KIND KCRP KAUST KWAWC KTER KCHG KRDP KPAS KITA KTSC KPAOPREL KWGB KIRP KJUST KMIG KLAB KTFR KSEI KSTT KAPO KSTS KLSO KWNN KPOA KHSA KNPP KPAONZ KBTS KWWW KY KJRE KPAOKMDRKE KCRCM KSCS KWMNCI KESO KWUN KPLS KIIP KEDEM KPAOY KRIF KGICKS KREF KTRD KFRDSOCIRO KTAO KJU KWMNPHUMPRELKPAOZW KEN KO KNEI KEMR KKIV KEAI KWAC KRCIM KWCI KFIU KWIC KCORR KOMS KNNO KPAI KBWG KTTB KTBD KTIALG KILS KFEM KTDM KESS KNUC KPA KOMCCO KCEM KRCS KWBGSY KNPPIS KNNPMNUC KWN KERG KLTN KALM KCCP KSUMPHUM KREL KGH KLIP KTLA KAWK KWMM KVRP KVRC KAID KSLG KDEMK KX KIF KNPR KCFC KFTFN KTFM KPDD KCERS KMOC KDEMAF KMEPI KEMS KDRM KEPREL KBTR KEDU KNP KIRL KNNR KMPT KISLPINR KTPN KA KJUSTH KPIN KDEV KTDD KAKA KFRP KWNM KTSD KINL KJUSKUNR KWWMN KECF KWBC KPRO KVBL KOM KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG KEDM KFLD KLPM KRGY KNNF KICR KIFR KM KWMNCS KAWS KLAP KPAK KDDG KCGC KID KNSD KMPF KPFO KDP KCMR KRMS KNPT KNNNP KTIAPARM KDTB KNUP KPGOV KNAP KNNC KUK KSRE KREISLER KIVP KQ KTIAEUN KPALAOIS KRM KISLAO KWM KFLOA
PHUM PINR PTER PGOV PREL PREF PL PM PHSA PE PARM PINS PK PUNE PO PALESTINIAN PU PBTS PROP PTBS POL POLI PA PGOVZI POLMIL POLITICAL PARTIES POLM PD POLITICS POLICY PAS PMIL PINT PNAT PV PKO PPOL PERSONS PING PBIO PH PETR PARMS PRES PCON PETERS PRELBR PT PLAB PP PAK PDEM PKPA PSOCI PF PLO PTERM PJUS PSOE PELOSI PROPERTY PGOVPREL PARP PRL PNIR PHUMKPAL PG PREZ PGIC PBOV PAO PKK PROV PHSAK PHUMPREL PROTECTION PGOVBL PSI PRELPK PGOVENRG PUM PRELKPKO PATTY PSOC PRIVATIZATION PRELSP PGOVEAIDUKNOSWGMHUCANLLHFRSPITNZ PMIG PREC PAIGH PROG PSHA PARK PETER POG PHUS PPREL PS PTERPREL PRELPGOV POV PKPO PGOVECON POUS PGOVPRELPHUMPREFSMIGELABEAIDKCRMKWMN PWBG PMAR PREM PAR PNR PRELPGOVEAIDECONEINVBEXPSCULOIIPBTIO PARMIR PGOVGM PHUH PARTM PN PRE PTE PY POLUN PPEL PDOV PGOVSOCI PIRF PGOVPM PBST PRELEVU PGOR PBTSRU PRM PRELKPAOIZ PGVO PERL PGOC PAGR PMIN PHUMR PVIP PPD PGV PRAM PINL PKPAL PTERE PGOF PINO PHAS PODC PRHUM PHUMA PREO PPA PEPFAR PGO PRGOV PAC PRESL PORG PKFK PEPR PRELP PREFA PNG PGOVPHUMKPAO PRELECON PINOCHET PFOR PGOVLO PHUMBA PRELC PREK PHUME PHJM POLINT PGOVPZ PGOVKCRM PGOVE PHALANAGE PARTY PECON PEACE PROCESS PLN PRELSW PAHO PEDRO PRELA PASS PPAO PGPV PNUM PCUL PGGV PSA PGOVSMIGKCRMKWMNPHUMCVISKFRDCA PGIV PRFE POGOV PEL PBT PAMQ PINF PSEPC POSTS PHUMPGOV PVOV PHSAPREL PROLIFERATION PENA PRELTBIOBA PIN PRELL PGOVPTER PHAM PHYTRP PTEL PTERPGOV PHARM PROTESTS PRELAF PKBL PRELKPAO PKNP PARMP PHUML PFOV PERM PUOS PRELGOV PHUMPTER PARAGRAPH PERURENA PBTSEWWT PCI PETROL PINSO PINSCE PQL PEREZ PBS

Browse by classification

Community resources

courage is contagious

Viewing cable 06BEIJING7696, NEW CAPITAL ACCOUNT LIBERALIZATION MEASURES SET

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs

Understanding cables
Every cable message consists of three parts:
  • The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
  • The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
  • The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
To understand the justification used for the classification of each cable, please use this WikiSource article as reference.

Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #06BEIJING7696.
Reference ID Created Released Classification Origin
06BEIJING7696 2006-04-25 00:16 2011-08-23 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Beijing
VZCZCXRO3208
PP RUEHCN RUEHGH
DE RUEHBJ #7696/01 1150016
ZNR UUUUU ZZH
P 250016Z APR 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 3705
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
UNCLAS SECTION 01 OF 03 BEIJING 007696 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR DAS LEVINE AND ITA/MAC/AP/MCQUEEN 
TREASURY FOR OASIA/ISA KOEPKE AND DOHNER 
STATE PASS CEA FOR BLOCK 
STATE PASS FEDERAL RESERVE BOARD FOR JOHNSON/SCHINDLER; SAN 
FRANCISCO FRB FOR CURRAN; NEW YORK FRB FOR DAGES/CLARK 
STATE PASS USTR STRATFORD/WINTER/MCCARTIN 
 
E.O. 12958: N/A 
TAGS: EFIN EINV CH
SUBJECT:  NEW CAPITAL ACCOUNT LIBERALIZATION MEASURES SET 
THE STAGE FOR MORE OUTWARD INVESTMENT,INCLUDING THE QDII 
PROGRAM 
 
 
THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED.  PLEASE HANDLE 
ACCORDINGLY.  NOT FOR DISTRIBUTION OUTSIDE USG CHANNELS. 
 
1.  (SBU) Summary.  China's financial authorities recently 
announced a series of capital account liberalization 
measures and provisions for introducing the long-awaited 
qualified domestic institutional investor (QDII) program. 
By allowing more forex to leave China and opening up the 
country's tightly restricted capital account, these 
regulatory adjustments may help address the pressures from 
China's burgeoning foreign exchange reserves, which reached 
US$ 875.1 billion as of March 31, 2006.  Deputy 
Administrator of the State Administration of Foreign 
Exchange (SAFE) Wei Benhua suggested that the QDII program 
is likely to be relatively small at first.  Other officials 
similarly indicated that the new policies would be 
implemented in a gradual way.  While the new measures are 
clearly a welcome signal and may represent a major new 
policy shift, these statements indicate that the impact of 
the new measures will be limited in the near term.  End 
Summary. 
 
New Liberalization Measures 
--------------------------- 
 
2.  (U) Over several days in mid-April, the Chinese 
Government issued a series of new measures to ease capital 
controls and lay the groundwork for more outward 
investment.  On April 13, A "Notice on Adjusting the 
Management Policies of Foreign Exchange in Current 
Accounts," issued by the People's Bank of China (PBOC) and 
the State Administration of Foreign Exchange (SAFE) on 
April 13 and due to take effect on May 1 simplifies 
approval procedures for forex accounts and payments. 
According to the notice, "the new rules have been launched 
in order to further satisfy the foreign exchange demand of 
domestic institutions and individuals and to facilitate 
trade development."  Institutions will no longer need to 
obtain SAFE approval to establish, modify, or close their 
forex accounts; instead they may apply directly to banks. 
 
3.  (U) In addition, the amount of forex that institutions 
may retain will rise.  Previously, the amount of forex a 
company could keep in its account was limited to between 50 
percent or 80 percent of the forex income of the previous 
year.  Starting May 1, a company may keep an amount equal 
to the sum of 80 percent of its forex income and 50 percent 
of its forex expenditure from the previous year.  For 
institutions with new accounts, the initial cap will be 
raised from US$ 200,000 to US$ 500,000. 
 
4.  (U) SAFE also indicated that Chinese citizens may 
purchase at least US$ 20,000 in foreign currency each year, 
and may obtain additional forex with a certificate that 
proves their need.  To obtain foreign currency, domestic 
residents need to provide only their identity card. 
 
5.  (U) On April 18, the PBOC, the SAFE, and the China 
Banking Regulatory Commission (CBRC) jointly issued 
measures allowing commercial banks to invest their clients' 
funds offshore.  Effective immediately, "This will widen 
domestic residents' investment channels in a positive and 
orderly way, and is a key measure toward helping to balance 
the international balance of payments," according to the 
statement released by the three agencies. 
 
6.  (U) PBOC official statistics indicate that deposits at 
China?s financial institutions totaled US$ 3.965 trillion 
at the end of March 2006, with personal deposits accounting 
for US$ 2 trillion of that amount.  "Today the investment 
channel for domestic institutions and residents is 
relatively narrow, and it has been difficult to use the 
international financial markets to improve the asset 
portfolio, spread investment risk and improve the return on 
funds," the statement noted. 
 
7.  (U) Under the new rules, commercial banks must obtain 
regulatory approval to invest their clients' funds 
offshore, and will be assigned quotas, which may later be 
adjusted according to China's international balance of 
payments situation.  Banks are required to hedge their 
 
BEIJING 00007696  002 OF 003 
 
 
foreign exchange risk for their offshore investments, and 
must report their capital flows to SAFE periodically.  The 
commercial banks must clearly inform their clients of the 
investment risks and the performance of their investments. 
 
8.  (U) The rules also require the commercial banks to 
have a custodian bank that will be responsible for all the 
assets invested offshore.  The domestic custodian bank must 
also assign another qualified foreign financial institution 
to handle offshore settlements and hold the securities in a 
separate account. 
 
9.  (U) Wu Dingfu, Chairman of the China Insurance 
Regulatory Commission (CIRC), announced last week that the 
State Council has approved plans to allow local insurers to 
purchase foreign currencies with their own yuan-denominated 
funds to invest overseas.  "A pilot program will be 
launched in the first half of this year," Wu confirmed, 
adding "CIRC will chose one or two insurance firms to start 
the pilot program."  In September 2005, CIRC authorized 
domestic insurers to invest a maximum 10 percent of their foreign 
exchange capital in overseas stocks of Chinese companies. 
 
Implementation is the Key 
------------------------- 
 
10.  (SBU) Despite these encouraging policy announcements, 
Econoff contacts agreed that the key lies with 
implementation.  A senior executive at an economic 
consulting firm pointed out, "Chinese individual investors 
are unfamiliar with overseas bond markets," and added that 
even Chinese banks themselves are not good at analyzing 
higher yielding but more risky overseas investment products. 
He concluded it will take about two or three years before 
the market matures.  Ha Jiming, Chief Economist with CICC, 
agreed that implementation would be slow.  He noted that 
some of China's insurance companies have already been 
allowed to participate in China IPOs in Hong Kong, but he 
expects investment in stocks and bonds will be allowed in 
other overseas markets as well. 
 
SAFE's Wei Predicts QDII Before Year End 
---------------------------------------- 
 
11.  (SBU) Wei Benhua, Deputy Administrator at SAFE, 
advised Econ Mincouns that these steps do indeed signal a 
new effort to expand outward investment options, especially 
for the Qualified Domestic Institutional Investor (QDII) 
program.  He indicated that banks and insurance companies 
will be confined to fixed income products in overseas 
markets, but securities firms and investment funds will be 
able to invest in overseas stock markets as well. He 
pointed out that any institution, domestic or foreign, that 
is registered in China could qualify as a QDII. 
 
12.  (SBU) As for implementation of the new outward 
investment measures, Wei confirmed that implementing 
regulations must be issued before they can begin.  Wei 
indicated that the QDII program will be phased in over time, 
with an approach that will likely seek a balance between 
the QDII and QFII (Qualified Foreign Institutional Investor) 
programs.  This would imply the QDII program will initially 
match the size of the QFII program, which currently has a 
quota of US$ 10 billion, US$ 6 billion of which has been 
issued to 39 QFIIs.  Wei said he hopes the QDII can be 
launched before the end of the year. 
 
Gradual Process 
--------------- 
 
13.  (SBU) In a similarly cautious vein, the China 
Financial News cited SAFE Assistant Administrator Li 
Dongrong as saying "We must be clear-headed in the process 
of steadily pushing forward capital account liberalization, 
refrain from being rigid and conservative, but prevent any 
blind and rash moves."  Qi Bin, Director General of the 
Research Department at the China Securities Regulatory 
Commission, informed a group of U.S. Federal Reserve 
officials during a mid-April meeting not to anticipate a 
flood of investment overseas in the near term.  Instead, 
"gradualism" remains the focus in implementing the 
 
BEIJING 00007696  003 OF 003 
 
 
regulations, according to Qi. 
 
14.  (U) Currently, no domestic institution has yet been 
granted a QDII license, although the China Securities 
Journal reported recently the National Council for Social 
Security Fund would likely become the first organization to 
receive a license during the second quarter of this year. 
Indeed, in late March, Hong Kong Exchanges & Clearing Ltd. 
announced it admitted China's Social Security Fund to its 
settlement system, which appeared to pave the way for 
Chinese institutions to invest in overseas securities.  The 
creation of the account removes a technical hurdle for the 
council to make overseas investments through the QDII program. 
 
Comment 
------- 
 
15.  (SBU) This series of new measures may represent the 
most significant policy shift so far in the Government's 
efforts to liberalize its tight currency control.  This 
could open the way for Chinese institutions and individuals 
to obtain higher returns and diversify their investment 
portfolios through investing overseas.  There may also be 
new opportunities for U.S. financial firms to provide 
investment management and related financial services. 
However, in keeping with China's gradualist policy 
approach, these new steps are likely to be implemented 
slowly and in a limited way.  China's forex reserves are 
growing at a slower pace, but still increased by US$ 20 
billion in the first quarter.  If, as suggested, the QDII 
program will only have a quota of US$ 10 billion, the 
Government will need to accelerate the implementation 
process. 
 
SEDNEY