China’s forex regulator has outlined new relaxed policies on foreign exchange forward hedging in a significant step towards financial market reform, giving greater freedom to companies hoping to limit their forex risks.
The rules, which built on previous policy to relax control in forex markets, will allow companies to use forward hedging to manage exchange rate risks even if they have no actual forex transactions. It is expected that this will expand access to Chinese markets as well as promote further reform.
A source talking to Caixin stressed the importance of the policy, comparing its impact to the PBOC’s 2005 decision to stop pegging the yuan to the dollar and use a “reference basket” of currencies to establish the exchange rate.