China’s SAFE to Expand Institutional Opening in Forex Sector
China’s State Administration of Foreign Exchange (SAFE) has announced it will continue to steadily expand institutional opening in the foreign exchange sector in the second half of 2026, according to a statement released after its H2 work conference held on August 1. The move is part of a broader push to support further internationalization of the yuan and deepen financial market reforms.
The meeting, chaired by SAFE Party Secretary and Director Zhu Hexin, outlined six priority tasks for the second half of the year, with institutional opening of the foreign exchange sector at the core of the agenda. The administration aims to build a “more convenient, more open, safer, and smarter” foreign exchange management system, as Xinhua reported.
Trade Facilitation and Capital Account Opening
SAFE will promote trade facilitation reforms by issuing a package of measures to optimize current account foreign exchange management. This includes comprehensively promoting high-level opening facilitation policies for cross-border trade foreign exchange receipts and payments, supporting new trade formats such as cross-border e-commerce, and optimizing foreign exchange settlement for service trade.
On the capital account front, the administration will issue a package of cross-border investment and financing facilitation policies, promote nationwide the centralized operation policy for domestic and foreign currency cross-border funds of multinational corporations, and issue regulations on the administration of domestic foreign exchange loans. Financial market connectivity will also be steadily and prudently expanded, according to the official statement.
The administration will also continue to optimize foreign exchange services for technology and small- and medium-sized enterprises, advance banking foreign exchange business reforms, and deepen foreign exchange market development. A particular focus is reducing the cost of exchange rate hedging for small and micro enterprises through multi-party cooperation, as detailed in the Shanghai Securities News report.
Regional Development and Risk Management
In supporting regional opening, SAFE will back Shanghai’s development as an international financial center, improve foreign exchange management to implement the plan for upgrading pilot free trade zones, and support the Hainan Free Trade Port and other regions in carrying out foreign exchange management innovations.
At the same time, the meeting emphasized building a “breakwater” and “wave barrier” against external shocks. The administration will strengthen monitoring of cross-border capital flows, continuously improve macro-prudential management and expectation management, and take comprehensive measures to safeguard the stability of the foreign exchange market, as Xinhua’s English service reported.
Strong First-Half Performance
The meeting reviewed progress from the first half of 2026, highlighting the resilience of China’s foreign exchange market under complex circumstances. The RMB exchange rate showed two-way fluctuation with a slight upward trend, and cross-border capital maintained net inflows. SAFE issued $5.3 billion in new QDII investment quotas during H1 2026, while the corporate foreign exchange hedging ratio rose to 35.3%. China’s foreign exchange reserves remained stable above $3.3 trillion.
Yuan Internationalization Momentum
The SAFE announcement comes amid accelerating momentum for yuan internationalization. Panda bond issuance surged 60% year-on-year in H1 2026, exceeding 160 billion yuan ($23 billion), according to Global Times reporting. Brazil became the first Latin American nation to plan sovereign panda bond issuance in June, while Kazakhstan completed its sovereign panda bond issuance of 3.4 billion yuan in May.
The People’s Bank of China (PBOC), which held its own H2 work conference on August 1, committed to supporting more overseas institutions in panda bond issuance and advancing RMB cross-border payment system construction, as Xinhua reported.
The concept of “institutional opening” represents a significant shift from channel-based opening to rules-based, institutional opening—aligning China’s foreign exchange management rules with international standards rather than merely expanding the scale of cross-border flows. This approach was first outlined by Zhu Hexin at the 2026 Lujiazui Forum in June, where he detailed “four deepenings” for capital account opening.
What to Watch
Looking ahead, market observers will be watching for the specific implementation details of the cross-border investment and financing facilitation policies, the nationwide rollout of the MNC centralized fund operations policy, and progress on the revision of the Foreign Exchange Administration Regulations. The administration’s use of AI and big data technologies to empower foreign exchange regulation also signals a modernization push that could reshape how forex oversight operates.
With global financial markets facing volatility from geopolitical tensions and shifting monetary policy expectations, SAFE’s dual approach of opening while maintaining safeguards reflects a careful balancing act—expanding China’s financial integration with global markets while building defenses against external shocks. The coming months will reveal how these policy commitments translate into concrete measures for businesses and investors operating in China’s foreign exchange market.