Section 1 Overview of Foreign Exchange Settlement
1. The Concept of Foreign Exchange Settlement
b>Foreign exchange settlement, also known as international settlement, is the process of handling domestic enterprises, institutions, agencies, groups, troops and other units and individuals through the receipt and payment of foreign exchange. Liquidation activities of creditor's rights and debts between relevant foreign entities and individuals.
Foreign exchange settlement can be divided into three categories, namely international trade settlement, international non-trade settlement and international financial transaction settlement.
(1) International trade settlement, or import and export trade settlement, refers to the transactions that occur between domestic enterprises and institutions in the import and export business of commodities and related foreign entities. Settlement business of creditor and debt relationships between individuals.
(2) International non-trade settlement refers to the economic and cultural settlement of domestic enterprises, institutions, agencies, groups, troops and other units other than commodity trade. and political exchange activities, such as labor export, international tourism, technology transfer, and overseas remittances, donations, etc. The settlement business of creditor's rights and debts.
(3) International financial settlement refers to the transactions that occur due to domestic enterprises and institutions engaging in international financial transaction activities, such as foreign investment, foreign financing, foreign exchange trading, etc. Settlement business of creditor-debt relationships.
Compared with domestic settlement, foreign exchange settlement has the following characteristics:
International
Although generally speaking, the purpose of settlement is to resolve the claims and debts of both parties to the transaction, the main reason for domestic settlement is between domestic units and individuals. Economic activities, and the reason for foreign exchange settlement is the economic activities between domestic units and individuals and foreign units and individuals. Therefore, domestic settlement is limited to the country, and its creditors, debtors, and intermediaries are all domestic. It only reflects the creditor-debt relationship between domestic units, and is also applicable to relevant domestic laws and regulations; while the creditors, debtors, and intermediaries in foreign exchange settlement are all domestic. Intermediary agencies are usually located in different countries and regions. This reflects the relationship between creditor and debt settlement between different countries. The guidelines and principles it follows must be internationally accepted and not just stipulated by domestic laws.
Creditability
Although bank credit and commercial credit are also widely used in domestic settlement, in Cash settlement also plays a certain role in domestic settlement, and some settlements are not based on credit. In international settlement, no matter what settlement method is used, it must be based on credit intermediary and all settlements are carried out through banks. Almost all settlement business is transfer settlement, and the main instruments in settlement are credit instruments such as promissory notes, bills of exchange, and checks.
Complexity
Although domestic settlement also has problems such as different periods and different locations, domestic settlement The settlement uses the common currency of the country, and its currency value generally does not change significantly in the short term, so it is relatively simple; therefore, the price comparison (i.e., exchange rate) between different currencies needs to be considered during settlement, which is somewhat complex.
2. Foreign exchange and exchange rate
Foreign exchange
Foreign exchange refers to foreign currencies or means of payment and assets expressed in foreign currencies for international settlement. First, foreign exchange must be foreign assets expressed in foreign currency, and various credit instruments and securities expressed in domestic currency cannot be regarded as foreign exchange; secondly, foreign exchange must be claims that can be repaid abroad and cannot be obtained abroad. Repaid claims, such as bills of exchange that are rejected by foreign countries, cannot be converted into foreign exchange; finally, foreign exchange must be a foreign currency asset that can be converted into other means of payment.According to the above regulations, all foreign currency deposits in domestic and foreign banks, foreign currencies, foreign currency bills, various payment certificates, stocks and bonds that can be repaid abroad, and Other assets that can be used to pay off international debts are foreign exchange. Correspondingly, foreign exchange can include the following five aspects:
(1) Foreign currency, including banknotes and coins;
(2) Foreign currency payment certificates, including bills, bank deposit certificates, postal savings certificates, etc.;
(3) Foreign currency valuable securities, including government bonds , corporate bonds, stocks, etc.;
(4) Special Drawing Rights, Euro;
(5) Other foreign exchange funds.
In foreign exchange settlement, foreign exchange is the means of payment to settle the relationship between claims and debts.
Exchange rate
(1) The concept of exchange rate
Foreign exchange rate It is the ratio, ratio or price at which one country’s currency is converted into another country’s currency. It can also be said to be the price of a foreign currency expressed in its own currency.
The exchange rate is based on the bank’s The division of buying and selling business can be divided into buying exchange rate, selling exchange rate and intermediate exchange rate. The buying exchange rate is also called the buying price, which refers to the exchange rate based on when the bank buys foreign currency; the selling exchange rate, also called the selling price, refers to the selling price when the bank sells it. The exchange rate based on when exporting foreign currency; the middle price refers to the average price of the buying price and the selling price, which is equal to the buying price plus the selling price divided by 2.
(2 ) Pricing method of foreign exchange
To convert one country's currency into another country's currency, you should first determine which country's currency should be used as the standard. Since the determined standards are different, There are also two pricing methods for foreign exchange rates:
①Direct pricing method
The direct pricing method is based on The method of expressing the price of foreign goods in domestic currency. Most countries in the world adopt this method, and so does our country. Using the direct pricing method, the amount of foreign currency is fixed, usually one unit or 100 units, and a few currencies use 10,000 or 100,000 units. For example, in the foreign exchange quotation published by my country’s State Administration of Foreign Exchange, the unit of U.S. dollars is 100, the unit of Italian lira is 10,000, and the unit of Japanese yen is 100,000; and the amount of domestic currency varies with foreign currencies. It changes with the change in the market value of the domestic currency. For example, today's exchange rate is: 100 US dollars = 830 yuan, tomorrow it may be 100 US dollars = 827 yuan, the day after tomorrow it may be 100 US dollars = 831 yuan, etc. Under the direct pricing method, An increase in the value of the domestic currency means an increase in the foreign exchange rate, indicating an appreciation of the foreign currency and a depreciation of the domestic currency; conversely, a decrease in the amount of the domestic currency means a decrease in the foreign exchange rate, indicating an appreciation of the domestic currency and depreciation of the foreign currency.
②Indirect pricing method
The indirect pricing method is a method of calculating how much foreign currency is converted into a certain unit of domestic currency. UK Always use the indirect pricing method. In indirect pricingUnder the law, the amount of domestic currency is fixed and the amount of foreign currency changes with changes in the market value of foreign currency or domestic currency. For example, 1 pound today = 1.57 US dollars, and 1 pound tomorrow = 1.59 US dollars. Under the indirect pricing method, if the amount of foreign currency increases, the foreign exchange rate will rise, indicating that the foreign currency appreciates and the domestic currency depreciates; if the amount of foreign currency decreases, the foreign exchange rate will decrease, indicating that the foreign currency depreciates and the domestic currency appreciates.
3. Foreign exchange management system
Implementing a foreign exchange income settlement system
According to regulations, all types of foreign exchange income of all domestic enterprises, institutions, agencies and social groups (hereinafter referred to as domestic institutions) must be transferred back to the country in a timely manner. Foreign exchange income falling within the following scopes (except foreign-invested enterprises) must be settled and sold to designated foreign exchange banks at the bank's quoted exchange rate (referring to banks approved to engage in foreign exchange business, including Chinese-funded banks, foreign-funded and Sino-foreign joint venture banks in China) ：
(1) Foreign exchange obtained from exporting or paying first and then receiving re-exported goods and other transactions;
">(2) Foreign exchange income from winning international tenders under overseas loans;
(3) Transportation (including various modes of transportation) and ports (including seaports, Foreign exchange income from goods or services provided by industries such as airports), postal and telecommunications (excluding international remittances), tourism, advertising, consulting, exhibitions, consignment, maintenance, and various agency businesses;
(4) Various foreign exchange fees, fines and confiscations received by administrative and judicial agencies;
(5) Land use rights, copyrights, trademark rights , foreign exchange income from the transfer of intangible assets such as patents, non-patented technologies, goodwill, etc.;
(6) Foreign exchange income from the sale of real estate and other assets overseas;
(6) Foreign exchange income from the sale of real estate and other assets overseas;
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(7) Foreign exchange profits repatriated by overseas investment enterprises, foreign exchange recovered under foreign financial aid and foreign exchange income from overseas assets;
(8) Foreign exchange income from external claims, returned foreign exchange deposits, etc.;
(9) Foreign exchange income from insurance institutions accepting foreign exchange risks ;
(10)GetIncome from foreign exchange business of financial institutions with a "Foreign Exchange Business License";
(11) Foreign exchange income from foreign donations, funding and assistance;
(12) Other foreign exchange that should be settled as prescribed by the State Administration of Foreign Exchange.According to regulations, domestic institutions can apply to the State Administration of Foreign Exchange or its branches (hereinafter referred to as the "Foreign Exchange Bureau") for the following foreign exchange, and issue it at a designated foreign exchange bank. Open a foreign exchange account and handle foreign exchange settlement in accordance with regulations:
(1) Companies that engage in overseas contracting projects and provide labor, technical cooperation and other services to overseas companies, in the above-mentioned business Foreign exchange received from business transactions during the project;
(2) Foreign exchange collected and paid by institutions engaged in agency foreign or overseas business;
(3) Foreign exchange temporarily received to be paid or temporarily received to be settled, including overseas remittance deposits, performance bonds, re-export trade receipts received first and paid later, post and telecommunications Foreign exchange remittances collected by departments for international exchange business, foreign exchange prepaid by foreign tourism agencies collected by Class I travel agencies, foreign exchange collected by railway departments for overseas insured transportation business, foreign exchange deposits and mortgage deposits collected by customs, etc.(4) Insurance institutions accept foreign exchange risks, external reinsurance and unsettled premiums.
The income from the above-mentioned foreign exchange items should be settled and sold to designated foreign exchange banks in full according to the accounting system.
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