CONSUMMATE THE MANAGEMENT OF NATIONAL COMPANIES’ USE OF FOREX ABROAD

The growing Chinese national companies are beginning to probe their ways abroad to compete with foreign rivals. However, the ongoing forex management polices and laws restrict their overseas development. So the Shenzhen Branch of the State Administration of Foreign Exchange (SAFE) conducted a specific survey on the use of forex abroad by the ZTE Corporation and Huawei Technologies Co. Ltd.

ZTE and Huawei, the leading manufacturers of communication equipment in China, are expected to grow into multinational hi-tech groups with overwhelming competitiveness. So far, ZTE has set up marketing, engineering service centers and R&D institutions in over 50 countries and regions, and has exported sets of high-tech equipments with high value added to over 30 countries and regions. In 2001, its sales revenue reached 11.3 billion RMB yuan; its international orders reached US$250 million with a forex earning of US$100 million, while Huawei has established outlets or joint-ventures in some 40 countries and regions, and managed to promote products there. Its sales revenue in 2001 climbed to 16.2 billion RMB yuan with US$300 million worth of international order, earning US$120 million.

The two giants focus their export target on developing countries. The export in the form of project contracts brings admirable profits to them, despite its high front end investment and long paying term. Their use of forex abroad includes daily expenditure of overseas staffs, marketing, commission, fixed assets purchase and R&D abroad. Nevertheless, the ongoing forex management regulations hinder due payment of the above items. Consequently, the companies can only resort to other channels, which increases the operational cost of the companies and encumbers the supervision of SAFE and internal management of the companies.

The forex authority should allow flexibility to enterprises (especially hi-tech ones) when they explore overseas markets. Quota management policy could be implemented in the companies with an annul forex income of over US$10 million. SAFE should ratify the quota on the basis of the companies' annual budgets for marketing and R&D expenses, and its forex earning in the previous year. The procedure to approve business passports and overseas assignments should also be streamlined. The quota of daily expenditure should be determined for the staff working abroad in accordance with The Expenditure Standard and Management Procedure of Staff Temporarily Working Abroad stipulated by the Ministry of Finance. In addition, the use of forex should be approved after the authenticity of the commission is audited, and the high-proportional commission of developing countries together with the cost of exchange and the profits of those companies should be taken into account as well.

(by Zhu Kai, M.A.,Chief, Current Account Management Dept., SAFE,Shenzhen Br.)