INTERBANK MARKET SCORED NEW ACHIEVEMENTS

INTERBANK MARKET SCORED NEW ACHIEVEMENTS

---REPORT ON THE CHINA FOREIGN EXCHANGE TRADE SYSTEM AND NATIONAL INTERBANK FUNDING CENTER IN 2003

In 2003, the trading volume hit record high in both the interbank FX and the RMB markets, and breakthroughs were made in the paper market and services of information and supervision. The interbank FX market concluded deals worth $151.13 billion in US dollar terms, including the turnover for USD of 147.74 billion, 18.63 billion of HKD, 76.16 billion of JPY, and 300 million of EUR, up year-on-year 54 per cent, 70 per cent, 3 per cent, and 110 per cent respectively. The average daily trading volume of the FX market was 600 million in US dollar terms, a rise of 54 per cent year-on-year. No mistake occurred in clearing and settlement during the whole year. The interbank deposit and bond system registered a turnover valued at 17.2 trillion yuan, the average daily turnover being 68.48 billion yuan, up 44 per cent from one year earlier. The turnovers for deposit, bond repo and cash bond were 2.4 trillion yuan, 11.7 trillion yuan, and 3.1 trillion yuan, increasing by 98 per cent, 14 per cent, and 594 per cent respectively. As of the end of 2003, members in the FX and the RMB markets reached 344 and 918 respectively, 21 and 185 more than the previous year.

Since its debut on June 30, 2003, the www.chinacp.com.cn fared stably with smooth quoting. As of the end of 2003, it had 891 members and concluded 872.95 billion yuan worth of 1,881 quotes for repo and rediscount from all kinds of financial institutions.

The consolidated voice brokering developed rapidly in 2003. By December 31, the number of institutions that have signed agreements with the CFETS for RMB and FX trading reached 204 and 114 respectively, 93 and 32 more than the previous year. The trading volume of RMB and FX via voice brokering reached 84.5 billion yuan and US$1.53 billion respectively, up 83.7 per cent and 60 per cent year-on-year.

In face of the SARS epidemic and international pressure on RMB appreciation, the China Foreign Exchange Trade System (also knowns as National Interbank Funding Center ), devoted to facilitating members' network connections, ensured the smooth operation of all systems through system upgrades, network maintenance, technical support improvement for members and ongoing system operations monitoring.

The CFETS spared no effort to optimize trading, information, and supervision platforms by launching five new systems. It introduced the www.chinacp.com.cn, therefore vitalizing the commercial paper market, long stricken by outdated infrastructure, low effectiveness, incomplete functions and lack of innovation. The CFETS introduced a new RMB trading system with rich functionality, user-friendliness and quick response that contributed to higher trading efficiency. The CFETS also launched a system for market analysis and risk management (the "F system"), which has helped guide trading, control risk and improve the effectiveness of the market. The CFETS also redesigned the www.chinamoney.com.cn to offer richer functionality, and, in order to meet the SAFE's supervisory requirements, developed a filing management system for FX sales and purchases, which is now undergoing trial operation in the big four state-owned commercial banks.

Ten new services were introduced by the CFETS to improve the effectiveness of market services. The CFETS extended trading hours for FX and RMB transactions; two-way trading was realized in the FX market; the FX trading platform was extended abroad, laying the groundwork for network connection and training for the Bank of China (Hong Kong) Ltd, which "as a member of the CFETS is to adjust its position in HKD/RMB exchange business"; the FX trading system was linked to the payment system, thus improving the efficiency of fund clearing and settlement; brokerage for FX and RMB businesses was consolidated, a money brokerage department began construction and insurance companies entered the FX funding market; to increase business innovation and overall development, the www.chinamoney.com.cn, a facility information system, was moved to the Beijing backup center; by developing user-end data interface, the CFETS provided members with customer-tailored service, which is now piloted by the Agricultural Bank of China; the CFETS innovated the method and content of training; the CFETS actively promoted the establishment of an e-filing system for non-members' quotes in the RMB market as well as for the central bank's supervision; and the CFETS introduced a same-city overnight deposit system to the Wuhan Branch and developed the system for the Lanzhou Branch of the People's Bank of China as well.

The CFETS gives priority to research and development and has obtained phase results for applicable and forward-looking research. It has been making efforts to enhance overall competitiveness by strengthening exchange and cooperation with counterparts abroad and by accumulating knowledge and skills in various forms.