The Industrial and Commercial Bank of China (ICBC) announced on Friday that it would impose some restrictions on retail companies involved in forex and commodities trading. According to Reuters, the manoeuvre is set to take place starting October 17, as it will suspend the opening of new accounts for ‘account forex business’.
The “risk is high these days in global forex and commodities markets, so please pay attention to controlling risks,” the bank commented. Moreover, existing customers will be banned from opening new trading positions in companies where individuals could trade forex against the Chinese yuan for speculative or hedging purposes.
The scrutiny of the domestic forex industry has increased significantly. China’s regulatory controls are poised to get extended in the cryptocurrency markets and the forex industry. Finance Magnates recently reported that domestic watchdogs are pressuring banks to pursue smaller-range trades, aiming to curb speculation. In addition, Chinese brokers had stopped publishing forex-related forecasts amid regulatory pressure on their backs as the interbank supervision significantly increased in the country.
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Chinese Scrutiny on the FX Industry
Also, the manoeuvre implies that the Chinese government is looking to dampen the commodity price increase across the board in the midst of the US policymakers’ preparations to withdraw monetary stimulus or tapering. Over the last few months, both ICBC and other Chinese banks had announced the closure of forex-related companies that enabled investors to bet on non-yuan currency pairs.
Even so, the watchdogs have been actively reminding the banks that their role as authorities is to smoothen fluctuations in the market ‘without pushing the yuan to either side.’ “(Now) you get calls from regulators if you trade too much,” a source told Reuters last week. As of now, the People’s Bank of China (PBoC) has injected a net 750 billion yuan ($116 billion) into the national banking system since September amid fears of a debt crisis triggered by the Evergrande Group.