China Revises Interbank FX Market Rules to Strengthen Supervision and Market Infrastructure
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China's central bank and foreign exchange regulator have launched a public consultation on a revised draft regulation aimed at strengthening supervision of the interbank foreign exchange (FX) market and enhancing its role in supporting the real economy. The draft, jointly issued by the People's Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE), updates the Interim Provisions on the Administration of the Interbank Foreign Exchange Market first introduced in 1996.
The interim provisions have long served as the backbone of China's interbank FX market, providing regulatory clarity, maintaining fair market order, protecting institutional rights, and promoting legal compliance. Over nearly three decades, the market's internal and external environment has evolved significantly, driven by ongoing economic reform, financial opening, and increasingly complex cross-border transactions. Regulators note that the existing framework no longer fully meets current operational needs, necessitating an integrated revision.
Strengthening Supervision Across Market Participants
The draft regulation establishes a full-chain regulatory framework covering all categories of market participants. It sets out clear requirements for institutional governance, trader conduct, market maker operations, information sharing and disclosure, data distribution, fee structures, and industry self-discipline. PBOC and SAFE intend to jointly supervise the interbank FX market, particularly focusing on the onshore RMB FX market, ensuring that all participants operate within clearly defined rules and are subject to explicit penalties for violations.
Enhancing Market Infrastructure Management
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The draft specifies responsibilities for market infrastructure providers, including trading and clearing institutions, and establishes mechanisms for coordination and reporting. Provisions address the handling of operational anomalies and reinforce supervisory duties, reflecting the authorities' aim to increase resilience and reliability of the interbank FX market.
Clarifying Institutional Business Boundaries
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The revised rules clarify market access conditions, permissible business scope, and operational principles for financial institutions. Institutions may autonomously manage risk-mitigation services such as trade netting and simultaneous settlement. The draft also reiterates that RMB FX derivatives transactions must be executed through domestic currency brokerage firms, ensuring consistency with regulatory frameworks.
Strengthening Supervision Across Market Participants
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Challenges remain in service reach, operational efficiency, and collaborative governance. Remote rural areas still face access limitations; expanding scale pressures claims and risk management; coordination among government, insurers, and social organizations remains incomplete.
Authorities and insurers are taking targeted actions:
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Expanded coverage to high-risk populations and eligible residents from Hong Kong, Macao, Taiwan, and select foreign nationals.
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Technological solutions: intelligent policy issuance and automated claims streamline processes and reduce costs.
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Collaborative governance: integration with government programs ensures multi-layered protection and improved service capacity.
China Life has deployed field service teams and over 500 service points across rural areas to strengthen access, while leveraging technology to standardize operations. These measures aim to sustain coverage and enhance efficiency.
Inclusive insurance in Guangdong illustrates a shift from availability to quality, accessibility, and operational effectiveness, providing a practical model for broader deployment.
Supporting Forward-Looking Market Development
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The draft regulation emphasizes the need for ongoing innovation in trading products and currency types, guided by market demand. It proposes that market-oriented data services be expanded while reinforcing rules for financial information providers to prevent misuse or misreporting. These measures aim to strengthen the interbank FX market's adaptability and transparency, enabling more efficient price discovery and risk management for institutional investors.
The consultation period for public feedback runs until September 21, 2025. Analysts note that for international banks, insurers, and asset managers operating in China, the revised regulation could offer clearer operational parameters, a more predictable regulatory environment, and improved infrastructure support—critical factors for managing cross-border FX exposure efficiently.
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