The China Monetary Policy Executive Report Quarter 4, 2004 released by People's Bank of China (PBC) on Thursday says that China will further deepen reform of foreign exchange management system and promote equilibrium of the balance of payments. China will speed up the infrastructure construction of foreign exchange market, increase varieties of transaction in the inter-bank forex market and experiment on US dollar market maker system. It means China is expected to introduce the US dollar market maker system into its foreign exchange management system.
In the section - Trends of Monetary Policy in 2005 where foreign exchange management is elaborated the report says with the objective of promoting the balance of payments the PBC will further deepen the reform of foreign exchange management system, continue to push ahead the convertibility of the Renminbi, explore and establish market mechanisms and management systems that regulate the balance of payments. It will intensify the management of the inflow and forex settlement of short-term capitals and strengthen the monitoring of trans-boundary flow of capitals; further improve the management of authorized limits of forex accounts and the cancellation of imports and exports after verification; perfect forex management policies to adapt to the characteristics of frontier trade and multinational operation; explore new channels for capital flow and push ahead the facilitation of trade and investment.
The report says the PBC will speed up the infrastructure construction of foreign exchange market, increase varieties of transaction in the inter-bank foreign exchange market and experiment on US dollar market maker system. It will further improve the management of the turnover position in designated forex banks and perfect existing exchange rate management and monitoring system; consolidate rule-conforming supervision and management, revamp and standardize forex market order; actively and steadily push ahead reform on RMB exchange rate-formation mechanism, maintain the basic stability of RMB exchange rate at a reasonable and balanced level.
In the international forex market so-called "market maker" commonly refers to big commercial banks with standing credit. Other players in the forex market often look to these commercial banks for exchange rates they can offer. And commercial banks, which act as market makers, are usually willing to take on exchange rate risks and engaged in trading. Part of the foreign exchange on the market will also divert to the hands of US dollar market makers.