(Yicai Global) Aug. 3 -- China's State Administration of Foreign Exchange plans to explore reforms of private equity fund cross-border investment management in the second-half as part of a steady, ongoing expansion of two-way opening and connectivity of China's financial market.

SAFE said this at a meeting on July 31, per a press release the foreign exchange regulator published online on Aug.1. The SAFE did not detail how it will seek to reform such management.

Worry over the risks of cross-border capital flows has prompted China to strictly regulate PE funds' cross-border investments, but the continuing opening of the financial sector has seen the country easing its regulation of PE investment fund cross-border investments by introducing the Qualified Foreign Limited Partner program in nine cities, including Beijing and Shanghai.

China has expanded QFLP to the Guangdong-Hong Kong-Macao Greater Bay Area with the trial of PE investment funds cross-border investments in the area since May, and is pushing orderly trials of the Qualified Domestic Limited Partner and Qualified Domestic Investment Enterprise to aid overseas investments by Chinese mainland PE investment funds. Macro-prudential management of the QFLP, QDLP and QDIE trials will allow mainland regulators to enhance regulation during and after the pilots by setting up and improving a joint evaluation system.

The SAFE will implement various forex facilitation measures, expand the trial of trade balance facilitation and promote online tax filing of external payments in the services trade area in the second half, it said at the meeting.

It will continue to fight hard to prevent and defuse major financial risks in the forex sector and guard against cross-border capital flow risks, the agency added. It will also strengthen macro-prudential management of cross-border capital flows, improve oversight of the currency market, and protect the rights and interests of its consumers and investors. Taking a 'zero-tolerance' approach, it will severely crack down on underground banks and cross-border gambling and other illegal activities in the sector to maintain a healthy order in the market.

The SAFE will also improve the operation and management of forex reserves to ensure assets' safety, liquidity and value.

China's forex market has been steady since this year's start, according to the agency. It has been effectively blocking the risks of external shocks, with the overseas currency reserves remaining at over USD3 trillion thanks to its prudent and steady operation.

Editor: Ben Armour