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China to ban interprovincial trading of paper-based bills among banks

China will ban interprovincial trading of paper-based bills of exchange among banks from Nov. 2, the China Banking and Insurance Regulatory Commission said.

The new rule comes after a string of illegal trading and fraud cases involving these short-term debt instruments. In January, 12 Chinese banks, including some of the country's biggest lenders, such as Postal Savings Bank of China Co. Ltd., were fined a combined 295.44 million yuan by the regulator for illegally trading bank bills.

In a statement released May 9, the CBIRC said all banks will have six months to phase out paper-based bills traded with lenders registered outside their own provinces. Such trading must all be executed electronically from Nov. 2, it said.

Bills in paper form are more easily stolen or forged, and using an electronic trading system for interprovincial bill trading would improve internal controls and fend off financial risk, the CBIRC said.

As of May 10, US$1 was equivalent to 6.35 Chinese yuan.