CHINA will cut paperwork and simplify foreign exchange rules in the service sector, starting from September 1, to support the country's economic restructuring, the foreign exchange watchdog said yesterday.

The reforms will cut administrative approval procedures, cancel more than 50 regulatory requirements on forex management, and simplify inspection of trade-related documents, the State Administration of Foreign Exchange said in a statement posted on its website yesterday.

All trade settlement can be conducted directly at financial institutions with no need to acquire approval, companies will be allowed more freedom to deposit their foreign exchange income offshore, and financial institutions will no longer check trade proof (or invoice verification) for deals under US$50,000, which account for 88 percent of all service trade.

"The foreign exchange authority aims to provide a better regulatory environment to boost the development of the country's service trade," the SAFE said. "Accelerating growth of the service sector is crucial in promoting the country's economic restructuring and industrial upgrade."

To ensure risk management, the authority said it will shift to a more balanced management of both capital inflow and outflow, and enhance archiving of trade documents for inspection.

Economists said the easier regulatory environment will benefit companies but may increase volatility in cross-border capital flow.

"Companies will operate more efficiently with fewer administrative approval procedures and enjoy more freedom in foreign exchange management," said Lian Ping, chief economist of Bank of Communications. "However, there could be more short-term fluctuations on the foreign exchange market when the exchange rate changes."

China had simplified foreign exchange rules for goods trade last year to boost trade against a global economic slowdown.

While loosening controls, the SAFE also vowed to ramp up supervision of the service trade forex flowing into and out of the country in order to prevent risks.

China has been emphasizing the service sector's role in lifting growth and creating jobs amid the country's recent economic slowdown.

The service sector accounted for roughly 44.6 percent of China's GDP in 2012, and policymakers aim to raise that to 47 percent by 2015.