China's foreign exchange administrator yesterday issued a circular on reforms to the way banks settle massive foreign currency holdings of individual residents.

The new rules on foreign currency will take effect on April 1.

While carrying forward policies of rigid foreign currency control, China will allow residents to convert their foreign currency holdings, which are growing rapidly due to the country's economic development and opening up, into renminbi at designated banks.

The new regulation from the State Administration of Foreign Exchange said mainland residents can convert up to US$10,000 worth of foreign currency into the yuan at banks after proving their identity.

The individuals should produce certificates proving their legitimate income sources to banks when converting between US$10,000 and US$50,000 in foreign currency.

Those looking to exchange more than US$50,000 will have to apply ahead of time to one of the country's forex administration bureaus and wait until the source of the money is verified.

A SAFE spokesman noted the move would "further upgrade administration of forex holdings of individual residents, standardize the banks' operation and tighten supervision over the flow of forex funds owned by individual residents."

The SAFE demanded bank outlets report "large-sums and suspicious " foreign currency transactions to their upper-level branches and SAFE bureaus.

The SAFE has, over the past months, tightened supervision on foreign exchange settlements at banks and flow of so-called "hot money" betting on a yuan revaluation in the near future.

The circular came at a time when the government is facing mounting pressure to revalue the renminbi, since some developed countries argue that a low yuan has been giving China an advantage in exports and bringing about job losses in other counties.

The Chinese government, however, repeatedly refuted the criticism, claiming that a stable currency is beneficial to both the Chinese and world economies.

Beijing has said, however, it will look at new ways to value the currency, such as pegging it to a basket of foreign currencies instead of just the US dollar.