But in the last two months, the practice has been made mandatory, as part of the effort to crack down illegal capital transfers. After the netting only the unfilled orders, a small portion of the whole transaction amount will go through the official exchange in Shanghai. Encouraged by the Japanese yen's rise against the dollar and a surprisingly robust trade surplus for the first eight months, dealers said demand for the yuan was unusually strong. This prompted the central bank to offload yuan bought during recent interventions, to slow the currency, which closed at 8.279 to the dollar against 8.2796 on Thursday. Traders said the PBOC was anxious to stem the yuan's rise to help promote the country's exports, which have slowed considerably this year because of the currency depreciations among its neighbours.
Japan is one of the mainland's biggest export markets.
Top Japanese and mainland government officials responsible for currency and trade matters are due to meet in Beijing on Monday to discuss Asia's financial crisis. These moves have helped push down interbank interest rates, with the benchmark three-month rate around the 8 to 9 per cent mark, compared with 12 to 15 per cent during late August. Lower interest rates remove one of the constraints on the economy. But, as Mr Tsang himself concedes, the moves carry a cost. And lower interest rates means lower funding costs for everyone, including the speculators whose raids on the markets he is seeking to eliminate.