China has scrapped a set of rules that provided incentives for exporters to repatriate foreign currency.

The rules, introduced in response to the Asian financial crisis in the late 1990s, encourage exports and inflows of foreign exchange.  The latest measure is widely viewed as another step in China’s efforts to slow down growth of capital inflows.

The State Administration of Foreign Exchange said on Monday that it had rescinded, as of July 1, a set of rules dating back to 1999 that had provided incentives for exporters to exchange their foreign exchange earnings with banks in a timely manner, as well as penalties for those that did not do so.

According to SAFE, although the rules played a major role in encouraging the country's accumulation of foreign exchange, they are now being canceled "in line with the present needs of economic development."

The rules had allowed for preferential treatment in customs procedures and bank lending for export firms that had good track records in remitting foreign exchange.  It also established severe penalties for the worst offenders, including revoking of export licenses.