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Rules and Regulations
  • Index number:
  • Dispatch date:
    2009-11-30
  • Publish organization:
    State Administration of Foreign Exchange
  • Exchange Reference number:
  • Name:
    Circular of the SAFE on Promulgating the Provisions on the Centralized Operations and Administration of Foreign Exchange Funds of Internal Members of Domestic Enterprises
Circular of the SAFE on Promulgating the Provisions on the Centralized Operations and Administration of Foreign Exchange Funds of Internal Members of Domestic Enterprises

The branches and foreign exchange administrative departments of the State Administration of Foreign Exchange (SAFE) in all provinces, autonomous regions, and municipalities directly under the central government, the SAFE branches in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo, and all designated Chinese-funded foreign exchange banks:
For the purpose of facilitating and supporting the utilization and operation of foreign exchange funds by domestic enterprises, improving internal operations and administration of foreign exchange funds by domestic enterprises, and enhancing the efficiency of utilization of foreign exchange funds, the Provisions on the Centralized Operations and Administration of Foreign Exchange Funds of Internal Members of Domestic Enterprises (hereinafter referred to as the Provisions) have been enacted by the State Administration of Foreign Exchange (SAFE), and are hereby promulgated pursuant to the Regulations of the People's Republic of China on Foreign Exchange Administration and the Interim Provisions on the Administration of Domestic Foreign Exchange Transfers.
The Provisions shall be implemented as of November 1, 2009. Please comply with and execute them accordingly.
All SAFE branches and foreign exchange administrative departments shall, upon receipt of these Provisions, immediately forward them to their subordinate branches, urban commercial banks, rural commercial banks, and foreign-funded banks within their respective jurisdictions; all designated Chinese-funded foreign exchange banks shall, upon receipt of these Provisions, immediately forward them to their subordinate branches.
Annex: Provisions on the Centralized Operations and Administration of Foreign Exchange Funds of Internal Members of Domestic Enterprises
                                                                                      

October 12, 2009

Provisions on the Collective Operations and Administration of Foreign Exchange Funds of Internal Members of Domestic Enterprises

Chapter One General Provisions

Article 1. For the purpose of facilitating and supporting the operations of domestic enterprises and their utilization of foreign exchange funds, improving internal operations and administration of the foreign exchange funds of domestic enterprises, and enhancing the efficiency of utilization of foreign exchange funds, the Provisions are hereby promulgated pursuant to the Regulations of the People's Republic of China on Foreign Exchange Administration and other relevant regulations.
Article 2. The domestic enterprisesherein refer to the union of legal person enterprises (exclusive of financial institutions) duly formed and registered in the Peoples Republic of China, linked by capital and consisting of parent companies, subsidiary companies, and other member enterprises or institutions.
The internal membersherein refer to the following: (1) a parent company and its subsidiary company, of which 51 percent or more of the shares are controlled by the parent; (2) companies of which 20 percent or more of the shares are controlled solely or jointly by the parent and/or the subsidiary, or (3) those companies in which the parent and/or the subsidiary is the biggest shareholder despite their share being less than 20 percent; (4) institutions or social organizations as legal persons that are subordinate to the parent and the subsidiary.
Article 3. The centralized operations and administration of foreign exchange funds herein refers to how domestic self-owned foreign exchange funds are utilized in China by the internal members of domestic enterprises (hereinafter referred to as domestic enterprises) in compliance with the Provisions and other relevant regulations on foreign exchange administration. This includes inter-company lending/borrowing of foreign exchange, implementation of administration of foreign currency fund pools, and the business of spot purchases and sales of foreign exchange via internal finance companies.
Article 4. Inter-company lending/borrowing of foreign exchange among domestic enterprises can be conducted in the form of entrusted loans via designated foreign exchange bank, or an internal finance company which is established upon examination and approval and is qualified to engage in the foreign exchange business (hereinafter referred to as finance companies).
The foreign currency fund pool business by domestic enterprises can be carried out within the legal framework of entrusted loans via a designated foreign exchange bank or a finance company.
Article 5. Inter-company lending/borrowing of foreign exchange and the foreign currency fund pool business by domestic enterprises shall use the discretionary foreign exchange funds in their foreign exchange capital account or current foreign exchange account.
In the event of inter-company lending/borrowing of foreign exchange funds and foreign currency fund pool business, domestic companies shall adhere to the principle of full-receipt, full-payment,shall not carry out net settlement without approval, and shall agree on the IBOR with reference to the commercial loan interest rate in the international financial market during the corresponding period, and in no event shall it be disproportionately high or low.
Article 6. Entrusted loan funds of domestic enterprises shall not be used for settlement of foreign exchange, nor shall they be used as a pledge for a RMB loan. Should it be necessary that they be used for the exchange settlement, the domestic enterprises shall transfer the entrusted loan funds that are in their foreign exchange capital accounts and current foreign exchange accounts back to the foreign exchange capital account or current foreign exchange account from which the outward transfer was made through the original routing and then conduct the foreign exchange settlement in compliance with the relevant regulations.
In the event of entrusted loan funds being transferred back to the foreign exchange capital account of the domestic enterprises, the, funds thereof shall not be considered when calculating the maximum transaction quota of the accounts hereof; in the event that banks that receive such transfers reply to a bank confirmation request concerning such funds, the Entrusted Loan Funds shall be specified in the Remarks thereof, and such requests shall not be used by accounting firms in processing the capital verification for foreign-invested enterprises.
Article 7. Domestic enterprises shall, in compliance with the relevant regulations on foreign exchange administration, perform the statistical and reporting obligations thereof, such as the declaration of balance of payments and go through the collection/payment procedures for foreign exchange funds.

Chapter Two  Administration of Inter-company Lending/Borrowing of Foreign Exchange among Domestic Enterprises

Article 8. In the event of inter-company lending/borrowing of foreign exchange among domestic enterprises, one designated foreign exchange bank (or finance company) in the locality where the lender or the borrower is located shall be chosen as the trustee (hereinafter referred to as the entrusted bank), and after the qualifications of the domestic enterprises are examined and approved according to the Provisions, the entrusted bank, the lender, and the borrower shall jointly sign a foreign exchange entrusted loan contract.
Article 9. In the event of inter-company lending/borrowing of foreign exchange among domestic enterprises, a special account for foreign exchange entrusted loans shall be opened in the entrusted bank by the borrower.
Article 10. The income in the special account for foreign exchange entrusted loans shall encompass income from the borrowers entrusted loan and the principal and interest transferred inwards of the repayment funds; expenditures hereof shall encompass the principal and interest of the entrusted loans repaid by the borrower, foreign exchange expenditures under the current account, and approved foreign exchange expenditures under the capital account.
Article 11. In the event that the entrusted banks handle the transfer procedures for funds lent or repaid between the lenders foreign exchange account under the capital account/current account and the borrowers special account for foreign exchange entrusted loans, no approval from the SAFE, its branches, or sub-branches (foreign exchange administrative departments, hereinafter referred to as AFEs) is required.
The borrower can go through the procedure of repaying the principal with the interest in compliance with the relevant regulations on domestic foreign exchange loans.
An entrusted bank shall, within 5 working days from the beginning of every month, report and file with the AFE in the locality where it is located the information concerning the foreign exchange entrusted loans (See Attachment 1 for the format.)
Article 12. In the event of inter-company lending/borrowing of foreign exchange among domestic enterprises, should the lending period expire, or the borrower requires repayment in installments or in advance, the entrusted bank shall supervise and assist the lender and the borrower in repaying in the following order: first, repayment shall be made to the lenders foreign exchange account under the capital account from which the lent amount was originally transferred outwards, until such amount is replenished, and the rest of the principal and interest can be transferred to the foreign exchange account under the current account.
Article 13. Inter-company lending/borrowing of foreign exchange in the form of entrusted loans by enterprises other than those prescribed in Article 2 therein shall be in compliance with the aforesaid relevant articles.

Chapter Three  Administration of Foreign Currency Fund Pool Business by Domestic Enterprises

Article 14. Domestic enterprises that engage in foreign currency fund pool business shall meet the following requirements: being lawfully formed and registered in Peoples Republic of China; with the registered capital  paid up by the due date; and no breach of the regulations on foreign exchange administration in the recent two years.
Article 15. In the event of foreign currency fund pool business conducted within the framework of entrusted loans, one participating internal member shall be deemed to be the host enterprise (hereinafter referred to as the host enterprise), which shall take the lead in conducting the centralized operations of the foreign exchange funds for all the participating internal members (hereinafter referred to as the participants).
The host enterprise, in principle, shall select one entrusted bank. After the entrusted bank is given the corresponding power of attorney, the said bank shall submit the following materials to the SAFE branch in the locality where the bank is located (foreign exchange administrative departments, hereinafter referred to as the AFE branch).
1. A written application, including, but not limited to, basic information on the domestic enterprise, a list of the host enterprise and participants in the foreign currency fund pool, the ownership structure, and its actual controller, and so forth;
2. A written document issued by the host enterprise that authorizes the entrusted bank to operate the foreign currency fund pool business; participation confirmation documents by the participant members; text of the authorized entrusted loan agreement for the domestic foreign currency funds pool among the host enterprise, the participants, and the entrusted bank.
3. An operational plan for the foreign currency fund pool, including but not limited to: the range of income and expenditure of the foreign exchange entrusted loan in the main account of the foreign currency fund pool to be opened by the host enterprise, and the foreign exchange entrusted loan subsidiary accounts in the foreign currency fund pool to be opened by the participants; the principles for dealing with overdrafts of the aforesaid accounts; approaches for distinguishing the entrusted loans from repayment funds; fund transfer requirements and routings.
4. An internal control system and relevant internal operational procedures established by the entrusted bank for the implementation of the operational plan for foreign currency funds pool, and instructions regarding the technical conditions and safeguards for the implementation thereof.
5. Other relevant materials as required by the AFEs.
After receiving a complete set of the aforesaid materials and examining them, the AFE branch shall, within 20 working days, make a decision as to whether or not to grant approval. In the case of approval, the AFE branch shall issue the approval document to the applicant; in the case of rejection, the AFE branch shall issue a written decision providing the reasons for rejection. The entrusted bank approved by the AFE branch shall not formally carry out the foreign currency fund pool business until materials such as the formally signed agreement and the operational plan for the foreign currency fund pool are filed with the AFE branch.
Article 16. In the event of foreign currency fund pool business operating within the framework of entrusted loans, the content and operational plan of the foreign currency fund pool approved by the AFE branch shall be strictly adhered to. Items such as the account opening and domestic foreign exchange transfers in relation to the approved operational plan of the foreign currency fund pool may be processed by the entrusted bank on behalf of the host enterprise and the participants with approval granted by the AFE branch.
The entrusted bank shall, within 10 working days from the beginning of every month, report to the AFE branch the operations of the foreign currency fund pool in the form of a Monthly Report on the Business of Foreign Currency Fund Pool Business. (See Attachment 2 for the format.)
Should any change occur in the participants, the entrusted bank shall promptly re-sign or amend the relevant agreements with the domestic enterprises, and then report and file with the AFE branch. Only with approval thereof can it continue to implement the plan for the foreign currency fund pool in accordance with increased/decreased number of participants.
Article 17. In the event of a foreign currency fund pool business operating within the framework of entrusted loans, the entrusted bank and the participants can negotiate to stipulate the daytime overdraft amount, and the participants are allowed to issue an overdraft payment from their foreign exchange entrusted loan subsidiary account. The overdraft thereof shall be promptly offset on the same day with the funds from its foreign exchange capital account and current foreign exchange account, or by the entrusted loan funds collected (or borrowed, transferred) by the host enterprise.
The entrusted bank and the host enterprise can agree on the following day the overdraft amount from the main account of the entrusted loans. The overdraft thereof shall be offset by the entrusted loan funds collected (or borrowed, transferred) by the host enterprise from the participants, or the funds from the host enterprises foreign exchange capital account and current foreign exchange account.
Article 18. In the event of a foreign currency fund pool business operating within the framework of entrusted loans, the income of the host enterprises main account for foreign exchange entrusted loans shall encompass: borrowed entrusted loans, collected principal and interest of entrusted loans, or funds transferred from its foreign exchange capital account and current foreign exchange account. Expenditures thereof shall encompass: lent entrusted loans, repaid principal and interest of entrusted loans, funds transferred back to the foreign exchange capital account and current foreign exchange account, interest on the entrusted loans transferred to its current foreign exchange account, or funds used for external payments for its current items.
The income of the participantsforeign exchange entrusted loan subsidiary accounts shall encompass: borrowed entrusted loans, the collected principal and interest of the entrusted loans, and funds transferred from its foreign exchange capital account and current foreign exchange account. Expenditures thereof shall encompass: lent entrusted loans, repaid principal and interest of the entrusted loans, funds transferred back to its foreign exchange capital account and current foreign exchange account, interest on the entrusted loans transferred to its current foreign exchange account, or funds used for external payments for its current items.
Article 19. In the event that domestic enterprises carry out foreign exchange fund operations via finance companies in the form of collecting the participantsforeign exchange deposits and granting foreign exchange loans to the participants, or if finance companies, within the range approved by the relevant authorities, collect the participantsforeign exchange deposits and grant foreign exchange loans to the participants, related issues thereof such as the opening of foreign exchange accounts and domestic foreign exchange transfers do not necessarily require approval by the AFE.
Finance companies shall, in compliance with the relevant regulations, report the relevant data through the foreign exchange account management information system.

Chapter Four  Administration of Domestic Enterprises Conducting the Business of Spot Purchases and Sales of Foreign Exchange via Finance Companies

Article 20. The business of spot purchases and sales of foreign exchange conducted by domestic enterprises via finance companies shall include exchange business for participants between RMB and foreign currencies by finance companies, and that for the finance companies themselves due to needs emerging from their own business activities.
Article 21. The following requirements shall be met by the finance companies that conduct the business of spot purchases and sales of foreign exchange:
1. Approval of qualification to operate the relevant financial business and foreign exchange business.
2. A complete internal administrative system for the purchase and sale of foreign exchange, including but not limited to: an internal control system for the purchase and sale of foreign exchange, operational procedures, a statistical and reporting system, an administrative system for certificates/documents; an independent system of account titles and an accounting method for the purchase and sale of foreign exchange; a complete internal administrative system for the business of declaring the balance of payments.
3. Sound technical conditions and an infrastructure for the purchase and sale of foreign exchange, including an exchange rate administration system for receiving/sending for the purchase and sale of foreign exchange; necessary technical conditions for filing the declared statistical data on the balance of payments and statistical data on the purchase and sale of foreign exchange; two or more relevant specialists; venues suitable for the purchase and sale of foreign exchange;
4. No breach of the foreign exchange administration regulations within the recent 2 years.
5. Other requirements as stipulated by the AFEs.
Article 22. In the event that domestic enterprises conduct the business of spot purchases and sales of foreign exchange via finance companies, the following materials shall be submitted by the finance companies to the AFE branch:
1. A written application, including but not limited to: basic information on the domestic enterprises, a list of all the participants, the ownership structure and its actual controller, and so forth; foreign exchange income/expenditure and purchase and sale of foreign exchange by all of the participants; a feasibility report on the business of spot purchases and sales of foreign exchange.
2. The finance companys Financial Business Operation Permit and approvals for its range of business; an assessment report on the finance companys capital and working capital; and participation confirmation documents of all the participants.
3. An internal administrative system for the purchase and sale of foreign exchange; an internal administration system for the declaration of the balance of payments; an exchange rate management system for receiving/sending for the purchase and sale of foreign exchange and equipment for querying the relevant reported data; the name list and CVs of all the senior executives practicing the business of purchase and sale of foreign exchange; the finance companys and all the participants audited financial statements for the recent 2 years.
4. Other relevant materials as required by the AFEs.
After receiving a complete set of the application materials, the AFE branch shall examine all the facilities on the spot to see whether they are qualified, and within 20 working days after the examination thereof, the AFE branch shall make a decision as to whether or not to grant approval. In the case of approval, an approval document shall be issued and a copy shall be reported to the SAFE. In the case of rejection, the AFE branch shall issue a written statement stating the reasons for rejection.
Article 23. The finance companies shall, within 30 working days after receiving the qualifications for the business of spot purchases and sales of foreign exchange, apply to the AFE branch for approval of the comprehensive position of purchase and sale of foreign exchange.
After acquiring membership on the inter-bank spot foreign exchange market, finance companies shall conduct the business of spot purchases and sales of foreign exchange in compliance with the relevant regulations for the administration of the purchase and sale of foreign exchange.
Branches of finance companies are prohibited from conducting the business of spot purchases and sales of foreign exchange.
Article 24. Finance companies that conduct spot purchases and sales of foreign exchange shall adhere to the relevant requirements issued by the SAFE concerning the designated foreign exchange banks conducting foreign exchange business, including the regulations for approval and safekeeping of the accounting documents, its own purchase and sale of foreign exchange, the comprehensive position for the purchase and sale of foreign exchange, the filing of purchase and sale of large amounts of foreign exchange, posted exchange rates and statistics for the purchase and sale of foreign exchange.
Subsequent to the purchase of foreign exchange from finance companies the participants shall, within 5 working days, on its own behalf pay all the expenditures for the current items other than the goods trade.
Article 25. In the event of applying to suspend the business of spot purchases and sales of foreign exchange, domestic enterprises shall submit the following materials to the AFE branch via the finance company:
1. A written application (including the reasons for the suspension and follow-up measures).
2. Enterprise documents regarding the decision to suspend the business of the purchase and sale of foreign exchange
3. Information about the business of purchase and sale of foreign exchange prior to the application for suspension.
4. Other materials as required by the AFEs.
After receiving a complete set of the aforesaid materials, the AFE branch shall, within 20 working days, issue a reply and send a copy thereof to the SAFE.

Chapter Five  Supplementary Provisions

Article 26. Domestic enterprises that engage in centralized operations of foreign exchange funds shall comply with the Provisions and other relevant regulations on foreign exchange administration, and shall accept the supervision, administration, and examination of the AFEs.
Article 27. The SAFE may, in accordance with Chinas balance of payments situation and the status of the centralized operations of the domestic enterprisesforeign exchange funds, adjust the relevant regulations on the centralized administration and operation of foreign exchange funds in an appropriate manner.
Article 28. The Provisions shall apply to internal members of domestic enterprises controlled by the same overseas parent company.
Article 29. Domestic enterprises, designated foreign exchange banks, and finance companies that conduct foreign exchange business in breach of the Provisions shall be punished by the AFE in compliance with the Regulations of the People's Republic of China on Foreign Exchange Administration and other relevant regulations.
In the event that an aforesaid party is in severe breach of the Provisions and other relevant regulations, the AFE branch in the locality where it is located can suspend foreign currency fund pool business or business for purchases and sales of foreign exchange.
Article 30. The SAFE shall be responsible for the interpretation of these Provisions.
Article 31. These Provisions will take effect as of November 1, 2009. After promulgation of the Provisions, the Circular of the SAFE Concerning the Relevant Issues on the Internal Operations and Administration of Foreign Exchange Funds of Multinational Companies (Huifa [2004], No. 104) and the Circular of the SAFE Concerning Relevant Issues on the Business of Spot Purchases and Sales of Foreign Exchange Carried Out by Finance Companies of Enterprise Groups (Huifa [2008], No. 68) shall be repealed. In cases of any discrepancies between the former provisions and these Provisions, these Provisions shall prevail.





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