In order to regulate the banksown foreign exchange settlement and sales business and to facilitate banking operations, the State Administration on Foreign Exchange (the SAFE) recently released the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Improving the Administration of the BanksOwn Foreign Exchange Settlement and Sales (Huifa No. 23 [2011]) (hereinafter referred to as the Circular). The Circular will come into effect as of July 1, 2011.

The Circular standardizes regulation of the settlement and sales of foreign exchange under the banks own current and capital accounts: first, it embodies balanced management by establishing unified quantitative standards for the conversion of the banks capital (or working capital) between domestic and foreign currencies; second, it reflects convenient operationsby straightening out and integrating the administrative policies on the banks own foreign exchange settlement and sales and standardizing such business that is not clearly stipulated in some of the current policies; third, it reflects a streamlined review process by simplifying the requirement for ex-ante review for the settlement of the banks profits in foreign exchange and canceling the ex-ante review requirement for the dividends and bonuses paid by banks to foreign shareholders as well as for profits remitted by foreign banks; fourth, it stresses laying emphasis on major items by standardizing foreign exchange settlement and sales for items that have a great impact on balance of payment and foreign exchange operations; and fifth, it represents ex-post supervisionby reiterating the statistical requirements for the banks own foreign exchange settlement and sales as well as regarding the information to be submitted by the banks.