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 branches in Shenzhen, Dalian , Qingdao , Xiamen , and Ningbo ; and all designated Chinese-funded foreign exchange banks:

According to the Announcement of the State Administration of Foreign Exchange, the State Administration of Taxation, and the General Administration of Customs on the Pilot Reform of the Foreign Exchange Administration System for Trade in Goods (Announcement No. 2 [2011] of the State Administration of Foreign Exchange), effective from December 1, 2011, the pilot reform on the foreign exchange administration system for trade in goods (hereinafter referred to as the “reform”) will be implemented in certain regions. In order to actively and orderly advance the pilot reform, the relevant matters are as follows:

I. Effective from December 1, 2011, the pilot reform will take place in the regions under jurisdiction of the branches of the State Administration of Foreign Exchange (the “SAFE”) in Jiangsu, Shandong, Hubei, Zhejiang (excluding Ningbo), Fujian (excluding Xiamen), Dalian, and Qingdao (hereinafter referred to as the “pilot regions”). The banks and enterprises in the pilot regions shall handle the foreign exchange receipts and payments for trade in accordance with the Guidelines for the Pilot Implementation of the Foreign Exchange Administration System for Trade in Goods and its Detailed Rules on Implementation (hereinafter referred to as the “pilot regulations”), and those outside pilot regions shall handle the foreign exchange receipts and payments for trade in accordance with the provisions in force.

In order to regulate the operation of the pilot, the SAFE has formulated the Operational Rules on the Guidelines for the Pilot Implementation of the Foreign Exchange Administration System for Trade in Goods (Bank and Enterprise Version) (hereinafter referred to as the “operational rules,” see Annex 1), to be implemented when the pilot becomes effective.

II. From the effective date of the pilot, the banks in the pilot regions shall suspend the formalities for the checking and input of information on advance payments for goods as well as the de-registration of deferred receipts and deferred payments of the enterprises in the pilot regions. The enterprises, banks, branches, and sub-branches of the SAFE (hereinafter referred to as the “foreign exchange authorities”) outside the pilot regions shall still handle the relevant business in accordance with the provisions in force on trade credit registration management.

III. During the pilot period, where the foreign exchange receipts and payments for trade are handled at banks in places other than those where the enterprises are located, the banks shall require that the enterprises explain their status with respect to the relevant lists and classifications, and shall handle the relevant business in accordance with the following provisions:

(1) Where Category-B and -C enterprises in the pilot regions handle foreign exchange receipts and payments for trade with banks outside of the pilot regions, the enterprises shall undergo the registration procedures with the local foreign exchange authorities on a case-by-case basis, and the banks shall handle the business based upon the strength of the Registration Form for Foreign Exchange Business for Trade in Goods (hereinafter referred to as the “registration form”) issued by the foreign exchange authorities where the enterprises are located.

Where Category-A enterprises in the pilot regions handle foreign exchange receipts and payments for trade with banks outside of the pilot regions, the banks shall handle the business in accordance with the relevant provisions in force outside of the pilot regions on foreign exchange collections from exports and the measures in force outside of the pilot regions applicable to Category-A import enterprises.

The banks in and outside of the pilot regions shall not directly handle the foreign exchange receipts and payments for trade of the enterprises within the pilot regions which are not on the List of Enterprises Involved with Foreign Exchange Receipts and Payments for Trade.

(2) Where the enterprises outside the pilot regions and are classified as Category-B or -C import enterprises in accordance with the Interim Measures for the Administration of Foreign Exchange Payments for the Import of Goods and the relevant provisions, or are not on the List of Importers Making Foreign Exchange Payments, shall handle foreign exchange receipts and payments for trade with banks in the pilot regions, the enterprises shall undergo the registration procedures with the local foreign exchange authorities on a case-by-case basis, and the banks shall handle the business upon the strength of the Registration Form issued by the foreign exchange authorities where the enterprises are located.

Where other enterprises outside of the pilot regions handle foreign exchange receipts and payments for trade with banks in the pilot regions, the banks shall handle the business in accordance with the measures applicable to Category-A enterprises in the pilot regions.

(3) As for business to be handled upon the strength of the Registration Form, the banks shall indicate the amount and date of the receipts and payments on the Registration Form and shall affix their business seal thereto after examination of the paper Registration Form.  They are not required to log into the relevant systems to verify or to indicate the electronic information on the Registration Form.

(4) Where the enterprises in the pilot regions handle trade credits with banks outside of the pilot regions, the banks are not required to handle the formalities for the checking and inputting of information on the advance payments for goods or the de-registration for deferred receipts and deferred payments; where the enterprises outside the pilot regions handle trade credits with banks within the pilot regions, the banks shall handle the relevant business in accordance with the provisions in force on trade credit registration management.

IV. As of the effective date of the pilot, use of the Verification System for the Collection and Payment of Foreign Exchange from Trade, the Online Inspection System for Foreign Exchange Collections and Settlements from Exports, and the China E-Port – the System for Foreign Exchange Payments for Imports –  shall be suspended, and the online operation of the Foreign Exchange Monitoring System for Trade in Goods (hereinafter referred to as the “monitoring system”) shall be implemented.

V. The banks shall carefully study the policies related to the reform, cooperate with the foreign exchange authorities with respect to doing a good job in training the bank branches in the pilot regions before the effective date of the pilot and in preparing for the online operations and the system connection in accordance with the following requirements:

(1) The bank and enterprise may access the monitoring system through the application service platform of the SAFE (hereinafter referred to as the “Application Service Platform”). The specific access channels are as follows:

(2) The banks in the pilot regions shall complete the work related to the network connection, the client environment setting, user management, authority assignment, and access tests between November 7, 2011 and November 25, 2011 in order to ensure that the bank outlets handling the foreign exchange business for trade in goods can access the monitoring system (bank version) through the Application Service Platform. Specific operating instructions for the bank network connection and the system access settings are detailed in the Access Settings Manual for the Foreign Exchange Monitoring System for Trade in Goods (Bank Version) (see Annex 2).

(3) As for bank outlets in the pilot regions that have been assigned financial institution identification codes by October 31, 2011, if they have not opened their accounts on the Application Service Platform, their accounts on the Application Service Platform and their accounts for Foreign Exchange Online Business for Trade in Goods will be automatically opened as of November 7, 2011, and they shall obtain the initial passwords from the business administrator in their head offices or from the SAFE through their head offices; if they have opened their accounts on the Application Service Platform, they will have their account for Foreign Exchange Online Business for Trade in Goods automatically opened as of November 7, 2011, and their business administrator passwords and business operator passwords will not change. The business operators with authority to access the Verification System for the Collection and Payment of Foreign Exchange for Trade (Bank Version) will automatically obtain authority to access the monitoring system (Bank Version).

(4) As for bank outlets in the pilot regions that apply for assignment of the financial institution identification codes after November 1, 2011, if they intend to handle foreign exchange business for trade in goods, they shall submit an application to the local foreign exchange authorities to open an account for Foreign Exchange Online Business for Trade in Goods, and they shall obtain the initial passwords for the business administrator user from their head offices or from the SAFE through their head offices.

(5) The authority of the bank outlets in the pilot regions to access the Verification System for the Collection and Payment of Foreign Exchange for Trade (Bank Version) shall be automatically cancelled by the Application Service Platform on December 1, 2011.

All designated Chinese-funded foreign exchange banks shall, upon receipt of this Circular, forward it to their branches as soon as possible. The branches and foreign exchange administrative departments of the SAFE shall, upon receipt of this Circular, forward it as soon as possible to the local commercial banks and the foreign-funded banks within their respective jurisdictions. If any problems are encountered during  implementation of the policy or the monitoring system, please report them to the local foreign exchange authorities in a timely manner.

Business Enquiry Hotline: 010-68402546

Monitoring System Support Hotline: 010-68402214

Enquiry Hotline for Bank Network Connection: 010-68402022

Enquiry Hotline for Application Service Platform: 010-68402141

Annex: (omitted)