To implement the relevant requirements of the State Council that the financial community should support the growth of the real economy, provide more conveniences for trade and investment, and promote the development of trade in services, the State Administration of Foreign Exchange (SAFE) recently issued the Circular on Printing and Distributing the Regulations of Foreign Exchange Administration for Trade in Services (Hui Fa [2013] No. 30, or the Circular), stating that a nationwide reform of foreign exchange administration will kick off on September 1, 2013. This reform will mainly focus on the following:
First, advancing the streamlining of administration and instituting decentralization. Purchases/sales of foreign exchange for trade in services will be handled by financial institutions without being verified. The foreign exchange regulatory bodies are expected to strengthen the due diligence requirements for financial institutions, urge them to improve their internal controls and operating processes, and monitor and inspect their implementation.
Second, canceling the verification of documents for small-value foreign exchange transactions. Small-value foreign exchange receipts and payments for trade in services will be handled directly with the financial institutions. In theory, a foreign exchange receipt or payment transaction in the amount of USD 50,000 or less (or the equivalent in other foreign currencies) can be made without document verification. However, institutions and individuals in China are required to retain all the documents related to each foreign exchange receipt and payment transaction for trade in services for five years in the case of any future checks.
Third, streamlining the verification of documents. The requirements for document verification for some foreign exchange transactions will be simplified, including simplifying and integrating the existing rules of verification for dozens of documents, eliminating the verification for most approval and filing documents by the relevant authorities, and eliminating the tax certificates for external foreign exchange payments.
Fourth, simplifying and integrating the regulations. The Guidelines on Foreign Exchange Administration for Trade in Services and their rules for implementation will be introduced, and more than 50 regulatory documents will be rescinded, to provide a systematic, clear, and transparent regulatory basis for foreign-related bodies to handle foreign exchange transactions for trade in services.
Fifth, relaxing the requirements for depositing foreign exchange abroad. Conditions for overseas deposits of foreign exchange income from trade in services by domestic organizations will be relaxed, with corporate groups allowed to deposit abroad their foreign exchange income from trade in services.
Sixth, strengthening balanced follow-up management. The monitoring of inflows and outflows of foreign exchange from trade in services will be intensified, with the establishment of an off-site regulatory system integrating macro analysis, intermediate monitoring, and micro checks, coupled with the necessary on-site inspections and examinations to enhance risk prevention and control.
The reform, reflecting the transformation of the concepts and approaches to foreign exchange administration, will help develop a new management approach that is convenient and risk-resistant and adapted to the trends in the development of trade in services and to promote the healthy growth of trade in services in China. (The end.)
