The SAFE has recently released the Circular of the SAFE Announcing that Thirty-four Regulatory Foreign Exchange Administration Documents shall be abolished and declared invalid (Huifa No. 44 [2014], hereafter referred to as the “Circular”). According to the Circular, thirty-four regulatory documents on foreign exchange administration will be abolished or will expire, among whicheighteen will be abolished and sixteen will expire. A relevant responsible person from the SAFE answered questions from reporters on related issues.
I. What is the background for streamlining the laws and regulations? What are the implications?
To implement the requirements of the CPC Central Committee and the State Council to streamline administration and decentralization as well as administration by law, we have streamlined the effective foreign exchange administration regulations in a centralized manner in accordance with the Opinions of the State Council on Strengthening Construction of Government by Law (Guofa No. 33 [2010]). According to the Opinions, the regulatory documents will be streamlined biennially and the results shall be announced to the public.
In recent years, the SAFE has announced that more than 700 regulatory documents have been annulled or declared invalid, reducing the number of regulatory documents by over 60 percent. First, regularly streamlining the laws and regulations is conducive to improving the transparency of the foreign exchange administration policies, making it easier for the public to understand the foreign exchange administration regulations and promoting trade and investment facilitation. Second, it is favorable for establishing a clear and concise legal framework for foreign exchange administration and for promoting the transformation of government functions to carry out their regulatory responsibilities according to the law.
II. What is the priority in the streamlining efforts this time?
The streamlining efforts this time focus on solving problems such as the mismatch between the regulatory documents and the difficulties in applying them accurately.To be specific, such problems include inconsistencies between previous and existing regulations due to the replacement of the relevant management content with subsequent regulations; the inability to adapt to new trends and developments and the inappropriatenessof the relevant management contentfor the transformation of government functions; the expiration of the application period forthe relevant regulations or the disappearance of the objects to be adjusted.
III. What laws and regulations are being streamlined at this time?
The regulatory documents repealed or declared invalid this time are divided into seven major groups categorized by business type:
First, five comprehensive regulatory documents. They involve off-site supervision of foreign exchange receipts and payments, declaration and cancellation after verification of the BOP for cash settlements, strengthening foreign exchange emergency management, as well as foreign exchange administration regulations for rescue-and-relief operations in Ya’an, Sichuan, and so forth.
Second, two regulatory documents on foreign exchange administration under the current account. These regulations involve foreign exchange administration for foreign trade denominated in RMB by domestic institutions and the reimbursed expenses of insurance companies.
Third, nine regulatory documents on foreign exchange administration under the capital account. They cover operational processes of foreign exchange administration for processing and assembly projects with overseas-supplied materials and foreign aid projects, foreign exchange administration for projects ensuring fixed returns for foreign investors, external debt management for foreign-invested banks in China, external debt registration for foreign-funded real estate enterprises, overseas funding by foreign-funded MNCs in Pudong New Area, overseas financing of the security balance quota, and outward remittances of foreign exchange profits by foreign-invested enterprises.
Fourth, ten regulatory documents on the supervision of the foreign exchange of financial institutions. These documents involve supplementingcapital for foreign exchange purchases by trust companies, remittances for personal advances for foreign exchange settlements, statistics on the use of Chinese mainland RMB cards in Hong Kong, management of special stamps for foreign exchange settlements and sales by banks, limits on cash withdrawals using UnionPay Cards at overseas ATMs, content and scoring standards for the assessment of banks in implementing the provisions of foreign exchange administration, and so forth.
Fifth, three regulatory documents on the RMB exchange rate and the foreign exchange market. These documents involve the exchange of the Russian Ruble, the listed exchange of the KRW, the submission of daily reports on the listed exchange rate, and so forth.
Six, two regulatory documents on the BOP and foreign exchange statistics. These documents involve BOP declarationsonthe transformation of foreign-invested banks, trade credit surveys, and so forth.
Seventh, three regulatory documents on foreign exchange inspections and applicable laws and regulations. These documents involve the handling of illegitimate foreign exchange futures trading institutions, restituting settlement of the capital in the qualitativeirregularities in the RNB loans through the revised Regulations on Foreign Exchange Administration, and so forth.
IV. How will the businesses involved in this clean-up be handled in the future?
As the eighteen repealed laws and regulations have mainly been replaced by subsequent regulations, the relevant regulations currently in force will prevail. As for the sixteen laws and regulations that have been declared invalid, no further implementation is needed since they have expired or the objects of adjustment have disappeared. In particular, after the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Some Bank Pilots to Handle Remittancesby Individuals with Pre-settled Foreign Exchange (Huifa No. 48 [2003] and the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Further Improving the Bank Pilots to Handle Remittances by Individuals Pre-settled Foreign (Huifa No. 51 [2009]) are repealed, administrative approvals for market access for remittancesby individuals with pre-settled foreign exchange are cancelled. But the pre-settled foreign exchange format can remain, and the banks can decide at their own discretion whether to offer this business in accordance with the relevant regulations on personal foreign exchange administration based on the market situation.
V. What arrangements will the SAFE make to further streamline the laws and regulations during the next step?
Next, the SAFE will further implement a long-term mechanism for streamliningthe laws and regulations to facilitate understanding by banks, companies, and individuals to apply the laws and regulations for foreign exchange administration, to promote foreign exchange administration according to the law, and to promote trade and investment facilitation. First, we will continue to thoroughly streamline the foreign exchange administration regulations to achieve new results in the clean-up as soon as possible. Second, we will promote reform of the foreign exchange administration and transformation of the administrative patterns. By combining overall promotion and making breakthroughs in key respects, we will strengthen the top-down design of the overall plan for the reform of foreign exchange administrationand will build a new foreign exchange administration framework based on streamlining administration and decentralization to satisfy the requirements for trade and investment facilitation. Third, we will update the Catalogue of Effective Laws and Regulations on Foreign Exchange Administration The SAFE will update the catalogue by the end of 2014 in accordance with the laws and regulations that have beenrepealed or declared invalid at this time. Fourth, we will compile and publish a Collection of Laws and Regulations on Foreign Exchange Administration of the People’s Republic of China (2014 version). The Collection will include the regulations on foreign exchange administration in effect and will provide explanations about thosethat have expired.
