The branches and foreign exchange administration departments of the State Administration of Foreign Exchange (SAFE) in provinces, autonomous regions, and municipalities directly under the central government; the SAFE branches in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo; and all the designated Chinese-funded foreign exchange banks,
To further deepen the reform of foreign exchange administration for capital account, boost and facilitate the operations of cross-border investment funds by enterprises, standardize foreign exchangeadministration for direct investment and enhance administration efficiency, the SAFE decides to further simplify and improve the policies for foreign exchange administration for direct investment across the country, based on the experience from the preliminary pilot program conducted in some regions. Relevant issues are notified as follows:
I. Canceling two administrative approval items, namely, registration and verificationof foreign exchange under domestic and overseas direct investment
Banks shall, in accordance with this Circular and the Operating Guidelines for Foreign Exchange Transactions for Direct Investment (see the Appendix), directly verify and handle the registration of foreign exchange under domestic and overseas direct investment (collectively referred to as registration of foreign exchange for direct investment) , while the SAFE and its branches (collectively referred to as the foreign exchange authorities) shall conduct through banksindirect regulation over registration of foreign exchange for direct investment.
(I) During the implementation of this Circular, the banks thathave obtained the financial institution identification code from the foreign exchange authorities and activated their capital account information system at theirlocal foreign exchange authorities can handle the registration of foreign exchange for direct investment directly through the capital account information system of the SAFE for domestic foreign-invested enterprises, and the domestic investment entities of overseas investment enterprises (hereinafter referred to as the relevant market entities).
(II) Banks and their branches shall handle registration of foreign exchange for direct investment under the guidance of their local foreign exchange authorities, and perform the responsibilities ofverifying, statistical monitoring and reporting within their power.
(III) A relevant market entity can choose a bank at the place of its incorporation for registration of foreign exchange for direct investment. After the registration, the entity is allowed to open accounts, and remit funds (including outward or inward remittance of profits or dividends), which are related to direct investment.
II. Simplifyingprocedures for some transactions of foreign exchange for direct investment
(I)Simplifyingregistrationmanagement for confirmation of capital contribution by a foreign investor under domestic direct investment. The registration for confirmationof non-monetary capital contribution by a foreign investorunder domestic direct investment and registration for confirmation of capital contribution by a foreign investor for acquisition of a Chinese shareholder's equity are cancelled. The registration for confirmation of monetary contribution by a foreign investor is replaced with registration for accounting entry of monetary contribution for domestic direct investment.If the foreign investor makes capital contributions in cash (including cross-border spot exchange and RMB), the opening bank can handle registration for accounting entry of monetary contribution for domestic direct investmentupon receipt of relevant capital funds directly through the capital accountinformation system of the SAFE, and the capital funds can be used only after the registration.
(II) Canceling filing of foreign exchange for overseas reinvestment.Foreign exchange filing will no longer be required for overseas reinvestment for establishment of or control over another overseas enterprise by an overseas enterprise established or controlled by a domestic investment entity.
(III)Canceling annual check of foreign exchange for direct investment and replacing it with registration for accumulated equity.Data on accumulated equity in domestic direct investment and/or overseas direct investment (collectively, the accumulated equity in direct investment) as at the end of the last year shall be reported through the capital account information system of the SAFE by relevant market entity itself or by an accounting firm or a bank before and on September 30 every year.
The foreignexchangeauthorities shall, through the capital account information system, control the transactions of a relevant market entity thatfails to abide by the provision above andno bank is allowed to handle transactions of foreign exchange under the capital account for this entity. Only after the data have been reported as required and a letter of explanation for reasonable causes has been delivered to the foreign exchange authorities can the foreign exchangeauthorities stop control over the entity's business. Administrative penalty shall be duly imposed on entities suspected of violating regulations on foreign exchange administration.
Relevant market entities, including foreign-invested enterprises participating in the sampling survey by the foreign exchange authorities on accumulated equity in direct investment, shall follow the requirements of the sampling survey system and report relevant information to theforeign exchange authorities at the place of their incorporation on a quarterly basis.
III. Banks shall raise their awareness of compliance in handling registration of foreign exchange for direct investment
(I) Banks shall develop internal managementregulations and systemson registration of foreign exchange for direct investment, and keep the rules for future reference. The internal management regulations and systems shall at least include the following:
1. Operating procedures for registration of foreign exchange for direct investment, including processes and standards for acceptance of transactions, compliance of documents and authenticity verification;
2. Risk control system for registration of foreign exchange for direct investment, including compliance risk review,transaction & check, andclassified review system;
3. Statistical reporting systemfor registration of foreign exchange for direct investment, including data collection channels and operating procedures.
(II) Banks can voluntarily conduct business access management for registration of foreign exchange for direct investment over their branches that have obtained the financial institution identification code from the foreign exchange authorities.
(III) Banks shall perform the obligation of authenticity verification in strict accordance with this Circular and the attached Operating Guidelines for Foreign Exchange Transactions for Direct Investment,handle registration of foreign exchange for direct investment through the capital account information system of the SAFE, and keep all the relevant registration documents for future reference.
(IV) In handling registration of foreign exchange for direct investment, a bank shall immediately report any unspecified provisions, inaccurate data or abnormalities to the foreign exchange authority at the place of the incorporation ofa relevant market entity.
IV. Foreign exchange authorities shall enhance training and guidance for, and ex post regulation of banks.
(I) Foreign exchange authorities shall enhance training and guidance for, and ex post regulation of banks. They shall obtain the information on their handling of foreign exchange for direct investmentandthesubmission ofrelevant data,statements and other documents. They shall conduct ex post verification and inspection of the banks' compliance in handling foreign exchange for direct investment and their execution of the internal control system to develop a full understanding of the banks' handling of foreign exchange for direct investment. They shall immediately report abnormalities, rectify and deal withany violations.
(II) In accordance with regulations on foreign exchange administration, the foreign exchange authorities shall impose punishment on any bank that fails to review, collect statistics on and report issues regarding the registration of foreign exchange for direct investment, and also may order the bank to suspend such registration. In cases that the bank seriously violate regulations or fails to effectively rectify itself during the suspension period, theforeign exchange authority may disqualify the bank for handling registration of foreign exchange for direct investment.
This Circular shall come into effect on June 1, 2015. After coming into effect, this Circular shall prevail where there is a discrepancy with previous regulations.The pilot regions for the reform of foreign exchange settlement of capital of foreign-invested enterprises shall continue to implement the willingness exchange settlement policy in accordance with the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Implementing a Pilot Program in Some Regions on Reform of Management Mode for Settlement of Foreign Exchange Capital of Foreign-Invested Enterprises (Huifa No. 36[2014]).Upon receipt of this circular, the SAFE branches and foreign exchange administration departments should immediately forward it to the central sub-branches, sub-branches, urban and rural commercial banks, foreign banks and rural cooperative banks within their respective jurisdiction, while the Chinese banks should promptly forward it to the branches within their jurisdiction. Any problems during implementation shall be reported to the Capital Account Management Department of the SAFE in a timely fashion.
The State Administration of Foreign Exchange
FILE: Operating Guidelines for Foreign Exchange Transactions for Direct Investment
