-
A briefing on policies for inspections of trade financing by banks was recently held by the State Administration of Foreign Exchange. The heads of the relevant business in thirty-six Chinese and foreign banks attended the meeting. The meeting provided information about the special campaign to combat false intermediary trade (the special campaign) launched in 2013. By the end of November 2013, 1,076 documents had been inspected for false intermediary trade, involving 112 enterprises and a total amount in excess of USD2.5 billion. Forty-one enterprises were subject to the procedures for administrative penalties, with the twelve enterprises that were suspected of committing crimes transferred to the public security organs. The meeting, providing information on the recently adopted foreign exchange administration policies for trade financing, urged banks to carry out the policies earnestly, to actively support the authentic trade financing demands of the real economy, and to prevent the defrauding of bank loans by enterprises with fictitious trading activities. The SAFE will intensify monitoring of the authenticity and compliance of trade financing by banks, evaluate the due diligence of bank transactions, and when necessary carry out on-site verifications or inspections. Emphasis was placed on the relaxation in the banks’ procedures for the handling of foreign exchange business, as was identified in the “special campaign.” It was stressed at the meeting that banks should follow the correct operating philosophies, bring into full play the role of finance in serving the real economy, and promote the healthy development of trade financing. Banks should follow the prudential operating principle of “understanding your client,” strengthen verification of the authenticity and compliance of trade financing, improve the mechanism for risk prevention and internal control, and control funding risks. Banks should provide trade financing services to serve the needs of the real economy, strictly examine the authenticity of trading activities to prevent operations of fictitious funds, and guard against speculation and arbitrage of foreign exchange funds. Banks should implement the foreign exchange administration policies in an earnest manner and should prevent non-compliance in implementation of the relevant rules or in the provision of assistance to evade the foreign exchange administration regulations. It was stressed at the meeting that the SAFE will actively carry out the spirit of the Third Plenary Session of the Eighteenth Party Congress, vigorously promote facilitation of trade and investment, and intensify efforts to support and facilitate operations of law-abiding and compliant enterprises. Efforts will be made to enhance analysis and monitoring of cross-border fund flows, to crack down severely on illegal and non-compliant foreign exchange transactions in accordance with the law, to guard against the risks of cross-border flows of abnormal foreign exchange funds, and to ensure the security of the foreign-related economy and finance. 2013-12-16/en/2013/1216/1096.html
-
The State Administration of Foreign Exchange (SAFE) recently promulgated the Notice of the State Administration of Foreign Exchange on Issues regarding Improving Foreign Exchange Administration for Trade Financing by Banks (Huifa No.44 [2013], hereinafter referred to as “the Notice”). The Notice was issued to facilitate business operations of law-abiding and compliant enterprises, to bring into better play the role of financial services in serving the real economy, to check against false trade financing activities without authentic transactional backgrounds, and to prevent cross-border flows of abnormal foreign exchange funds. The Notice includes the following three points. The first is to urge banks to improve verifications of the authenticity and compliance of trade financing. Banks should follow the principle of “understanding your client,” strengthen verifications of the authenticity and compliance of trade financing, especially long-term trade financing, actively support the authentic trade financing demands of the real economy, and prevent the defrauding of bank loans with false transactional backgrounds. Banks should enhance internal control and supervision, timely report suspicious transactions, and prevent non-compliance in implementation of the relevant rules or provision of assistance to evade the foreign exchange administration regulations. The SAFE should intensify verifications of the authenticity and compliance of bank trade financing, evaluate the due diligence of bank transactions, and implement on-site verifications or inspections when needed. The second is to strengthen the classified management of enterprises and to create an impartial and orderly market environment. Foreign exchange receipts and payments for trading activities by enterprises should provide authentic and legitimate transactional backgrounds. The SAFE should intensify the monitoring and verification of enterprises with abnormal trade balances, especially enterprises with abnormal growth of long-term trade financing and typical arbitrage characteristics, undertake classified administration of the relevant enterprises by complying with the relevant rules of foreign exchange administration for trade in goods, provide the strongest support to law-abiding and compliant enterprises, and pay special attention to enterprises that are categorized as Class-B or Class-C. The third is to impose tougher penalties on the non-compliant activities of banks and enterprises. Banks that fail to fully perform their verification duties shall be punished by the SAFE in compliance with the risk reminders and relevant regulations. With respect to enterprises that operate in violation of the regulations, the SAFE shall impose penalties on the enterprises concerned in accordance with the relevant regulations. The penalties shall be based on the various circumstances of the violations, i.e., illegal inflows of foreign exchange, illegal settlements of foreign exchange, illegal purchases of foreign exchange, or evasion of foreign exchange. If the relevant acts by the banks or enterprises constitute criminal offenses, the criminal responsibilities shall be investigated in accordance with the law. This Notice shall take effect as of the date of promulgation. 2013-12-07/en/2013/1207/1094.html
-
In order to improve foreign exchange administration regarding the conversion of external debts into loans (loan conversion), to streamline administration, to institute decentralization, and to promote facilitation of investment and financing, the State Administration of Foreign Exchange (SAFE) recently released the Circular of the State Administration of Foreign Exchange on the Issuance of the Foreign Exchange Administration Regulations on the Conversion of External Debts into Loans (Huifa No.5 [2014], hereinafter referred to as “the Circular”). The Circular mainly includes the following: (1) Ending deal-by-deal registration and remittance approval of loan conversions at the SAFE, and replacing them with a centralized registration of creditors for loan conversions; (2) Terminating the account opening and approval for loan conversions; as a result, loan conversion debtors will be allowed to complete account-opening procedures at the banks by presenting an application to open an account and an agreement to convert the loan; (3) Loan conversion creditors or debtors will be allowed to complete the procedures for the transfer of the relevant funds within China directly at the opening bank by presenting the agreement regarding the loan conversion; (4) Ending examination and approval of policy-based foreign exchange settlements for loan conversions; loan conversion debtors will be allowed to complete the procedures for foreign-exchange settlements of funds for the loan conversions directly at the opening bank by presenting the agreement for the loan conversion; (5) Removing the procedures for the approval of capital repayments with interest and foreign exchange purchases under the item of loan conversions; as a result, loan conversion debtors will be allowed to complete repayment procedures directly at the banks by presenting items such as the agreement on the loan conversion and the repayment notification. This Circular will enter into effect as of March 1, 2014. 2014-02-21/en/2014/0221/1106.html
-
To further improve the functions of China's RMB foreign exchange derivatives market, to help market players, such as businesses and banks, to manage exchange-rate risks, to promote the development of China's foreign exchange market, and to give the market a decisive role in allocating foreign exchange resources, the State Administration of Foreign Exchange (SAFE) recently released the Circular on Adjusting the Management of RMB Foreign Exchange Derivatives (HuiFa [2013] No. 46, hereafter referred to as the Circular). The highlights of the Circular are as follows: 1. Simplifying management of access to foreign exchange swaps and currency swaps to support the banks in better serving the real economy via streamlining administration and delegating power to lower levels. 2. Increasing the patterns in the exchange of the principal in currency swaps to help businesses manage the risks of foreign currency debts. 3. Supporting banks to improve options pricing and risk controls so as to enable banks to accurately identify, measure, and manage exchange-rate risks. The Circular will come into force on January 1, 2014. 2013-12-19/en/2013/1219/1097.html
-
Han Jian Member of the Balance-of-Payments Statistical Committee of the IMF BOP statistics is a statistical system that fully reflects the foreign-related economic development of a country. It is one of the so-called four primary accounts of the macro-economy (the other three are the System of National Accounts, the Monetary and Financial Statistics, and the Fiscal Statistics). In 1995, upon approval of the State Council, the People’s Bank of China (PBOC) promulgated the Measures for the Declaration of Balance-of-Payments Statistics (hereinafter referred to as the “Measures”), laying a legal foundation for China’s implementation of BOP statistics. With the constant expansion of China’s foreign-related transactions, a number of new challenges have arisen from the BOP statistics. The State Council recently decided to amend the Measures; the changes will come into force as of January 1, 2014. The amendments to the Measures mark an important move to improve the country’s BOP statistical system as required by the latest IMF standards. In the following, we present interpretation of the Measures in six respects: I. The BOP statistics not only include transactions, but they also cover the stock of external assets and liabilities. In the past, countries throughout the world, including China, focused on cross-border capital flows and placed less emphasis on the stock of external assets and liabilities. The lessons learned from the financial crises over the several years highlight the importance of reliable statistics on external assets and liabilities, which is a foundation for the formulation of scientific macro-economic policies and wise decisions for routine supervisions and for tackling potential crises. In 2009 the IMF published the 6th edition of The Balance of Payments and International Investment Position Manual, with a special emphasis on the statistical requirements for the stock of external assets and liabilities. Correspondingly, with respect to the scope of BOP statistics, special emphasis was placed on the amendment to the statistics on the stock of external financial assets and liabilities held by Chinese residents. Thus far the declaration of BOP statistics not only includes economic transactions between Chinese residents and non-Chinese residents, but also covers external financial assets and liabilities of Chinese residents. II. Both Chinese and non-Chinese residents are responsible for issuing statistical declarations. The Balance of Payments and International Investment Position Manual (sixth edition) not only specifies the BOP statistical requirements of residents, but also specifies the statistical requirements for non-residents. Prior to the amendments, the Measures only specified the declaration obligations of Chinese residents. With the expansion of China’s foreign-related economy, an increasing number of non-residents have begun to carry out foreign-related transactions through domestic financial institutions. For a complete understanding of China’s BOP status, non-Chinese residents carrying out economic transactions within the territory of China are now incorporated into the scope of the declaration entities, as required by the revised Measures. According to the revised Measures, both Chinese residents and non-Chinese residents carrying out economic transactions within the territory of China are required to declare their BOP information. It should be noted that only non-Chinese residents who carry out economic transactions within the territory of China are required to make statistical declarations. Non-Chinese residents with no economic transactions in China or with economic transactions outside the territory of China are not subject to a statistical declaration. Economic transactions between Chinese residents and non-Chinese residents are primarily declared by the Chinese residents. Non-Chinese residents shall only declare data that do not meet the BOP statistical requirements or are not acquired through the declarations by Chinese residents. The State Administration of Foreign Exchange (SAFE) will specify the time-points, aspects, and channels of declaration by non-Chinese residents in light of the actual circumstances. Furthermore, “residents” as specified in the Measures are residents in statistical terms, including both institutions and individuals. III. Not only entities directly involved in the transactions are obligated to make declarations, but intermediaries, such as registration, settlement, and trusteeship agencies, also must make such declarations. In the past, the entities subject to the BOP statistical declarations were primarily that participated directly in the transactions. As foreign-related transactions have become more diversified in terms of the types and methods of transactions, new products and businesses, such as cross-border portfolio investments, financial derivatives, and bank cards, have come to the fore. In view of the large number of entities involved in making declarations, data collection through intermediaries engaging in services such as registration, settlement, and trusteeship will help facilitate data acquisition, increase the accuracy of the relevant data, reduce social costs, and relieve the burdens on the declaration entities to submit the relevant data. The previous version of the Measures only specified the declaration obligations of entities directly involved in transactions and securities registration agencies. According to the Measures, institutions that provide services such as registration, settlement, and trusteeship are also subject to the declaration. IV. Both institutions and individuals are subject to the declarations As China is moving ahead in its opening-up drive, the stock of external financial assets and liabilities of individual Chinese residents is also increasing. However, these data, which should be incorporated into the scope of the statistics and monitoring to complete the BOP statistical data, cannot be fully collected by financial institutions. According to the amended Measures, “Resident Chinese individuals who hold external financial assets and liabilities shall declare the conditions of their external financial assets and liabilities according to the regulations of the SAFE.” This is a supplementary provision of the Measures. Thus far, the SAFE has not worked out any regulations on the specific measures for individuals’ declarations of external assets and liabilities. Resident individuals holding external assets and liabilities above a certain amount may be required to submit the relevant information to the authorities, according to detailed rules that are expected to be formulated based on the actual circumstances. V. Both BOP statisticians and other personnel involved with statistics, such as bank staff, are obligated to keep the relevant information confidential. In order to relieve the concerns of the declaration entities regarding breaches of data and to reduce the work by the declaration entities in fulfilling their declaration obligations, the previous version of the Measures specified that BOP statisticians are obligated to keep the data declared by the relevant entities confidential. The amended Measures again underscore the confidentiality obligations from the perspective of the complete data-acquisition process, requiring that banks, dealers, and institutions that provide services such as registration, settlement, and trusteeship when dealing with the relevant businesses shall keep strictly confidential all data known to them that are declared by the relevant entities. VI. Not only will violations of the foreign exchange administration regulations be punished, but violations of the BOP statistical regulations will also be punished. In practice, institutions and individuals attach great importance to complying with the regulations on the administration of foreign exchange under the current account and the capital account and the administration of foreign exchange business, but they tend to neglect their statistical obligations as provided by the law. According to the Measures, Chinese and non-Chinese residents who fail to make BOP statistical declarations as required by the regulations shall be punished in accordance with Article 48 of the Regulations on Foreign Exchange Administration of the People’s Republic of China (hereafter, the Regulations) of the SAFE and its branches or sub-branches. In order to facilitate implementation, the amended Measures delete all inapplicable penalty clauses specified in the previous version and simplify the wording to maintain consistency between the Measures and the Regulations. Entities that fail to make BOP statistical declarations in accordance with the regulations will be subject to penalties. The foreign exchange administration authorities may order the relevant entities to make corrections and the authorities may issue warnings to the relevant entities. Institutions that act in violation of the relevant regulations may be fined no more than RMB 300,000. Individuals who act in violation of the relevant regulations may be subject to a fine of no more than RMB 50,000. 2013-11-22/en/2013/1122/1088.html
-
To implement the State Council's requirements that the financial community 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 Forwarding the Regulations on 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. To further clarify this reform, the relevant person-in-charge at the SAFE was interview by a journalist. Q: What is the background of this reform? A: During the 12th Five-Year Plan period, a critical period in building China into a moderately prosperous society and in promoting the development of the service sector, an acceleration of the development of the service sector is very important to advance the economic restructuring and the upgrading and optimization of the industrial structure. As stated in the 12th Five-Year Plan for the Development of the Service Sector by the State Council, in order to further expand the opening-up of the service sector efforts should be stepped up to rigorously develop trade in services by establishing a promotion system, enhanced laws and improved regulations, and offering more conveniences. The Guidelines of the General Office of the State Council on the Financial Community's Support for Economic Restructuring, Transformation, and Upgrading also state that the foreign exchange administration system for trade in goods and services must be improved by advancing, streamlining, and deregulating foreign exchange administration, with a focus on delivering more conveniences for trade and investment. The SAFE is seizing this opportunity to initiate a reform of foreign exchange administration in support of trade in services based on in-depth investigations and extensive solicitation of comments and suggestions, with the aim of creating a better policy environment for foreign exchange administration so as to facilitate the healthy development of trade in services. Q: What are the guidelines for this reform? A: This reform, as an important part of the reform of institutions and mechanisms for foreign exchange administration, reflects the country's overall requirements for the transformation of the concepts and approaches to foreign exchange administration. First, we will provide more conveniences for foreign exchange transactions via such measures as removing the administrative approvals and streamlining the verification of documents; second, we will transform the administrative model from stressing outflows rather than inflows to balanced administration of outflows and inflows; third, we will replace ex-ante administration focusing on approvals and verifications by ex-post administration stressing monitoring and analysis; fourth, we will replace monitoring each transaction with integrated monitoring focusing on the participants in the foreign exchange transactions. The above measures aim to build a more convenient, regulated, transparent, and efficient system of foreign exchange administration in support of trade in services. Q: How will this reform benefit institutions and individuals in China? A: Focusing on promoting the facilitation of foreign exchange administration, this reform will bring greater conveniences to institutions and individuals in terms of foreign exchange transactions for trade in services. Specifically, the benefits are as follows: First, purchases of and payments in foreign exchange for trade in services will be handled by financial institutions without verification. Second, in theory small amounts of foreign exchange receipts and payments for trade in services (equivalent to USD 50,000 or less per transaction) can be handled by the financial institutions without the need for document verification. This will facilitate most trade in services, but it is not applicable if the amount of the foreign exchange receipts and payments for trade in services for each transaction exceeds USD 50,000 or the equivalent in other foreign currencies. Third, the requirements for document verification for some foreign exchange transactions will be simplified, including simplifying and integrating the existing verification rules for dozens of documents, eliminating the verification of most approval and filing documents by the relevant authorities and eliminating the tax certificate requirement for external payments in foreign exchange. Fourth, conditions for overseas deposits of foreign exchange income from trade in services by organizations in China will be loosened, with corporate groups allowed to deposit abroad their foreign exchange from trade in services. Q: What changes will this reform make to the tax policy for external payments in foreign exchange? A: The SAFE and the State Administration of Taxation (SAT) jointly issued on July 9 the Announcement of Issues regarding Tax Record Filings for External Payments in Foreign Exchange for Trade in Services (SAT and SAFE Announcement No.40, 2013), jointly determining the program to reform the tax policy for external payments in foreign exchange. According to the announcement, the tax certificates will be replaced by record filings for external payments in foreign exchange, meaning that foreign exchange payers only need to register their payments with the tax authorities before making any payments. The record filing is applicable to payments in excess of USD 50,000 or the equivalent in other foreign currencies. Q: The new policy canceled the verification of documents for foreign exchange receipts and payments for trade in services in the amount equivalent to USD 50,000 or less per transaction, thereby providing more conveniences for enterprises. What is the basis for introducing this reform measure? A: This policy is based on the fact that China’s trade in services features frequent and small-value transactions, and USD 50,000 as the cutoff point is set according to the statistics and analysis of foreign exchange receipts and payments for trade in services during recent years. Based on the 2012 statistics, 88 percent of the foreign exchange transactions for trade in services totaled no more than USD 50,000 (or the equivalent in other foreign currencies) per transaction; thus the removal of the document verification for each of these transactions will benefit the majority of enterprises involved in trade in services in China. The remaining 12 percent of transactions associated with trade in services that are subject to document verification by financial institutions account for about 92 percent of the total value of enterprise transactions for trade in services. This approach, focusing on controlling the majority, will help further enhance the efficiency of foreign exchange administration and reduce social costs. Q: How will this reform influence financial institutions in terms of handling the relevant foreign exchange transactions? A: Integrating the regulations for foreign exchange administration in support of trade in services will provide a clearer and simpler basis and more conveniences for financial institutions. Streamlining the document verification will help financial institutions reduce their operating costs and improve their operating efficiency. Furthermore, the reform further clarifies the authority and responsibilities of the financial institutions in terms of the verification of their business, strengthens their due diligence responsibilities, and encourages them to improve internal controls and related business processes to prevent abnormal cross-border flows of capital via trade in services. Q: How will “facilitation” and “risk prevention” be balanced in this reform? A: Integrating “facilitation” and “risk prevention” is a crucial principle in this reform. While introducing measures to promote facilitation of trade in services, the foreign exchange authorities will strengthen balanced ex-post management, and intensify the monitoring of the inflows and outflows of foreign exchange based on an off-site regulatory system integrating macro analysis, intermediate monitoring, and micro checks established to enhance the ability to identify, predict, and prevent the risks entailed in foreign exchange transactions associated with trade in services. In addition, the focus will be placed on verifying large-value transactions. Institutions and individuals in China are required to keep all the documents for each foreign exchange receipt and payment transaction for trade in services through financial institutions for five years in case of any ex-post checks by the foreign exchange authorities. Due diligence responsibilities will be clarified for financial institutions in terms of the verification of documents so as to raise their awareness to actively abide by the regulations for foreign exchange administration, making sure that facilitation and risk prevention are fully integrated and mutually supportive. 2013-07-24/en/2013/0724/1083.html
-
Based on the work arrangements of the CPC Central Committee and the State Council for current economic conditions and the coming period, as well as in the spirit of the Seminar for Presidents from Branches and Sub-branches of the People’s Bank of China, the 2013 Mid-year Branch Directors’ Meeting that was recently convened by the State Administration of Foreign Exchange (SAFE) summarized the progress achieved in foreign exchange administration since the beginning of this year, studied and analyzed regarding the financial foreign exchange situation, and mapped out the priorities for foreign exchange administration for the second half of the year. Safe administrator Yi Gang delivered a work report, and deputy administrators, heads of the discipline inspection teams, chief economists, chief accountants, and heads of the SAFE branches (foreign exchange administration departments) and SAFE departments were all present. The conference pointed out, led by the party committee of the People’s Bank of China, that the foreign exchange administration bureaus have followed the uniform arrangements of the CPC Central Committee and the State Council and the spirit of the 18th CPC National Congress and the Central Economic Work Conference, have accelerated the five transformations in the concepts and approaches to foreign exchange administration since the beginning of this year, significantly improving their capability to work for the real economy and to improve the quality of services. Specifically their achievements are as follows: First, they have done whatever it takes to control risks and they have introduced a package of measures to enhance foreign exchange administration, which has produced significant results. Second, the reform of foreign exchange administration for trade has been advanced, thus enhancing trade facilitation. The institutional reform of foreign exchange administration for trade in goods has proved fruitful, the reform of foreign exchange administration for trade in services has been accelerated, and foreign exchange administration for areas under special customs surveillance has been improved. Third, the reforms have been deepened, with the convertibility of the RMB capital accounts steadily enhanced. The IT basis for capital account management has been strengthened, administration of foreign debts and capital markets has been streamlined and power has been delegated to lower levels, institutions for QFII, RQFII, and QDII have been implemented, and foreign exchange administration for cross-border guarantees has been improved. Fourth, transformation of the approaches to foreign exchange administration has been advanced to support the transformation and upgrading of the real economy. The pilot program for centralized use of foreign exchange by multinationals has been advanced, foreign bonds and external guarantee indicators have been optimized, development of cross-border e-commerce has been supported, and infrastructure construction for the foreign exchange market has been advanced. Fifth, the operation and management of foreign exchange reserves have been improved to ensure the security of foreign exchange reserve assets. Sixth, with a focus on improving regional foreign exchange situation, advances in basic tasks like systematic research and statistics for foreign exchange administration have made further progress. Seventh, administration streamlining and power delegation as well as the streamlining of regulations have been carried out more rigorously to further increase the transparency of foreign exchange administration. Eighth, the CPC Central Committee eight-point code has been implemented to further build a clean and honest government and CPC teams. The conference also studied and determined the priorities for foreign exchange administration for the coming period. First, the five transformations in the concepts and approaches to foreign exchange administration need to be accelerated to prevent any risks associated with cross-border capital flows. Monitoring and analysis of the foreign exchange situation should be strengthened, with the building of a platform for monitoring and analysis of cross-border capital flows further advanced and contingency plans and policies further fleshed out. Second, the transformation of government functions needs to be accelerated, with trade and investment facilitation enhanced. The benefits from the institutional reform of foreign exchange administration for trade in goods need to be consolidated and the reform of foreign exchange administration for trade in services needs to be advanced. Third, the convertibility of capital accounts should be steadily advanced. The capital market should continue to be liberalized in an orderly way and more conveniences should be provided for management of the capital account. Fourth, the CPC’s mass line campaign should be rigorously implemented. Closely following these themes, the campaign must be advanced vigorously and the work styles of officials must be transformed to make sure concrete benefits are achieved through this campaign. The conference stressed that since the tasks for foreign exchange administration for the coming period are arduous, the foreign exchange administration bureaus at all levels must follow completely the spirit of the 18th CPC National Congress and align their thoughts and actions with the central government’s analysis and judgment regarding China’s economic condition and related decisions and arrangements by making steady progress, deepening the reforms, streamlining administration, delegating power, and preventing risks, to fully strengthen support for the economic restructuring, transformation, and upgrading. 2013-08-05/en/2013/0805/1084.html
-
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.) 2013-07-24/en/2013/0724/1082.html
-
Beijing November 22, 2013 (Xinhua): Premier Li Keqiang recently signed the Decree of the State Council promulgating the revised Measures for the Collection of Statistics and the Declaration of the Balance of Payments, which will be implemented as of January 1, 2014. Statistical data on the balance of payments are are flection of the external economic position of a country and an important basis for macro-economic decision-making. In 1995, with the approval of the State Council, the People’s Bank of China promulgated the Measures for the Collection of Statistics and the Declaration of the Balance of Payments, providing a mechanism for fully grasping China's international balance-of-payments situation. During recent years, as the scale of balance-of-payments transactions has constantly expanded, the content, type, and modes of transactions have become increasingly diversified. In 2008the IMF released the sixth edition of itsBalance of Payments and International Investment Position Manualas the universal standard for the compilation of statistical statements on the balance of payments. The new edition instituted many revisions, including with respect to the statistical principles, the current account, and the financial account, and it adopted higher standards for the collection of the statistical data and the methods for declaring the balance of payments. In order to further increase the comparability of the relevant data across countries, the new edition prescribed that “all economic transactions between Chinese and non-Chinese residents and external financial assets and liabilities of Chinese residents shall be subject to the statistics and the declaration of the balance of payments.” As stipulated in the previous measures, all economic transactions (flows) between Chinese and non-Chinese residents shall be subject to the statistics and the declaration of the balance of payments, with the exclusion of the external financial assets and liabilities (stock) of Chinese residents. According to the previous measures, Chinese residents who carry out transactions with non-Chinese residents through domestic financial institutions shall declare the content of the transactions through the financial institutions to the State Administration of Foreign Exchange (SAFE) or its branches/sub-branches. Financial institutions within the territory of China shall declare their own external business directly to the SAFE or its branches/sub-branches (including their external assets, liabilities, and their variations), and shall fulfill the obligations in their role as an intermediary through which Chinese residents declare their statistics and the balance of payments to the relevant authorities. Given that the data on the external financial assets and liabilities of Chinese residents cannot be fully acquired through financial institutions, the stipulation that “Chinese residents who have external financial assets and liabilities shall declare the relevant information regarding their external financial assets and liabilities in accordance with the relevant regulations of the State Administration of Foreign Exchange” will supplement the new measures. Given that it has become common practice that non-residents are treated as the entity for the statistics and the declaration of the balance of payments, the new measures incorporate non-Chinese residents with economic transactions within the territory of China into the scope of the declaration entities, with the stipulation that “Chinese residents and non-Chinese residents carrying out economic transactions within the territory of China shall declare the information on the balance of payments in compliance with the relevant regulations in a timely, accurate, and complete manner.” 2013-11-22/en/2013/1122/1090.html
-
In order to further standardize foreign exchange administration for overseas portfolio investments by domestic institutions and to promote the facilitation of overseas portfolio investments, the State Administration of Foreign Exchange (SAFE) recently promulgated the Regulations on Foreign Exchange Administration for Overseas Portfolio Investments by Qualified Domestic Institutional Investors (Announcement No. 1 of the SAFE in 2013, hereinafter referred to as the “Regulations”). The Regulations cancel or streamline the relevant procedures for foreign exchange administration, and merge and integrate the foreign exchange administration policies for qualified domestic institutional investors (QDIIs). The main aspects of the Regulations include: (1) removal of the currency restrictions on fund remittances, and diversifying the fund sources of overseas portfolio investments by domestic institutions; (2) lifting the verifications for foreign exchange settlements and purchases, and simplifying the materials to apply for quotas; (3) unifying the requirements for quota management, i.e., implementing balanced management of overseas portfolio investments for various kinds of qualified institutions, that is, the net amount of remittances of the overseas portfolio investments shall not exceed the approved investment quota; (4) strengthening statistics and monitoring, intensifying efforts for statistical and ex-post monitoring of the inflow and outflow of cross-border funds under portfolio investments by making full use of IT approaches, with the aim of preventing the risks of cross-border fund flows. Implementation of the Regulations will play an active role in promoting the facilitation of overseas portfolio investments by qualified domestic institutions and will better meet the investment needs of domestic institutions and individuals for overseas portfolio investments. 2013-08-27/en/2013/0827/1087.html