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In order to further improve foreign exchange management of the capital account, simplify the procedures for administrative examination and approval, and promote the facilitation of trade and investment, the State Administration of Foreign Exchange (The SAFE) recently issued the Circular of the SAFE on Cancellation or Adjustments of Certain Approval Authorities and Administrative Measures for Foreign Exchange Business under the Capital Account (HuiFa No. 20 [2011], hereinafter referred to as the Circular). The Circular will come into effect as of June 1, 2011. The Circular mainly stipulates the following: First, it cancels the registration and approval of overdue deferred payments in the management of trade-credit registration. Where an enterprise registers to withdraw deferred payments within 120 days (inclusive) upon the issuance of the import customs declaration by customs, it is unnecessary to undergo the overdue registration and approval formalities at the local foreign exchange authority. Second, the Circular cancels the examination and approval for the return of foreign exchange under advance payments in the management of trade-credit registration. When foreign exchange from the advance payments of an enterprise is returned, the enterprise can directly log into the Trade- Credit Registration Management System to go through the cancellation procedures, as well as to go through the formalities to enter the returned funds into the account in accordance with the relevant regulations on foreign exchange administration of the current account. Third, the designated foreign exchange banks can directly handle the procedures for when foreign exchange obtained through a reduction in state-owned shares in overseas listed companies is transferred to the national social security fund and put on file. Fourth, the branches and foreign exchange administrative departments of the SAFE are authorized to check and ratify the quota for the balance of external financing guarantees (excluding those explicitly stipulated to be ratified by the SAFE) for the designated foreign exchange banks registered within their jurisdictions in accordance with the current regulations on the administration of external guarantees. Fifth, the base ratio for advance payments of goods under trade credit is increased from 30 percent to 50 percent. This policy adjustment will help enterprises reduce costs and enhance efficiency. While vigorously simplifying the ex-ante approval procedures, the SAFE will also increase efforts to conduct off-site inspections and to carry out ex-post supervision, constantly improving foreign exchange administration of the capital account and steadily advancing the convertibility of the RMB under the capital account. 2011-05-27/en/2011/0527/998.html
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The State Administration of Foreign Exchange (SAFE) and the General Administration of Customs (GAC) recently signed a Memorandum of Cooperation between the State Administration of Foreign Exchange and the General Administration of Customs on the Joint Promotion of Reform of the Foreign Exchange Administration System for Trade in Goods in order to strengthen cooperation between departments, efficiently promote the reform of the foreign exchange administration system for trade in goods, and jointly improve the level of cooperative supervision. The SAFE and the GAC have already established effective cooperative mechanisms to coordinate policy formulation, to share regulatory information, and to strengthen business cooperation. The execution of this Memorandum further defines the process of coordinating business and the exchange of regulatory information between the parties and other affairs in accordance with the needs to promote the reform of the foreign exchange administration system for trade in goods. The main contents of this Memorandum include: First, adjusting the business process and function of the system for coordination between the foreign exchange authorities and the customs. Upon the date of nationwide generalization of the reform of the foreign exchange administration system for trade in goods, the management method with the Export Verification Form for Foreign Exchange Collection will be cancelled; the foreign exchange authorities and the banks will no longer make a note of the amount of the customs declaration or deduct (or increase) the receivable foreign exchange quota from exports through the online inspection system for customs declaration of imported goods and the online inspection system for foreign exchange collections and settlements from exports; the customs will maintain the current operation of issuing and printing the certification sheets for receipts and payments of foreign exchange from the customs declaration for imported and exported goods . Second, further strengthening the sharing of regulatory information. The GAC and the SAFE will strengthen their exchange of regulatory information in such areas as the data on the customs declaration for imported and exported goods of enterprises, the information about the classified management of the enterprises, the ratios of export receipts and import payments of foreign exchange of enterprises, and the electronic data on the receipts and payments of foreign exchange for trade in goods of enterprises on a case-by-case basis, and will realize their data sharing. The execution of the Memorandum represents a management concept and a service consciousness of keeping up with the times and of reform and innovation, while effectively promoting trade facilitation and is beneficial to creating a synergy to rigorously crack down on illegal behavior such as irregular cross-border capital flows, evasion and illegal purchases of foreign exchange, and smuggling, and to effectively safeguarding the security of the foreign economy and finances of China. 2012-01-18/en/2012/0118/1027.html
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In order to regulate the banksown foreign exchange settlement and sales business and to facilitate banking operations, the State Administration on Foreign Exchange (the SAFE) recently released the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Improving the Administration of the BanksOwn Foreign Exchange Settlement and Sales (Huifa No. 23 [2011]) (hereinafter referred to as the Circular). The Circular will come into effect as of July 1, 2011. The Circular standardizes regulation of the settlement and sales of foreign exchange under the banks own current and capital accounts: first, it embodies balanced management by establishing unified quantitative standards for the conversion of the banks capital (or working capital) between domestic and foreign currencies; second, it reflects convenient operationsby straightening out and integrating the administrative policies on the banks own foreign exchange settlement and sales and standardizing such business that is not clearly stipulated in some of the current policies; third, it reflects a streamlined review process by simplifying the requirement for ex-ante review for the settlement of the banks profits in foreign exchange and canceling the ex-ante review requirement for the dividends and bonuses paid by banks to foreign shareholders as well as for profits remitted by foreign banks; fourth, it stresses laying emphasis on major items by standardizing foreign exchange settlement and sales for items that have a great impact on balance of payment and foreign exchange operations; and fifth, it represents ex-post supervisionby reiterating the statistical requirements for the banks own foreign exchange settlement and sales as well as regarding the information to be submitted by the banks. The release of this Circular is expected to reduce the review requirements, streamline the administrative process, and facilitate the banks own foreign exchange settlement and sales and other related business activities in an orderly manner. 2011-06-13/en/2011/0613/1000.html
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In order to prevent and crack down on hot money and other kinds of cross-border fund inflows in violation of the regulations, to maintain the healthy and steady operation of the foreign exchange market, and to ensure the economic and financial security of the state, since the latter half of February 2010, the State Administration of Foreign Exchange (SAFE) has launched special campaigns to struggle against hot money and other kinds of fund inflows in violation of the regulations in some provinces (regions and cities) with massive inflows of foreign exchange funds. To date, 197 cases of foreign exchange transactions in violation of the regulations have been disclosed, involving a total amount of USD7.34 billion. At the beginning of October 2010, the SAFE launched a new round of special inspections to combat foreign exchange fund inflows in violation of the laws and regulations. In total, 3 head offices of commercial banks, 33 branches of Chinese-funded banks, and 9 branches of foreign-funded banks have been inspected, covering areas such as foreign exchange settlement and sales, short-term external debt, offshore financing, sources and utilization of foreign exchange funds, and so on. The inspections show that with constant efforts to improve financial services, the majority of the banks have enhanced their awareness of business compliance, and as a result overall compliance has improved. However, it was also found that some banks had operated in violation of the relevant regulations. The major forms of violations include: the amount of the short-term debt exceeding the quota, illegal foreign exchange settlement of capital and settlement and sale of foreign exchange by individuals, fund collections and payments under the current account and the capital account in violation of the regulations on the administration of foreign exchange accounts, failure to conduct authenticity examinations when offering foreign exchange transaction services for clients, and so forth. By complying with the relevant laws, the SAFE has dealt with the said cases in a centralized manner and has imposed severe punishments. Since October 2010, the SAFE has imposed penalties on banks conducting business in violation of the regulations in 20 regions, including Guangdong, Jiangsu, Beijing, Shanghai, and so forth. The entities involved include 79 branches of 16 incorporated banks, such as the Industrial and Commercial Bank of China (ICBC), the Agricultural Bank of China (ABC), the Bank of China (BOC), China Construction Bank (CCB), China CITIC Bank, Shanghai Pudong Development Bank (SPDB), Xiamen International Bank, and Yamaguchi Bank. Penalties have been imposed in the form of fines, suspensions of certain kinds of foreign exchange businesses, punishment of senior management, and so forth. In order to warn and educate the banks and their branches, to further enhance the banks awareness of business compliance, and to create social synergy to struggle against the hot money,the SAFE circulated information about the cases of non-compliance in various batches. The first batch of typical cases, involving banks that illegally conducted foreign exchange business and were penalized, was announced on October 28, 2010. Now information about the second batch of cases is being circulated as follows according to the progress of the relevant inspections: In January 2009, the sub-branch of the ICBC in Yanbu county of Foshan city failed to scrutinize the vouchers for foreign exchange settlement and handled a foreign exchange settlement deal involving capital totaling USD26.32 million for a real estate company in Foshan, which violated the regulations on the administration of foreign exchange settlement of capital. According to the Regulations of the Peoples Republic of China on Foreign Exchange Administration (hereinafter referred to as the Regulations), the SAFE imposed fines on the said sub-branch and suspended its capital settlement business for 3 months. Meanwhile, fines were imposed on two senior managers in the said sub-branch. During the period from January to December 2009, the sub-branch of the ICBC in Hanjiang county of Yangzhou city failed to scrutinize the vouchers for the settlement of foreign exchange and concluded 22 deals of foreign exchange settlement of capital for three foreign-invested enterprises, including a textile company in Yangzhou, involving a total amount of USD19.174 million. Such behavior was deemed to be in breach of the relevant regulations on the administration of foreign exchange settlement of capital. Therefore, the SAFE imposed fines on the said sub-branch and suspended its capital settlement business for 3 months pursuant to the regulations. In November 2009, the Liuli sub-branch of the CCB in Shanghai failed to scrutinize the vouchers for the settlement of foreign exchange and completed one deal of foreign exchange settlement of capital totaling HKD63.1166 million for a shopping company. Furthermore, the inspection revealed that no vouchers were issued for HKD26.7212 million of the total amount. This violated the regulations on the administration of foreign exchange settlement of capital. In light of this, the SAFE imposed fines on the sub-branch and suspended its capital settlement business for 3 months pursuant to the regulations. In September 2009, the Sanyuan sub-branch of the CCB Beijing branch failed to examine vouchers in the amount of USD1.73 million for foreign exchange settlement when handling foreign exchange settlement business for individuals in excess of the annual total limit. Such behavior was deemed to be in violation of the relevant regulations on the administration of foreign exchange settlement of capital. The SAFE thereby imposed fines on the said sub-branch and suspended its foreign exchange settlement and sale business for 6 months pursuant to the regulations. In April 2009, the Baoan sub-branch of the CCB Shenzhen branch settled USD2.3 million-worth of short-term loans in foreign exchange for an instrument company in Shenzhen. Such behavior was deemed to be in violation of the relevant regulations on the administration of foreign exchange settlement under the capital account. The SAFE thereby imposed fines on the sub-branch and suspended its foreign exchange settlement business for capital projects for 3 months according to the regulations. During the period from March 2008 to May 2010, the Fuzhou branch of the Xiamen International Bank handled 33 foreign exchange settlement deals without using the information system for the administration of foreign exchange settlement and sale for individuals, involving a total amount of HKD 17.2842 million. This violated the relevant regulations on the administration of individual foreign exchange. The SAFE thereby imposed fines on the said branch and suspended its foreign exchange settlement business for individuals for 6 months according to the regulations. During the period from February to October 2009, the Zhongxing sub-branch of the SPDB in Ningbo city handled 56 foreign exchange settlement deals for a person surnamed Dong and 55 other domestic individuals by splitting large sums of foreign exchange into smaller parts, involving a total amount of USD2.7659 million. In accordance with the regulations, the SAFE imposed fines on the said sub-branch. In May, July, and August 2010, the business department of the Dalian branch of the China CITIC Bank had USD1.3779 million-worth of capital settled through 3 petty cash deals for a real estate company in Dalian. The department failed to scrutinize the vouchers for the foreign exchange settlement, resulting in a violation of the relevant regulations on the administration of capital settlement business. The SAFE thereby imposed fines on the department and suspended its capital settlement business for 3 months pursuant to the regulations. In December 2009, the Jiangnan Sub-Branch of the ICBC in Yulin city completed 14 foreign exchange settlement deals in cash for individuals by splitting large sums of money into smaller parts, involving a total amount of USD67, 000. In May 2010, the business department of the ICBC Yulin branch concluded 5 deals of spot exchange settlement for individuals by splitting large sums of money into smaller parts, totaling HKD 2.3 million. Such behavior was deemed to be in violation of the relevant regulations on the administration of individual foreign exchange, and the SAFE thereby imposed fines on the said sub-branch and branch and suspended their foreign exchange settlement and sale business for 3 months pursuant to the regulations. The designated foreign exchange banks, as the major channels for conducting foreign exchange business, should firmly embrace the philosophy of scientific development and fulfill their social responsibilities in an earnest manner and in strict compliance with the regulations on foreign exchange administration. The banks referred to in this circular should attach great importance to their violations, examine their business operations, and rectify any acts of non-compliance. Other banking institutions should draw lessons from the above-mentioned cases so as to strengthen their internal management and to operate their businesses according to the laws and regulations. The foreign exchange authorities will continue to improve financial services to facilitate the operation of market entities; meanwhile, they will intensify supervision of the foreign exchange business of banks, enhance the approaches for foreign exchange inspections, and crack down severely on hot money and other kinds of cross-border fund flows that do not comply with the law, thus promoting the healthy development of the foreign-related economy and finance. 2010-12-29/en/2010/1229/973.html
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In order to ensure the economic and financial security of the state and to severely crack down on hot money, since February 2010, the State Administration of Foreign Exchange (SAFE) has launched a series of special campaigns to combat hot money in provinces and cities with large amounts of foreign exchange businesses. With intensified efforts to crack down on cross-border fund flows with no verifiable trade/investment background, by the end of October 2010, 197 cases in violation of the foreign exchange regulations were discovered and disclosed, involving a total sum of USD7.34 billion. Among these cases, 178 were filed and penalties were imposed. For the purpose of raising the awareness of banks and enterprises in handling the foreign exchange business in compliance with the regulations, warning and instructing entities involved in the violation of the regulations and of creating a social synergy for cracking down on the hot money,the SAFE has decided to circulate the non-compliance cases in stages, based on the types of entities involved. During implementation of the special campaigns, priority was given to inspections of banks handling the settlement and sales of foreign exchange, short-term external debts, offshore financing, as well as to the sources and utilization of foreign exchange funds and so forth. Inspections show that with constant efforts to improve financial services, all the designated foreign exchange banks have enhanced their awareness of the compliance risks, with further improvements achieved on the overall condition of compliance operations. However, there are still some banks that put a priority on business expansion and ignore compliance operations. Their inadequate fulfillment of the verification of authenticity has given rise to the inflow of hot money, producing a negative impact on the equilibrium in the balance of payments as well as on the healthy and stable development of the national economy and finance. Cases of bank violations of the foreign exchange regulations that have been penalized are hereby circulated as follows: On November 22, 2007, China Construction Bank Limited, Jiangmen Branch, handled settlement of foreign exchange in the amount of HKD31.5 million for capital of a foreign-funded enterprise. These funds were subsequently used to extend loans to the administration committee of a high-tech industrial development zone, but the purpose of the funds as declared by the enterprise was a security deposit for land purchases This violates the relevant regulations on the administration of exchange settlement for capital. In accordance with the Regulations of the People's Republic of China on Foreign Exchange Administration, the SAFE decided to impose administrative penalties on the branch in the form of fines. During the period from January 20 to May 22, 2009, the Agricultural Bank of China Limited, Guanghua Sub-Branch in Chengdu City, handled the cross-border collection of foreign exchange for 28 individuals within the territory of China. Among the individuals, 20 collected funds from a payer who was outside the territory of China, with and 8 collecting from the same payer, after which the funds were settled and transferred immediately to an individual within the territory of China. Such acts violate the relevant regulations on the administration of individual foreign exchange due to the fact that large sums of money were split into smaller amounts for the settlement and sales of foreign exchange. In accordance with the Regulations of the Peoples Republic of China on Foreign Exchange Administration, the SAFE decided to impose administrative penalties on the sub-branch in the form of fines. On November 21, 2007 and March 27, 2008, the Bank of China, Zhenhai Sub-Branch in Ningbo City, handled the settlement of foreign exchange for the external debts of a company in the amount of USD13.58 million. It was verified that the purpose of the settlement failed to conform to the purpose ratified by the SAFE; meanwhile, the bank failed to pay the settled funds directly to the payee within the prescribed time limit. This violated the relevant regulations on the administration of foreign exchange settlement for external debts. In accordance with the Regulations of the Peoples Republic of China on Foreign Exchange Administration, the SAFE imposed fines on the sub-branch and ordered that it correct its behavior. On May 7 and 8, 2009, the Bank of China, Guchengtai Sub-Branch in Xining City, handled the settlement of foreign exchange for the capital fund of a foreign-funded enterprise in the amount of HKD85.3 million and HKD28.2 million respectively. The funds were subsequently used for capital investments, which exceeds the business scope of the enterprise and violates the relevant regulations on the administration of foreign exchange settlement for capital funds. In accordance with the Regulations of the Peoples Republic of China on Foreign Exchange Administration, the SAFE decided to impose administrative penalties on the sub-branch in the form of a 3-month suspension of involvement in foreign exchange settlement and sales. During the period from October 2006 to July 2007, German-based NORD/LB, Shanghai Branch, handled 12 agency import deals with a letter of credit for a number of Chinese-funded banks, involving a total sum of USD26.98 million. With no prior notice delivered to the Chinese-funded issuing bank, the branch transferred all the financial claims to the aforesaid Chinese-funded bank to its overseas branches. This violated the regulations of the state on the administration of external debts. In accordance with the Regulations of the Peoples Republic of China on Foreign Exchange Administration, the SAFE decided to impose administrative penalties on the branch in the form of fines. On February 1, 2008, the Bank of East Asia (China) Limited, Guangzhou Branch, handled the settlement of foreign exchange for a Hong Kong resident in the amount of HKD11 million to be used for the purchase of non-residential housing. This violated the relevant state regulations allowing overseas individuals to purchase commercial residential housing for their own use within the territory of China for the purpose of satisfying their basic living needs. In accordance with the Regulations of the Peoples Republic of China on Foreign Exchange Administration, the SAFE decided to impose administrative penalties on the branch in the form of fines. During the period from September 1, 2008 to June 30, 2010, the Agricultural Bank of China Limited, Yichun Branch, handled 35 foreign exchange settlements of capital for a number of foreign-funded enterprises, involving a total amount of over RMB100 million. The branch failed to carefully examine the relevant funds and to preserve the vouchers for the settlement in accordance with the law. This violated the relevant regulations on the administration of foreign exchange settlements of capital. In accordance with the Regulations of the Peoples Republic of China on Foreign Exchange Administration, the SAFE decided to impose administrative penalties on the branch in the form of fines. In 2009, a number of institutions, including Taijiang Sub-Branch within the jurisdiction of the Business Department of the Industrial and Commercial Bank of China Limited, Fujian Branch, failed to handle the settlement and sales of foreign exchange for individuals through the information system for the administration of settlement and sales of foreign exchange for individuals in 42 deals involving a total amount equivalent to USD265,000. These institutions, including the Gulou Sub-Branch within the same jurisdiction, failed to handle the deferred payments of foreign exchange for enterprises in accordance with the regulations in three deals involving a total amount equivalent to USD2.94 million. In accordance with the Regulations of the Peoples Republic of China on Foreign Exchange Administration, the SAFE decided to impose administrative penalties on the aforesaid sub-branches in the form of fines. As the main channel for handling foreign exchange business, all designated foreign exchange banks should further consolidate the concept of scientific development, earnestly fulfill their social responsibilities, and strictly comply with the policies for the administration of foreign exchange business. The involved banks referred to in this Circular should pay great attention to their violations of the relevant regulations, examine their handling of the business using the regulations as a benchmark, and conscientiously correct their non-compliance in their handling of the business. Banks and relevant institutions should draw lessons from the above cases, strengthen their internal management, and handle their businesses in compliance with the laws and regulations. The SAFE will, in addition to performing its role to further improve financial services and facilitate the business operations of market entities, strengthen supervision over the foreign exchange business of banks, improve constantly the effectiveness of foreign exchange inspections, increase the efficiency of supervision and inspection, crack down severely on cross-border flows of hot money in accordance with the law, and continue to promote the healthy development of the foreign-related economy and finance. October 28, 2010 2010-10-28/en/2010/1028/962.html
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Mr. Deng Xianhong, Deputy Administrator of the SAFE, was recently interviewed by Rui Chenggang, reporter from the Finance and Economics Channel of CCTV. Rui Chenggang (hereinafter referred to as Rui): First, I would like to express my thanks to you for accepting this interview. Can we start from the term? Deng Xianhong (hereinafter referred to as Deng): OK. Rui: How do you define hot money? Deng: To date, there is no uniform definition of hot money. From my point of view, hot money should be categorized differently in countries allowing free capital flows and countries imposing foreign exchange controls. In China, all illegal capital flows without authentic transactional backgrounds (either in trade or investment) and in violation of the foreign exchange administration regulations are considered hot money and are the target of our attack. One of the goals of our macro-economic regulatory policy is to lessen interest-oriented pursuit of the market featured by excessive speculation. And we will take strong administrative measures to combat hot money,which is in breach of both the laws and regulations. Rui: As for hot money statistics, we have many approaches in the media. How do you calculate the amount of hot money? Deng: In the context of partially imposed capital controls, hot money flows into a country in the guise of being legal. In other words, it is impossible for hot money to get across the border if it is identified as illegal. Therefore, only by inspections and examinations can we know the amount of hot money. Hot money is somewhat like disbanded soldiers who hide themselves in the thick forest. Only by searching the forest can we get to know the actual number of disbanded troops. Certainly some funds may escape from capture. But I can definitely say that in China, there are no massive inflows of hot money and hot money is only dispersed in small amounts. Rui: You disagree with the comment that the inflow of hot money is accelerating. Why is this comment being spread throughout the society? Deng: Analysis shows that there is a considerable amount of net inflows and surplus. However, we cannot equate such inflows and surplus with hot money. Our analysis indicates that a large amount of the net inflows and surplus results from the allocation of assets and liabilities of enterprises based on their expectations of market interest rates and exchange rates. Serious analysis shows that the settlement of foreign exchange contributes slightly to the increase in net inflows and surplus. However, when it comes to foreign exchange purchases and payments, a large amount of the transactions (imports) are carried out in the form of trade financing, deferred payments, external loans with internal guarantees, overseas agent-based payments, and overseas financing as a substitute for foreign exchange payments. Thus, it appears that the outflow of foreign exchange is relatively small. Rui: It is true that in the wake of the global financial crisis, the country is facing increasing inflows of capital or liquidity and that may not necessarily be hot money.Is this the reality? Deng: It is the reality. To combat the financial crisis, some developed countries adopted quantitative easy monetary policies which gave rise to an overwhelming liquidity of funds. Amidst the financial crisis, China took the lead in restoring its economy and achieving a rapid increase in foreign trade. That led to the formation of a gap that led to some expectations about interest margins and exchange margins. The country will see a considerable amount of net inflows of funds, and the inflows will trigger an increase in a favorable balance. Though this has created some pressure for us, we cannot equate the net inflows and surplus with hot money. As mentioned previously, all capital flows with verifiable transactional backgrounds are the results of normal economic activities. Rui: What are the major motivations for the inflow of hot money in pursuit of arbitrage by illicit means? Deng: The expectation of an RMB appreciation, the expectation of a rising stock market, and the expectation of a rise in the real estate market. The hot money is generally driven by such expectations, which in turn serve as the target for hot money inflows. Rui: In addition to their basic functions, what are the major roles of commercial banks in preventing the inflow of hot money? Deng: Inspections show that some banks have failed to perform their verification duty, that is to say, some banks have failed to comply completely with the policy requirements for foreign exchange administration, which has given rise to the inflow of hot money.Generally, our inspections during the past few years show that banks have strengthened their regulatory compliance. The banks compliance with the relevant regulations plays an important role in preventing hot money because complete compliance by one bank will mean effective administration of thousands of market entities. Rui: It is really hard to impose effective regulation on the underground money shops. What are the SAFEs effective approaches for combating against such underground money shops? Deng: During recent years we have come up with some effective methods for cracking down on underground money shops. For example, we established close collaboration with the public security organs to jointly combat the underground money shops and we have encouraged social forces to become involved. Since the beginning of 2010, we have discovered 13 large-scale money shops. Instead of combating the shops separately, we are now cracking down on them en masse. Rui: The last question: Are there any foreign investors who have different opinions about the intensified efforts for combating hot money? I mean, they may worry that these efforts may affect their investments? Is this a double-edged sword to a certain degree? Deng: A good question. It is true that we need to pay special attention to law-based administration when combating hot money. We should take effective measures to combat the illegal inflow of funds. Meanwhile, we need to ensure that the crackdown is carried out according to the law. It should not affect the legal operations of market entities. In a word, we need to achieve a trade-off between cracking down on hot money and implementing the reform of foreign exchange administration. Rui: Thank you so much. 2010-11-10/en/2010/1110/967.html
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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: In order to prevent financial risks caused by cross-border flows of capital, issues related to the strengthening of the administration of foreign exchange operations are hereby notified as follows: 1. Strengthen administration of the banks comprehensive positions in the settlement and sales of foreign exchange. Implement a minimum level of management of the banks balance of positions calculated on a cash basis based on the current management of the comprehensive position limits for foreign exchange settlement and sales. The lower limit of the position shall be the position of the day on a cash basisas presented in the Daily Statement of the Comprehensive Position of Foreign Exchange Settlement and Sales issued by each bank on November 8, 2010. 2. Tighten administration of online inspections of foreign exchange collections and settlement for exports. Abrogate the provision that In the event that the enterprise has an insufficient balance of foreign exchange receivables due to a delay in the transmission of data on exports, the banks may, on the strength of the letter of commitment submitted by the enterprise, settle or transfer the funds in the accounts to be verified.The banks shall, in light of the limits on the balance of foreign exchange receivables, settle or transfer the funds in the accounts to be verified. The proportion of foreign exchange collection from the processing of imported materials shall be uniformly reduced from 30 percent to 20 percent. In the event that the proportion of the actual collection of foreign exchange for customs declaration for a single batch of exported goods under trade for the processing of imported materials exceeds 20 percent, the banks shall handle the relevant business in accordance with the existing regulations on foreign exchange collection for the processing of imported materials with the proportion of exchange collected in excess of the prescribed limit. 3. Strengthen administration of the quotas on short-term external debts and the balance of external guarantees of financial institutions. In the event that banks conduct agency payments abroad for the business subsequent to the issuance of L/Cs to their customers and the total time limit of both payments exceeds 90 days, the amount under the agency payment abroad shall be incorporated into the quota control of the short-term external debt. The foreign exchange authorities shall monitor and provide early warnings about the circumstances, such as the banksborrowing of short-term external debt and the provision of external guarantees for financing in violation of the regulations, and shall impose tight restrictions on bank operations in excess of the quotas. 4. Strengthen administration of capital contributions by overseas investors of foreign-funded enterprises. In the event that the actual payer is inconsistent with the overseas investor of a foreign-funded enterprise, the foreign-funded enterprise shall submit a notarized certification of the proxy contribution when entrusting an accounting firm to consult the foreign exchange authorities for capital verification. 5. Strengthen examination of the authenticity of the settlement of funds repatriated as capital raised from overseas listings in accordance with the requirements for foreign exchange settlements for payments. The materials certifying authenticity shall be examined in accordance with the relevant regulations on foreign exchange administration for the settlement of capital funds in foreign exchange for foreign-funded enterprises. The foreign exchange settlement shall be conducted in compliance with the purposes specified in the prospectus; for any amount that exceeds the planned limit on fund raising or goes beyond the purposes stated in the prospectus, a board resolution concerning the purposes of the foreign exchange settlement shall be submitted. The foreign exchange that is to be settled and paid to the other party in the transaction shall not be settled and deposited in the Renminbi account of the enterprise. 6. Strengthen administration of overseas incorporations of companies with special purposes by domestic institutions and individuals, and impose penalties on enterprises and individuals operating in violation of the regulations. 7. Impose penalties on banks operating in violation of the regulations by complying strictly with the law. Banks shall strengthen verification and examination of the authenticity of transactions by their customers and the consistency of foreign exchange receipts and payments. For those bank operations in violation of the foreign exchange regulations that result in illegal inflows of funds, the foreign exchange authorities shall impose penalties in the form of fines, termination of relevant operations, circulation of notices of criticism, and so forth, and shall investigate the responsibilities of the senior management staff who are directly liable for the violations. This Circular shall come into effect as of the date of promulgation. All the branches and administrative departments of the SAFE shall, after receipt of this Circular, forward it as soon as possible to the central sub-branches, sub-branches, and banks within their jurisdictions. All Chinese-funded designated foreign exchange banks shall, after receipt of this Circular, forward it to their branches and sub-branches as soon as possible. If any problems arise in the implementation of this Circular, please report them to the SAFE in a timely manner. Tel.: 010-68402295, 68402450, 68402366 2010-11-09/en/2010/1109/966.html
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To bring into better play the vital role of the market in selecting the best market makers and to respond to the increasing varieties of trading products on the inter-bank foreign exchange market as well as the increasingly segmented market positioning of commercial banks, in August 2010 the State Administration of Foreign Exchange issued the Circular on the Printing and Distribution of Guidelines for Market Makers on the Inter-Bank Foreign Exchange Market (Hui Fa [2010] No.46), in which a trial market-making business was introduced into the inter-bank foreign exchange market, with more accessibility granted to non-market-makers to become involved in market-making competition. According to the Circular, a system for the grading of market makers was established, and the liquidity and trading efficiency of derivative markets, including the forward-swap market, were increased. The appraisal mechanism for selecting the superior market makers and eliminating the inferior market makers was perfected, and the initiative for market makers to participate in market making was enhanced. The Circular represents another important move on the part of the SAFE to speed up the development of the foreign exchange market as well as to gradually improve the market mechanism since the introduction of the market-maker system into the inter-bank foreign exchange market in January 2006. So far, by adhering to the principles of willingness and selecting the best, the SAFE has given the go-ahead to 26 spot market markers and 18 forward-swap market makers. Qualifications for a trial spot market marker and a trial forward-swap market maker were granted to 7 and 12 commercial banks respectively. For details thereof, please refer to the Namelist of Inter-bank Foreign Exchange Market Makers. FILE: Guidelines for Inter-bank Foreign Exchange Market Makers 2010-12-30/en/2010/1230/974.html
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With the rapid development of Chinas foreign-related economy and the increasing cross-border interactions by individuals, bank cards, as a safe and convenient mode of payment, have gained growing popularity for cross-border consumption. In order to improve the management of foreign currency bank cards and to familiarize the public with the relevant management policies, the State Administration of Foreign Exchange (SAFE) recently promulgated the Circular on Regulating the Administration of Foreign Currency Bank Cards (Huifa No.53 [2010], hereafter referred to as the Circular). The Circular will come into force as of November 1, 2010. According to the Circular, the four original laws and regulations on foreign exchange administration with regard to foreign exchange bank cards have been integrated into one set of laws. Meanwhile, the fundamental principle for the management of bank card-related foreign exchange businesses is specified in three respects: (1) insistence on the convertibility of the current account; both residents and non-residents are allowed to use their bank cards for cross-border consumption for tourism, services, etc; (2) the use of domestic bank cards outside of China shall be subject to the management rules of the merchant category codes; cash withdrawals outside of China shall be conducted within the prescribed amounts, and shall be handled by the card-issuing financial institutions or the bank card organizations in charge of the transfer; (3) the relevant authorities shall keep records on bank card transactions, monitor and track abnormal transactions efficiently, and investigate and deal with illegal acts and non-compliance with the regulations in a timely manner. With reference to the working practices in recent years, the Circular has made adjustments to the limit of withdrawals of RMB in cash at ATM by foreign cards within China, viz. each transaction shall not exceed RMB3000. The Circular will play an active role in enhancing the transparency of the laws and regulations on the administration of foreign exchange, enabling the public and the banks to better understand and carry out the relevant regulations on foreign exchange administration so as to facilitate the use of bank cards by the public for cross-border interactions. As a result, larger amounts of foreign-related transactions will be conducted within the bank system and greater transparency of the foreign-related economy will be achieved. 2010-10-11/en/2010/1011/955.html
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To deepen the reform of the foreign exchange administration system, boost the sustainable development of the foreign-related economy, and further promote the facilitation of trade, the SAFE recently promulgated the Circular on Issues Concerning Implementation of the Reform of the Verification and Writing-off System for Foreign Exchange Payments for Imports (hereinafter referred to as the Circular). It has been decided that the reform will be carried out as of December 1, 2010. The reform covers four areas: first, enterprises will no longer be subject to on-site verification procedures for the operation of routine business, greatly facilitating external payments for trade; second, the on-line verification procedures processed by the banks for foreign exchange payments by enterprises for imports have been lifted, lessening the burden on the banks and facilitating the routine business operations of the banks; third, the SAFE will make use of the directory for the administration of enterprises; the directory of enterprises that have a need for foreign exchange payments for imports will be shared nationwide, and foreign exchange remittances by enterprises in different regions will no longer be subject to recording in advance with the foreign exchange authorities; fourth, the SAFE will carry out off-site inspections, monitoring, and early warnings on enterprises via the Verification System for the Collection and Payment of Foreign Exchange under Trade, implement on-site verification of abnormal trading entities, identify the categories for the classified evaluation of enterprises, and implement classified administration. The reform of the verification and writing-off system for foreign exchange payments for imports represents a fundamental change to the current model of verification administration, and a constructive innovation in the foreign exchange administration system and trade mechanism. Implementation will: first, promote conceptual and practical innovation in foreign exchange administration, thereby realizing the transformation from case-by-case verification to aggregate verification, from on-site verification to off-site verification, and from behavioral supervision to subject supervision; second, lubricate the process of trade, streamline the procedures for foreign exchange payments for imports, reduce costs for enterprises, facilitate enterprise operations, and promote the smooth implementation of business activities by legitimate enterprises; third, play a positive role in guarding against risks; when there are any changes in the foreign exchange circumstances or any misbehavior by the trading entities, the foreign exchange authorities will be able to take effective measures to enhance on-site inspections of Class-B and Class-C enterprises, carry out strict measures for classified supervision, and impose penalties on enterprises that do not comply. 2010-10-27/en/2010/1027/961.html