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March 16, 2007 - The SAFE recently held its 2007 work conference on foreign exchange management under the capital account in Nanjing , summarizing its work in 2006 and making arrangements for foreign exchange management under the capital account for 2007. Deputy Administrator Li Dongrong attended the meeting and delivered a speech. Centering on the promotion of an equilibrium in the balance of payments and based on the principle of balanced management of capital inflows and outflows, the SAFE, in keeping with national macro-control, carried out institutional innovations and policy adjustments, working out and releasing a sequence of policies and measures in 2006. Management of foreign exchange under the capital account has made new progress. The SAFE improved management of external financial investment and guided the orderly bi-directional flow of capital under the securities account. The qualified domestic institutional investors (QDII) system was introduced and totals of USD 13.4 billion, USD 3.488 billion, and USD 0.5 billion respectively were approved for the external financial investment of banks in China, insurance institutions, and securities institutions, and a total of USD 3.4 billion was approved for qualified foreign institutional investors (QFII). Meanwhile, the SAFE strengthened and improved the statistical monitoring of cross-border capital flows, strictly controlled short-term external debts, and further standardized foreign exchange management of foreign capital mergers and acquisitions and round-tripping investment. To coordinate macro-control of the real estate market, the SAFE further standardized foreign exchange management of capital inflows into the real estate market and the practice of foreign exchange sales of property by overseas institutions and individuals and effectively controlled the borrowing of external debt by foreign-funded enterprises. The SAFE further deepened the reform of foreign exchange administration of overseas investments and offered vigorous support for competent enterprises to "go global." By lifting the limitations on foreign exchange purchases for overseas investment, enterprises were allowed to remit related early-phase investment-related expenses in advance to fully satisfy corporate demands for overseas foreign exchange. The conference also made arrangements for foreign exchange administration under the capital account in 2007. First, the reform of foreign exchange administration of direct investment will be further deepened, competent enterprises will be given vigorous support to "go global," and channels for overseas investment will be broadened. The SAFE will cooperate with the relevant departments to improve the statistical monitoring of foreign direct investment and administration of capital sales, and will perfect the centralized management of the foreign exchange capital of multinational corporations. Second, external debt management will be strengthened. The SAFE will improve statistical monitoring, restrain the overheated growth of short-term debts, control the sales of external debts, and improve the management of external guarantees. Third, the opening up of the capital market will be steadily driven to promote the orderly bi-directional flow of capital. The SAFE will improve the implementation of qualified institutional systems such as QFII and QDII, standardize individual foreign exchange administration under the capital account, and gradually loosen the restrictions on individual external financial investments. Li emphasized that foreign exchange administration under the capital account faces new challenges due to the serious disequilibrium in the balance of payments. He put forward six requirements in order to effectively do the work of foreign exchange administration under the capital account in 2007. First, the spirit of the Central Economic Work Conference and the National Financial Work Conference should be studied to align with the thinking of the Central Governments analysis and judgment on the current balance of payments, to recognize the complexity of achieving an equilibrium in the balance of payments, and to guide the administration of foreign exchange under the capital account. Second, vigorous measures should be taken to cultivate a working style and accomplish every task in a down-to-earth manner. Third, a sense of serving society and facilitating trade and investment should be encouraged. Fourth, science should be respected to improve the monitoring, servicing, and administrative efficiency via hi-tech methods. Fifth, a sense of financial security should be strengthened, correctly balancing reform and risk prevention while further promoting RMB convertibility under the capital account. Sixth, the fight against corruption should be reinforced, improving internal management and building a team that is proficient and ideologically advanced 2007-03-16/en/2007/0316/831.html
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March 30, 2007 - The SAFE recently held the 2007 National Work Conference on Foreign Exchange Inspection and the Work Conference on the Inspection of Foreign Exchange Capital Inflows and Sales in Dongguan , Guangdong . The conference summarized the inspection of foreign exchange in 2006 and made arrangements for 2007. Deputy Administrator Mr. Deng Xianhong attended the meeting and delivered a speech. The SAFE focused on inspection to combat abnormal capital and short-term venture capital against the background of the continuous balance of payments surplus and the rapid increase in foreign exchange reserves. By carrying out special inspections and surveys of the external debts and the foreign exchange assets and liabilities of banks, deferred payments, cross-border related transactions, services trade, external debts of foreign-funded enterprises, temporary payable received accounts of Chinese- and foreign-funded enterprises, collections and sales in some regions, pending surrender accounts, and nominal rate and foreign capital inflows to the real estate market, the SAFE cracked down on over 70 underground money shops and dens of illegal foreign exchange transactions and solved some large cases, for instance online speculation in foreign currency, illegal transaction of verification documents, and underground KRW circulation and illegal inflows of large amounts of abnormal funds through exchanges outside of China. During the entire year of 2006, 1,914 cases were investigated and punished through the national foreign exchange inspection system and 1,915 cases were solved, with the amounts of the fines totaling RMB 139 million and the confiscations totaling RMB 138 million in the one year. The work in 2006 played a positive role in grasping the overall trend in foreign exchange capital inflows, curtailing the inflow of illegal capital, and promoting an equilibrium in the balance of payments. The conference also made overall arrangements for foreign exchange inspection work in 2007. In light of the financial situation of the macro-economy, the inspection of foreign exchange will center on the goal of achieving a basic equilibrium in the balance of payments and stepping up the monitoring and inspection of the inflow of short-term abnormal capital. Inspection of the main factors that influence an equilibrium in the balance of payments will be intensified, while taking into consideration the new problems emerging in the equilibrium in the balance of payments. The SAFE will keep up with an adjustment of the policies for foreign exchange administration, carry out special inspections and check the effects of the new policies, severely crack down on illegal foreign exchange behavior and enhance the inspection and punishment of severe and important cases, reinforce the study of means for off-site inspections and establish an off-site inspection system, further rectify and standardize the foreign exchange market order, deepen the construction of a foreign exchange credit system, and strengthen the construction of internal control. Management and inspection teams will be strengthened and the risks of law enforcement will be prevented. The conference made detailed arrangements for the coming all-round inspection of foreign exchange capital inflows and the collection and sales of banks in some regions. Inspections of foreign exchange capital inflows and sales will be divided into two phases off-site and on-site. The SAFE will carry out off-site inspections covering foreign exchange collection and sales and the use of RMB capital from foreign exchange by banks, enterprises, and institutions, foreign institutions in China , and individuals in ten regions where the exchange business is brisk. Four designated foreign exchange banks in Shanghai, Tianjin, Beijing, and Shenzhen will undergo special inspections of their foreign exchange collection and sales, through which the SAFE will grasp whether the business was conducted according to the regulations and whether the business had an impact on an increase in a favorable balance between the settlement and sale, and will deal with their illegal practices. 2007-03-30/en/2007/0330/834.html
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March 30, 2007 - The SAFE recently held a Briefing Meeting on Inspection of Designated Foreign Exchange Banks in Dongguan , Guangdong . Attendees included representatives from 19 Chinese banks, including the China Development Bank, Export-Import Bank of China, Agricultural Development Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank, as well as ten foreign-funded banks, including Standard Chartered Bank, Mizuho Corporate Bank, Bank of East Asia, KBC Bank N.V., and United Overseas Bank. Deputy Administrator Deng Xianhong attended the meeting and delivered a speech. The meeting announced the inspection and punishment of designated foreign exchange banks by the administrative authorities in 2006. With the development of the foreign exchange market and improvement in its administration, designated banks are attaching increasing importance to the lawfulness of their operations and the majority conduct their business in accordance with the laws. However, some still violate the rules. The foreign exchange administrative departments inspected 2,027 sectors (including head offices, branches, and sub-branches) of 29 Chinese- and foreign-funded banks in 2006, and 265 sub-branches were discovered to be violating the regulations and accordingly were fined RMB 16 million. Illegal conduct included excessive short-term external debt, illegal sales and transfers of external debt capital, violating the regulations on the management of foreign exchange loans and guarantees, illegal management of the general position for the sale and purchase of foreign exchange, over-fluctuation in the nominal rate, unlawful handling of collections and sales, sales and payments of foreign exchange, violating regulations on the management of export verifications, etc. Acts that purposefully evaded the regulations, for instance handling foreign exchange business by dividing the amount, were also discovered. The meeting pointed out that with the deepening of the foreign exchange structural reform, foreign exchange administration changed from pre-event examination and approval to post-event supervision and from direct supervision to indirect supervision. The designated foreign exchange banks play an increasingly important role in the administration. The meeting set forth the requirement that the banks balance their business development and lawful operations, strengthen internal management, improve their internal control system for each business, and improve the skills of their staff and the lawfulness of their businesses. The meeting also called for active cooperation and support in the coming special inspections of foreign exchange capital inflows and settlement and the foreign exchange collections and sales of the banks, e.g., preparing materials and data, timely reporting existing problems, and assisting inspectors with all the inspection work. The briefing meeting strengthened communications between the foreign exchange administrative departments and the designated foreign exchange banks, which has played a positive role in promoting the sound development of the market and an equilibrium in the balance of payments. Attendees said that they would utilize this critical juncture to raise their overall economic sense, further improve their internal control system, strengthen the authenticity of the verification, enhance the level of the lawfulness of their practices, and guard against the risks of foreign exchange business. 2007-03-30/en/2007/0330/835.html
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March 26, 2007 - In recent years, a number of lawless individuals and organizations have been setting up investment funds via the Internet and tempting the public to invest overseas by promising huge returns. Such activities, a kind of pyramid selling, are deceptive and harmful. Such illegal overseas financing activities can be generally described as using the Internet as its stage, overseas funds as its camouflage, illegal pyramid selling as its method, huge returns as its bait, and racketeering money as its object.The following methods are frequently used. 1) Collecting money in the name of a private equity fund and promising investors that the company will manage the money and they will receive bonuses if they entrust their money to the company. 2) In the name of buying products or enlarging membership, investors will reap profits via enrolling new members. 3) Selling to investors the stocks of companies that plan to go public overseas by promising that the investors will earn huge profits by selling the stocks after the company is listed. However, once there are insufficient subsequent funds, the capital chain will immediately split, resulting in irreversible losses to the investors. To satisfy individual demands for overseas investment, the SAFE recently introduced a succession of policies. The Measures for the Administration of Individual Foreign Exchange issued at the end of 2006 specify that individuals in China can directly purchase B-shares, or entrust domestic commercial banks to invest in overseas financial products, or directly invest abroad after obtaining approval of the administrative authorities for overseas investment. It is suggested that investors remain alert to overseas investment, especially to such scams as investment funds, and that they conduct financial transactions through legal channels to guarantee the safety of their property. 2007-03-26/en/2007/0326/833.html
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Agricultural Bank of China 's purchasing quota of foreign exchange for overseas investment services on behalf of its clients approved 2007-02-12/en/2007/0212/827.html
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QFII investment quota of Sumitomo Mitsui Asset Management Company Limited approved 2007-02-14/en/2007/0214/828.html
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QFII investment quota of HSBC Investment ( Hong Kong ) Limited approved 2007-02-15/en/2007/0215/829.html
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QFII investment quota of Shinko Securities Co. Ltd approved 2007-02-16/en/2007/0216/830.html
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The National Work Conference on Foreign Exchange Administration was recently held in Beijing . At the conference, the gist of the Third Plenary Session of the 17th Central Committee of the CPC and the Central Economic Work Conference were studied and conveyed, foreign exchange administration work in 2008 was summed up, there was an analysis of the current situation, challenges, and opportunities facing foreign exchange administration, and arrangements were made for foreign exchange administration work in 2009. At the conference, Ms. Hu Xiaolian, deputy governor of the PBOC and administrator of the SAFE, delivered a report on foreign exchange administration. Present were deputy administrators of the State Administration of Foreign Exchange Deng Xianhong, Fang Shangpu, Wang Xiaoyi and Li Chao. The year 2008 witnessed a complex and ever-changing economic situation both at home and abroad. The foreign exchange administration departments, in accordance with the unified arrangements of the Party Central Committee and State Council, adjusted the direction and focus of foreign exchange administration in a timely manner, actively promoted facilitation of trade and investment, improved management of balanced foreign exchange capital flows, strengthened monitoring and early warning of cross-border capital flows, made effective preparations for emergency plans for risk prevention, and strived to improve the balance of payments situation. All the work made new achievements. The status of the balance of payments was improved. The ratio of the current account surplus to GDP declined. Foreign capital inflows enjoyed steady growth. The growth rate of external debts slowed down and the surplus in the balance of payments steadily smoothed the slowdown in the rapid growth; the foreign exchange administration departments made new progress in the promotion of facilitation of trade and investment, carried out a pilot licensed foreign currency exchange business, enlarged the main transaction parties in the inter-bank foreign exchange market, made great efforts to provide foreign exchange services for the Olympic Games, and actively assisted earthquake relief work. They increased the proportion of foreign exchange settlement for advance receipts in goods according to the changing situation to provide support for general enterprises to cope with the international financial crisis; they further strengthened regulation of cross-border capital flows, revised and implemented the Regulations on Foreign Exchange Administration, intensified review of the authenticity and consistency of foreign exchange capital flows in trade and goods, strengthened monitoring and management of foreign exchange flows in direct investment, and carried out assessments measures of the banks performance in implementing the provisions of foreign exchange administration, thereby further giving play to the mechanisms for regulation and coordination of abnormal foreign exchange capital flows and cracking down on the illegal activities of underground banks. The operation and management of foreign exchange reserves have withstood a significant test. Meanwhile, the foreign exchange administration departments adopted a prudent approach toward the international financial crisis sweeping across the globe and instituted timely emergency response mechanisms, reinforced research and decision-making, intensified risk management and internal control and supervision, and reasonably arranged the currency asset structure to realize the preservation and appreciation of national foreign exchange reserves. The basic work of foreign exchange administration was further solidified and the monitoring and early-warning system for the balance of payments was further improved. Great efforts have been made in investigation and research while the supervision and restrictions over the power of administrative examination and approval have been intensified. Hu Xiaolian proposed that, while affirming our achievements, we should also clearly understand the complicated and serious domestic and international situation in 2009 and fully estimate the difficulties and challenges lying ahead in foreign exchange administration. Affected by the world economic recession and financial turbulence, the abnormal cross-border capital flows will bring about potential risks. Due to the uncertainties in capital flows, the deteriorating external environment for international trade and investment, and increased business risks, it is still an arduous task to improve the status of the balance of payments and to guard against international economic risks. Although the challenges facing us are severe, the pressures and drives are mutually dependent and the opportunities and challenges coexist. At present, national macro-policies such as expanding domestic demand provide a foundation for promoting the balance of payments equilibrium, while the market-oriented reforms of the prices of resources, energy, and other key items provide a powerful safeguard for improving the adjustment mechanism for the balance of payments market. The fall in the prices of international energy and resources has provided favorable conditions for enterprises to carry out foreign investment in a safe and orderly way on the basis of strengthened risk prevention and management. The larger scope for demand of RMB for trade valuation and settlement has increased, which is beneficial for the areas along the coast and borders to create a more efficient and convenient environment for trade development. To this end, we should consolidate our conviction, draw on the advantages and avoid the disadvantages, and more conscientiously implement the scientific outlook on development, properly handle the relationship between the balanced management of foreign exchange and the focus of supervision under the complex circumstances, the relationship between continuity and flexibility of foreign exchange administration policies, and the relationship between strengthening foreign exchange administration and promoting market-oriented reforms, and we should keep abreast of the times to create a favorable environment for stable and rapid economic development. At the conference, arrangements were also made for the major foreign exchange administration work for 2009. Hu Xiaolian stressed the need to fully implement the gist of the Third Plenary Session of the 17th Central Committee of the CPC and the Central Economic Work Conference, to put the scientific outlook on development into practice, and to actively implement the strategic plans of the Central Government to maintain stable and rapid development of the national economy under the guidance of Deng Xiaoping Theory and the Three Represents. She also stressed the need to enhance the innovation and mechanisms of the foreign exchange administration system, actively promote facilitation of trade and investment, improve the system for balanced management of cross-border capital flows, further improve the status of the balance of payments, and strengthen monitoring and early warning of the balance of payments as well as risk management of foreign reserves to safeguard national economic and financial security; to further improve foreign exchange administration work in accordance with the general ideas of Maintaining Growth, Preventing Risks, and Promoting Balance. Maintaining Growth means actively implementing the general requirements of the Central Government to maintain stable and rapid economic development as the primary task of economic work in 2009; to promote the reform of the verification system for imports and exports, improve foreign exchange administration of trade in services, support the opening up and healthy development of the services sector, do a good job in the pilot RMB settlement of international trade, and to allow foreign exchange administration to play a greater role in economic growth with the promotion of facilitation of trade and investment as the starting point and ultimate goal. Preventing Risksmeans intensified efforts in monitoring, early warning, and crisis response to the balance of payments, establishing a two-way monitoring and early-warning framework for balance of payment risks, and further improving the emergency safeguard system for the balance of payments; improving the management of external claims and liabilities and direct investment, further guiding the standard development of Chinas foreign exchange market, devoting more efforts to inspections on the compliance of foreign exchange businesses and cracking down on various illegal activities of foreign exchange; and further strengthening the risk management of reserves operations and guaranteeing the role of foreign exchange reserves as a final protection in risk management. Promoting Balancemeans further improving the status of the balance of payments and coordinating with the relevant departments to effectively expand domestic demand and make structural adjustments; continuing to improve the balanced management of cross-border capital flows, steadily promoting the foreign exchange system reform in an orderly manner, and gradually establishing systems and mechanisms that contribute to an adjustment in the balance of payments. Finally, Hu Xiaolian pointed out emphatically that foreign exchange administration departments should regard the studies and practices of the scientific outlook on development as a powerful driving force to improve work, bring their thoughts in line with the analysis of the current situation and decision-making arrangements of the Central Government, and make greater efforts to study the situation. At the same time, foreign exchange administration departments should strengthen the anti-corruption campaign and construction of the cadre ranks, carry out administrative affairs in strict accordance with the law, improve the internal management system, make more efforts in internal control and supervisory inspections, reinforce the mechanisms for supervisory restricting powers, and further enhance the level of Party conduct and clean governance. 2009-01-06/en/2009/0106/883.html
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The SAFE issued recently the Circular on Relevant Issues Regarding Foreign Exchange Administration of Overseas Lending Granted by Domestic Enterprises (hereinafter referred to as the Circular). The person-in-charge of the SAFE was interviewed on the relevant issues. Q: What is the main purpose of promulgation of the Circular? A: Chinese overseas investment has seen steady development with positive results. Meanwhile, Chinese-funded enterprises in overseas countries are baffled and impeded from further development and expansion due to difficulties in overseas financing and to insufficient liquid funds. The ongoing international financial crisis has added to the liquidity pressures of overseas financial institutions and the deterioration in the financing environment for Chinese-funded enterprises. Current cross-border financial services provided by domestic financial institutions have proven to be inadequate to meet the needs of overseas Chinese-funded enterprises for further development, which still require improvement. The measures recently issued by the State Council, which aim to further stabilize external demand, call for considerable efforts to be made to address the financing difficulties of foreign trade enterprises, as well as to support the go-global move of Chinese enterprises of diverse ownerships to stimulate exports. In such a context, for the purpose of bolstering the go-global efforts of financially strong enterprises, further promoting the facilitation of investment and trade as a way to stabilize external demand and for better coping with the global financial crisis, the SAFE issued the Circular in a timely manner and with earnest efforts of drawing on the experiences from the pilot reform of lending overseas. Q: What is the main content of the Circular? A: The Circular mainly includes the following content: First, the scope of lenders for overseas lending is expanded from the qualified Chinese and foreign-funded transnational companies currently in force to qualified enterprises of diverse ownerships. Second, the sources of funds for overseas lending have been expanded. Domestic enterprises are allowed to provide overseas lending through the use of diverse forms of sources of fund within certain limitations, such as self-owned foreign exchange and foreign exchange purchased with the home currency. Third, the ratification and exchange procedures for overseas lending have been streamlined. Matters concerning the opening of special foreign exchange accounts for overseas lending, fund transfers within China, and the purchase of foreign exchange etc. will all be handled directly by designated foreign exchange banks. Fourth, the statistical monitoring and risk prevention mechanism for overseas lending has been improved. Q: How does the SAFE guard against possible risks to the equilibrium in the balance of payments brought about by overseas loans? A: The economic stimulus package which aims to expand domestic demand and foster the stable and rapid development of the national economy has yielded initial positive results. The operation of the economy has witnessed positive changes and the general position of the balance of payments remains stable and free from major fluctuations. These have laid a solid foundation for overseas lending. Meanwhile, the relatively limited amount of overseas lending, as compared to the total scale of the balance of payments and the foreign exchange reserves, will not have a major impact on the national equilibrium of the balance of payments, and consequently the overall risks will be controllable. In terms of the design of the detailed policy plans for overseas lending, we have perfected the statistical monitoring and risk prevention mechanism for overseas lending, which are mainly embodied in the following aspects: management of the qualifications of the lenders and borrowers for overseas lending has been perfected, and two quantitative thresholds have been installed for an overseas lending quota: the quota for overseas lending shall not exceed 30 percent of the owners equity of the lender and shall not exceed the total agreed investment amount that has been concluded through the registration procedures by the borrower, and the lower of the two figures shall be adopted; the term of validity for overseas lending is clarified; the quota ratification, special foreign exchange account, foreign exchange fund transfers within China as well as the outward and inward remittances of overseas lending will be integrated into the foreign exchange management information system under direct investment, and a sound statistical monitoring mechanism is established for the inflow and outflow of foreign exchange funds for overseas lending; in the Circular, safeguard provisions are established stipulating that the SAFE can make timely adjustments to the qualifications, fund sources, amounts, terms, etc. of domestic enterprises for overseas lending. Q: What new measures are incorporated in the Circular to streamline administration, decentralize power, and to provide facilitation for the enterprises? A: On the premise of effectively preventing risks, the Circular has further streamlined administration, decentralized power, and provided facilitation for the enterprises, which are mainly embodied in the following aspects: the ratification, registration, and other procedures related to overseas lending will be handled by the branches of the SAFE and the SAFE will be responsible for instructing and organizing implementation of the relevant policies; in terms of administration of the exchange, the ratification procedures for domestic transfers involved in overseas lending are streamlined, except that outward remittances of loans through the special account for overseas lending as well as inward remittances of funds for repayment of the principal and interest or the performance of a guarantee for the special account for overseas lending are subject to ratification by the foreign exchange administrations, the transfer between related domestic foreign exchange accounts and special foreign exchange accounts for overseas lending and settlement of foreign exchange can be completed at banks by domestic lenders by presenting the ratification documents for overseas lending, without having to obtain ratification by the foreign exchange administrations. As for the administration of overseas lending quotas, balanced management shall apply, i.e., domestic enterprises engaged in overseas lending can repeatedly use the recovered quota for overseas lending within the ratified quota and term, thus changing the previous principle based on the amount incurred. This will be conducive for domestic enterprises to determine independently the frequency and amount of overseas lending so as to satisfy the financing needs of their overseas invested enterprises as well as to increase the efficiency of fund use. Q: What are the qualifications of the lenders? A: The Circular has reduced the restrictions on the qualifications for overseas lending to a large extent. In the case that both the lenders and the borrowers are registered and established in accordance with the law and their registered capital has been fully paid, and the lenders and borrowers have sound track records and are free from violations of foreign exchange administration regulations within the recent three years after ratification by the foreign exchange administrations, the borrowers and lenders can apply to the said Administration for granting loans to their overseas directly-invested enterprises. Q: What are the sources of the funds for overseas lending? A: The Circular allows domestic enterprises to offer lending to their overseas directly-invested enterprises by using self-owned foreign exchange funds in the foreign exchange capital account and foreign exchange account under the current account, foreign exchange funds purchased with RMB, and funds participating in the foreign currency pool. Q: What is the relationship between overseas lending and overseas direct investment? A: In a broad sense, overseas investment can be classified as overseas claim investment and overseas equity investment. Overseas lending granted by domestic enterprises can be considered a part of overseas claims and jointly constitutes the overseas investment. According to the prevailing overseas direct investment administration framework, overseas direct investment shall be ratified or put on the record by Chinas relevant departments for overseas investment. Therefore, the Circular stipulates that the prerequisite condition for overseas lenders are: all overseas direct investment projects by the lender during the past years have been ratified by the relevant domestic departments for direct overseas investment and the foreign exchange registration procedures have been fulfilled at the foreign exchange administrations, and the lender was graded at or above Grade Two in the last joint annual inspection of overseas investment. Q: What approaches are applicable in the Circular for providing overseas loans? Q: Overseas lending can be provided in the forms of: (p) direct lending, i.e., the lending is granted directly by domestic enterprises to their wholly-owned subsidiaries or share-holding enterprises legally established abroad; (q) granting lending by entrusting designated foreign exchange banks. In addition, if the group company that the domestic enterprise is affiliated with has a financing company with qualifications to conduct foreign exchange business, the enterprise can provide lending by means of entrusted lending through the financing company. Q: What is the relationship between the Circular and the Circular of the SAFE on Issues Regarding the Management of Internal Operations of Foreign Exchange Funds of Transnational Companies (Huifa No. 104 [2004])? A: The lending granted by domestic enterprises (including foreign-invested enterprises) to their wholly-owned subsidiaries and share-holding enterprises legally established abroad is subject to the provisions of this Circular. The lending granted by foreign-invested enterprises to other overseas related-party companies shall be subject to the relevant provisions in the Huifa No. 104 [2004] document. 2009-06-09/en/2009/0609/892.html