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To promote facilitation of receipts and payments under trade in goods and satisfy banks' and enterprises' demand for handling of foreign exchange through electronic data interchange (EDI), the State Administration of Foreign Exchange (SAFE) has recently released the Circular of the State Administration of Foreign Exchange on Standardizing Reviews of Electronic Documents for Receipts and Payments of Foreign Exchange under Trade in Goods (Huifa No. 25 [2016], the "Circular"). The highlights of the Circular include: First, allowing reviews of electronic documents when receipts and payments of foreign exchange under trade in goods are handled. While observing the existing regulations on the administration of foreign exchange under trade in goods and implementing the three principles of business operation, banks can choose to review paper or electronic documents at their discretion. Second, encouraging credible enterprises and banks doing business in compliance with regulations to handle receipts and payments of foreign exchange under trade in goods by using electronic documents. In particular, it is required that the handling bank should be class-B or above (excluding B-) in foreign exchange administration assessment over the past three years, and the enterprise should be class-A with regard to trade in goods. Third, defining the obligations of banks and enterprises. Banks shall make further efforts for authenticity reviews, independently and cautiously choose enterprises subjected to reviews of electronic documents and keep the documents for future reference. Enterprise shall work to ensure the authenticity and compliance of electronic documents presented, and cooperate with banks in authenticity reviews. Fourth, standardizing ex-post administration. The SAFE will verify or inspect reviews of electronic documents and punish irregularities in accordance with the law. This Circular shall come into force as of November 1, 2016. 2016-11-08/en/2016/1108/1226.html
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To push ahead with capital account convertibility and promote cross-border investment and financing facilitation, the State Administration of Foreign Exchange (SAFE) recently released the Regulations on Foreign Exchange Administration for Domestic Securities Investments by QFII (Announcement No. 1 of the SAFE in 2016, hereinafter referred to as the Regulations) to reform the foreign exchange administration system for qualified foreign institutional investors (QFII). The highlights of the Regulations include: first, easing the upper limit on the investment quota of a single QFII. The SAFE will no longer define a unified upper limit on the investment quota of a single institution and assign an investment quota (basic quota) to the institution in proportion to the size of its assets or assets under management (AUM). Second, simplifying quota approval management. A QFII's application for an investment quota that is within the basic quota will be subject to filing management, while the application for an investment quota that goes beyond the basic quota will be subject to SAFE approval. Third, further facilitating inward and outward remittances of funds. No requirements will be imposed on the deadline for the inward remittance of investment principal by a QFII. QFIIs will be allowed to subscribe and redeem open-end funds on a daily basis. Fourth, the lock-up period will be shortened from one year to three months, but the requirement that funds should be remitted out in batches and installments will remain unchanged, with the monthly total of outward remittance by a QDII no more than 20% of its domestic assets. The Regulations shall come into force as of the date of release. 2016-03-14/en/2016/0314/1194.html
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Q: Foreign media recently reported that Terex terminated the acquisition negotiation with Zoomlion because "the SAFE didn't allow Zoomlion to raise funds for closing the deal". Is this true? A: We also have noted relevant reports. Zoomlion has given explanations why the negotiation with Terex was terminated. There are no policy barriers to the deal because of foreign exchange administration, so the reports are not true to the fact. China has increased its ODI in recent years, showing China's dramatically strengthened overall strengths and enterprises' requirements for optimizing global allocation of their assets. The SAFE has been committed to promoting administration streamlining and power delegation, supporting qualified and competent companies to go global, and improving companies' capabilities in international operation, while enhancing ongoing and ex-post monitoring and management, and cracking down on false ODIs to boost the healthy and orderly development of ODIs. 2016-08-30/en/2016/0830/1206.html
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Q: Foreign media reported that Deutsche Bank is discussing remitting overseas its gains from selling shares in Huaxia Bank with the State Administration of Foreign Exchange. Is it true? A: This is not true. There is no policy barrier against the business in foreign exchange administration. According to the existing foreign exchange administration regulations, any foreign institution who wants to transfer the shares it holds in a domestic institution may directly go through the formalities for foreign exchange purchase and payment related to share transfer with a bank, and can do so after passing the authentic and compliance reviews by the bank, with no need of ex-ante approval or verification by the SAFE. Foreign exchange authorities support every authentic and compliant cross-border equity transfer transaction in a bid to promote trade and investment facilitation. 2016-11-08/en/2016/1108/1227.html
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Since the Outline of the Plan for Social Credit System Construction (2014-2020) (Guofa No. 21 [2014], the “Outline”) was promulgated in June 2014, the State Administration of Foreign Exchange (SAFE) has conscientiously implemented the strategic plan of the CPC Central Committee and the State Council on the construction of the social credit system and vigorously pressed ahead with the credit system construction in the foreign exchange area, based on the situations of foreign exchange administration, so as to promote the healthy and orderly operation of the foreign exchange market. The major work is highlighted as follows: First, improving the work mechanism. The Plan Promotion Team was established, with administrator of the SAFE as head, and deputy administrator of the SAFE as deputy head, to take full charge of the organization, advancement and coordination regarding the credit system construction in the foreign exchange area. Second, strengthening top-down design. The Opinions on Credit System Construction in Foreign Exchange Area was introduced, expressly setting forth the general ideas and major tasks of the credit system construction in the foreign exchange area, and defining the top priorities and divisions of responsibilities for 2015, in a bid to lay a solid foundation for pressing ahead with the credit system construction in the foreign exchange area in an orderly manner. Third, conducting more promotion and education activities. The SAFE has actively carried out activities such as the “Promotion Month for Running Businesses with Integrity”, and published a byline story entitled Actively Pressing Ahead with Credit System Construction in Foreign Exchange Area to make a profound interpretation of the credit system construction in the foreign exchange area. Fourth, stepping up efforts to disclose violations of foreign exchange laws and regulations. The SAFE discloses violations of foreign exchange laws and regulations via inquires on a quarterly basis, and actively cooperates with relevant departments to integrate foreign exchange violations into the basic database of the People’s Bank of China on financial credit information and the comprehensive credit database of China E-Port Committee for importers and exporters. Fifth, investigating into and rigorously rectifying violations of foreign exchange regulations. In 2014, the SAFE investigated into and rectified 1903 foreign exchange cases, imposing administrative penalties of RMB 450 million; and cooperated with public security authorities to detect 32 foreign exchange illegal cases such as underground banks, involving RMB 222.4 billion. Next, the SAFE will continue to conscientiously implement of the plans of the CPC Central Committee and the State Council, further press ahead with the credit system construction in the foreign exchange area by strengthening top-down design, improving institutional arrangements, standardizing credit information records and use and improving classified management, so as to create a sound foreign exchange credit environment highlighting “incentivizing the creditable and punishing the discredited". (The end) Relevant links: 1. The Circular of the State Administration of Foreign Exchange on Issuing the Opinions on Credit System Construction in Foreign Exchange Area (Huifa No. 16 [2015], see Appendix 1) 2. Actively Pressing Ahead with Credit System Construction in Foreign Exchange Area (See Appendix 2) FILE: Opinions on Credit System Construction in Foreign Exchange Area FILE: Actively Pressing Ahead with Credit System Construction in Foreign Exchange Area 2015-07-24/en/2015/0724/1164.html
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The year 2015 marks the first year to promote rule of law in China in an all-round way.The SAFE has abolished and nullified more than 700 documents on foreign exchange administration since 2009, and recently released the Circular of the State Administration of Foreign Exchange on Abolishing and Nullifying 50 Regulatory Documents on Foreign Exchange Administration (Huifa No. 17 [2015]) to step up efforts to streamline laws and regulations. To be specific, 27 documents are to be abolished and 23, nullified. These 50 documents chiefly include: first, those that are not in conformity with the foreign exchange administration philosophies and to be streamlined or changed to show the fruits of the reforms in key areas of foreign exchange administration such as capital account. In recent years, the SAFE has streamlined administration and delegated power to lower-level authorities by vigorously promoting the foreign exchange administration reform in direct investment, external debts, external guarantee, capital market and sales and settlement of foreign exchange by banks, to release the dividends of the reform and serve the development of the real economy.Of the 50 documents to be abolished and nullified this time, 50% are those to be abolished or declared invalid after the foreign exchange administration reform for capital account or financial institutions.Second, those that are not inconformity with the new requirements for acquiring foreign exchange administration statistical data and to be streamlined to show the continued improvement of statistical monitoring of cross-border capital flows.In recent years, the SAFE has built unified data acquisition regulations by building or improving the statistical monitoring of cross-border capital flows and accelerating the integration and upgrading of the IT system for foreign exchange administration, to enhance the efficiency and offer more convenience. Of the 50 documents to be abolished and nullified this time, 50% are those to be abolished or declared invalid after the reconstruction of the IT system and adjustment of data acquisition rules. Next, the SAFE will continue with the law-based administration, enhance the top-down design of the laws and regulations on foreign exchange administration, and implement the long-term mechanism for streamlining the laws and regulations to facilitate understanding and application by banks, companies, and individuals of the laws and regulations on foreign exchange administration, and to promote trade and investment facilitation. 2015-05-18/en/2015/0518/1157.html
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To further deepen the foreign exchange administration system reform, and better satisfy the requirements for and facilitate operations and capital operations of foreign-invested enterprises, the State Administration of Foreign Exchange (SAFE) recently issued the Circular of the State Administration of Foreign Exchange Concerning Reform of the Administrative Approaches to Settlement of Foreign Exchange Capital of Foreign-invested Enterprises (Huifa No. 19 [2015], “the Circular”). The Circular is highlighted as follows: firstly, the settlement of foreign exchange capital of a foreign-invested enterprise is conducted on a voluntary basis, allowing enterprises to freely choose the timing for settlement of foreign exchange capital; secondly, the use of capital and funds from foreign exchange settlement of foreign-invested enterprises shall conform to relevant regulations on foreign exchange administration, with a negative list approach adopted for the use of capital; thirdly, efforts shall be made to facilitate domestic equity investment with RMB funds acquired from exchange settlement by foreign-invested enterprises; fourthly, the management of the payments with funds from foreign exchange settlement will be further standardized to make sure banks conduct authenticity review in line with the three principles of business development; fifthly, management of the settlement and utilization of funds in the foreign exchange accounts under other direct investments are clarified and streamlined; sixthly, the SAFE shall strengthen ongoing and ex-post administration to further reinforce ex-post monitoring and investigation and punishment of violating activities. The release of the Circular is a key move by the SAFE to implement the relevant requirements of the State Council on promoting the replicable pilot reform experience of China (Shanghai) Pilot Free Trade Zone and to transform foreign exchange administration concepts and approaches. The implementation of the Circular will give the full decision-making power and the right of choice on foreign exchange capital settlement to enterprises, thus providing policy spaces for enterprises to avoid the risk of exchange rate fluctuations and helping reduce social costs to further facilitate trade and investment and serve the development of the real economy. The Circular shall come into force on June 1, 2015. (The End) 2015-06-11/en/2015/0611/1160.html
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To further advance administration streamlining and power delegation, and improve foreign exchange administration for the insurance business, the State Administration of Foreign Exchange (SAFE) recently released a Circular on Printing and Issuing Guidelines for Foreign Exchange Administration for Insurance Business (Huifa No. 6 [2015], hereinafter referred to as the “Circular”). The Circular is highlighted as follows: First, streamlining administration and delegating power. The power to examine and approve the entry/exit of an insurance institution into/from foreign exchange insurance market as well as the conversion between domestic currency and foreign currency should be delegated. The ex-ante approval of entry/exit of insurance institutions at the provincial level and lower levels into/from foreign exchange insurance market should be cancelled. The requirement that the qualification of an insurance institution that provides insurance services in foreign exchange shall be reviewed every three years should be cancelled. Second, standardizing management. The business rules for activities including cross-border insurance, utilization and entrusted management of foreign exchange funds should be defined to standardize the use of foreign exchange accounts of an insurance institution. Third, integrating legislations. Eight regulations on foreign exchange administration related to insurance business should be abolished to facilitate the market players in understanding and implementation. Fourth, simplifying procedures. A processing financial institution may, based on the principles of “know your customer”, “understand your business” and “due diligence”, simplify the review documents for insurance business in foreign exchange. The centralized receipt and payment of foreign exchange under insurance business is allowed within the same insurance institution as a legal person. Fifth, improving supervision. Requirements for data submission should be made clear, and ex post monitoring and verification of foreign exchange under insurance business and related foreign exchange receipts and payments. The Circular shall come into force on March 1, 2015. 2015-04-02/en/2015/0402/1154.html
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To actively support the development of cross-border e-commerce, and guard against the risks arising from online foreign exchange payments, the State Administration of Foreign Exchange (SAFE) has since 2013 implemented the pilot program of foreign exchange payment business forcross-border e-commerce through payment institutions in Shanghai, Beijing, Chongqing, Zhejiang and Shenzhen, and the outcome of the pilot program has been satisfactory. On this basis, the SAFE recently issued the Circular on the Implementation of the Pilot Program of Cross-border Foreign Exchange Payment Business through Payment Institutions (Huifa No.7 [2015], the "Circular"), to pilot cross-border foreign exchange payment business through some payment institutions across the country, allowing the payment institutions to provide the parties of cross-border e-commerce transactions with foreign exchange receipts, payments, settlement and sales services. The major contents of the Circular include: first, raising the limit on a single transaction. The limit on a single transaction in online shopping is raised from the equivalent of USD10,000 to the equivalent of USD50,000, and the restriction on the number of foreign exchange reserve accounts opened by a payment institution is relaxed. Second, regulating the processes of the pilot program. Any payment institution shall register with the foreign exchange authority at the place of its incorporation on the List of Enterprises Making Foreign Exchange Receipts and Payments under Trade to be qualified for the pilot program. Third, implement strict risk management. Any payment institution is required to strictly perform the responsibility of verifying the authenticity of transactions, retain relevant information for 5 years for future reference, and promptly and accurately submit relevant business data and information. The foreign exchange authorities will carry out offsite and onsite verifications on the pilot business for prudential regulation. The Circular shall come into effect as of the date of issuance. 2015-03-16/en/2015/0316/1150.html
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To further promote the smooth assessment of the performance of banks in implementing the regulations on foreign exchange administration, and to make sure the performance assessment is more scientific and equitable, the State Administration of Foreign Exchange (SAFE) has recently released the Circular of the State Administration of Foreign Exchange on the Amendment to the Measures for Assessment of Banks' Implementation of Regulations on Foreign Exchange Administration (Huifa No. 26 [2015], "The Circular"). The amendment is highlighted as follows: first, refining assessment items. Based on the streamlining and adjustment of the original assessment indicators, efforts have been made to further refine the assessment criteria and scoring methods, making sure relevant requirements are more concise and easier to understand and implement. Second, stressing advancement with the times. The assessment items are updated based on the foreign exchange situations and the developments of regulatory requirements, with the assessment mechanism for bidirectional adjustment of cross-border capital flows introduced to enhance the effectiveness of foreign exchange regulation and control. Third, optimizing assessment process. The impact of differences in business category and size between banks on assessment outcomes has been fully considered to make sure the assessment and rating are more equitable and reasonable. Fourth, highlighting assessment of internal control management in banks. The specific requirements have been proposed to assess head offices' and branches' internal control of foreign exchange business, forcing banks to better implement the principles of "knowing your customers, understanding your business and exercising due diligence". Fifth, improving implementation mechanism of violation rectification. A bank feedback and rectification reporting system is built to urge banks timely implement the violation rectification measures and give feedback on rectification results while subsequent tracking is enhanced to effectively improve the effectiveness of the assessment. The Circular shall come into force as of the date of release. 2015-08-18/en/2015/0818/1166.html