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The State Administration of Foreign Exchange (SAFE) recently released the data on foreign exchange settlement and sales by banks and foreign-related receipts and payments by banks for customers for December 2015. The spokesperson of the SAFE answered press questions on related issues. Q: What would you say about the cross-border capital flows in China in 2015? What are the characteristics? A: Overall, China witnessed net outflows of cross-border capital in 2015, but the pressure from outflows in the fourth quarter was lower than it was in the third quarter. Below are the major characteristics: First, foreign exchange settlement and sales by banks and foreign-related receipts and payments by banks for customers were both in deficit. In 2015, in dollar terms, foreign exchange settlement by banks was down by 9% from 2014, and foreign exchange sales by banks were up by 24%, indicating a deficit of USD 465.9 billion; foreign-related receipts by banks for customers were slightly down by 0.8%, and foreign-related payments by banks for customers were up by 6%, suggesting a deficit of USD 200.9 billion, including a deficit of USD 253.8 billion in foreign-related foreign exchange receipts and payments. Second, cross-border capital flows fluctuated drastically. For foreign exchange settlement and sales by banks, a deficit of USD 91.4 billion was recorded in the first quarter, which declined to USD 13.9 billion in the second quarter, expanded to USD 196.1 billion in the third quarter and then dropped to USD 164.4 billion in the fourth quarter. For foreign-related foreign exchange receipts and payments by banks for customers, deficits of USD 25.3 billion, USD 1.6 billion, USD 163.7 billion and USD 63.1 billion were posted in the first, second, third and fourth quarters respectively. Net foreign exchange outflows in the fourth quarter were down by 61% quarter-on-quarter. Third, companies actively repaid domestic foreign exchange loans and cross-border financing and released the risks of high-leverage operation and currency mismatch in an orderly way. The foreign exchange sales rate that measures the motivation for purchasing foreign exchange, or the ratio of foreign exchange sales by banks for customers to foreign-related foreign exchange payments, was 81% in 2015, 12 percentage points higher than it was in 2014, indicating an increasing part of foreign exchange payments by companies was made for foreign exchange purchases while a smaller part was for financing. Accordingly, the balance of domestic foreign exchange loans dropped by USD 100.6 billion in 2015, compared with an increase of USD 21.7 billion in 2014. The cross-border trade finance for imports such as refinancing and forward L/C fell by USD 115.1 billion in 2015, compared with a drop of USD 44.9 billion in 2014. Fourth, letting people hold more foreign exchange was pushed ahead with and outbound investments by companies for going global were accelerated. The foreign exchange settlement rate that measures the willingness to settle foreign exchange, or the ratio of foreign exchange settlement by banks for customers to foreign-related foreign exchange receipts, was 68% in 2015, 3 percentage points lower than 2014, suggesting companies and individuals were more willing to hold foreign exchange income. While more foreign exchange was used to repay domestic foreign exchange loans and cross-border financing, the balance of companies' foreign exchange deposits as a whole went up by USD 24.9 billion in 2015. The balance of individuals' domestic foreign exchange deposits climbed by USD 18.4 billion, up by USD 13.3 billion than 2014. Chinese companies made ODI of USD 161.4 billion in 2015, up by 90% from 2014. Fifth, banks posted a deficit in forward settlement and sales of foreign exchange, which dropped significantly in the fourth quarter. In 2015, the value of contracts signed between banks and customers in respect of forward settlement of foreign exchange dropped by 56% compared with that of 2014 and the value of contracts signed between banks and customers in respect of forward sales of foreign exchange went up by 33%, indicating a deficit of USD 194.2 billion. Specifically, the deficit was USD 47 billion in the first quarter, dropped to USD 21.5 billion in the second quarter, expanded to USD 99.3 billion in the third quarter and then fell by a staggering 73% quarter-on-quarter to USD 26.3 billion in the fourth quarter. Q: What is your view of the recent significant changes in Chinas' cross-border capital flows? A: The current cross-border capital flows are reflective of the adjustment of the structure of external assets and liabilities in China. According to the data in the International Investment Position, China's net external assets amounted to USD 1.54 trillion as at the end of September 2015. For statistical reasons, this figure is not comparable to that of the end of 2014, but is USD 136 billion higher than the comparable figure of the end of March 2015. Specifically, holders of external assets have shifted from the central bank to market players. As official reserve assets drop, the assets of Chinese market players, such as ODI, securities investments and overseas deposits and loans, have increased, with the figures of the end of September climbing by USD 52.5 billion, USD 8.8 billion, and USD 87.8 billion from the end of March respectively. As for external liabilities, foreign investments in securities and foreign loans in China are dropping, with the figures of the end of September decreasing by USD 180.4 billion and USD 71.5 billion from the end of March. Meanwhile, China's FDI has increased by USD 100.5 billion, indicating continuous inflows of funds for long-term investments. For the moment, China's balance of payments remains stable, suggesting the risk of cross-border capital flows is within control. First, China continues to post a current account surplus, with the causes and structure of the surplus being reasonable, and still ranks No. 1 worldwide by the size of foreign exchange reserves, which was USD 3.33 trillion as at the end of 2015, much higher than USD 1.2 trillion in Japan, the No. 2 country, and USD 600-odd billion in Saudi Arabia, the No. 3 country. This indicates that the usual payments of the balance of payments are fully ensured. Second, the external solvency risk is in good order and within control. Some companies have recently adjusted their structure of assets and liabilities, leading to a drop of USD 143.4 billion in the balance of external debt at the end of September 2015 from the figure with comparable coverage at the end of March 2015, which is conducive to reducing the risk of repaying external debts in the future. As for solvency, China's external debt critical indictors have been within the international safe standards over the years. For example, as at the end of September 2015, the ratio of full-scale outstanding short-term external debt in both domestic and foreign currencies to the balance of foreign exchange reserves was 29.1%, down by 2.5 percentage points from the end of March and much lower than the international safe standard of 100%. Last but not least, the impact of cross-border capital outflows on domestic liquidity and economic and financial operation is within control. Q: What's your view of the impact of the Fed's interest rate rise on China's cross-border capital flows? If the Fed continues to slowly raise interest rates in 2016, what changes will occur to China's cross-border capital flows? What will be the mid- and long-term impact? A: The Fed's interest rate rise will boost the cyclical adjustment of the relevant structure of assets and liabilities of Chinese market players, which is in line with the market law and a necessary phenomenon. Over the past years, as developed economies such as the US adopted QE, emerging economies witnessed large-scale cross-border capital inflows. During this period, Chinese market players also showed a preference for foreign exchange financing to holding foreign exchange assets, which was a reasonable choice in face of unilateral appreciation of the RMB and low cost of foreign exchange financing, but was at risk of excessive adjustment and increased cross-border capital inflows in China. As the Fed recently exited from QE and began raising interest rates, Chinese enterprises adapted to the changes in the environment, optimized the structure of assets and liabilities in domestic and foreign currencies and adjusted the behavior of holding assets in domestic currency and owing debt in foreign currencies that has continued for years. For example, the SAFE statistics show that companies' cross-border financing for imports such as refinancing and forward L/C dropped from the peak of USD 367.4 billion in June 2014 to USD 164.6 billion at the end of 2015, which was equal to the level prior to the Fed's exit from the second round of QE in 2011. This change helped release the external financing risk accumulated by Chinese enterprises as developed economies adopted QE. The Fed's interest rate rise will pose a challenge to most emerging economies, but China has relatively strong capability to resist the external impact. An analysis of the impact of the Fed's past and recent interest rate rises on emerging economies shows that hard-hit countries are usually those struggling with obviously deteriorated economic fundamentals, continued current account deficit, and heavy reliance on external financing. China's overall economic fundamentals are sound, its economic growth is at the forefront among major economies despite a large economic size, its industrial structure is diversified with great potential, strong resilience, and large leeway, and its financial system is robust. China's balance of payments is stable and healthy, trade in goods and current accounts continue to post a surplus, long-term capital continues to flow in, foreign exchange reserves are abundant, and the marketization of the foreign exchange rate formation mechanism is being deepened. The Fed's interest rate rise will not upset the basic equilibrium of China's balance of payments in the mid- and long-term. The purpose of this round of interest rate rise by the Fed is to normalize the monetary policy, not to cool the overheated economy, but its direct or indirect impact on the US economy and finance will be taken into consideration, including changes of other economies due to the spillover, which may impact the US instead. As a result, the Fed's interest rate rise may be a slow and cautious process as we expect, the US Dollar Index will fluctuate prior to and post the interest rate hike, and part of the market impact of the interest rate hike may be digested step by step. The normalization of the Fed's monetary policy somehow indicates the promising prospects of the US economic recovery, which will be favorable for stabilizing China's external demand. But it is sure that China's cross-border capital flows are essentially dependent on China's domestic economic fundamentals. In the coming years, as China's economic structure is optimized and upgraded, and the dividends of reform are yielded, China's domestic economy is expected to stabilize and grow after the adjustment is completed, which will strengthen the foundation for the basic equilibrium of China's balance of payments. Q: China's balance of foreign exchange reserves dropped by USD 512.7 billion year on year as at the end of 2015. Where have these foreign exchange reserves been used? A: As at the end of December 2015, the balance of China's foreign exchange reserves was USD 3.33 trillion, down by USD 512.7 billion year on year. Many factors have contributed to the changes in China's foreign exchange reserves, such as the Central Bank's operation in the foreign exchange market, the price fluctuations of foreign exchange reserves as investment assets, the changes in foreign exchange rate and support of the "going global" effort by foreign exchange reserves. Major factors are as follows: First, changes in non-trading value like foreign exchange rate and price led to a decrease of more than USD 100 billion in the book value of foreign exchange reserves, which is different from outflows of foreign exchange from foreign exchange reserves. According to the balance of payments data, in the first three quarters of 2015, foreign exchange reserves obtained from the trading of foreign exchange dropped by USD 227.2 billion accumulatively, while the balance of the book value of foreign exchange reserves fell by USD 328.9 billion, indicating the book value of foreign exchange reserves was down by USD 101.7 billion due to the valuation factors such as conversion of foreign exchange rates. As foreign exchange reserves are denominated in the US dollar, changes in the exchange rates of other currencies against the US dollar will lead to changes in the size of foreign exchange reserves. For example, as the US Dollar Index went up by 9% in 2015, foreign exchange reserves denominated in the US dollar will shrink when non-US dollar assets like the euro in foreign exchange reserves are converted into the dollar. Second, Chinese market players including companies optimized the structure of domestic assets and liabilities in domestic and foreign currencies, increased foreign exchange deposits and repaid foreign exchange loans. In 2015, corporate and individual foreign exchange deposits in China increased by USD 24.9 billion and USD 18.4 billion respectively, and domestic banks increased USD 102.4 billion in foreign exchange position to satisfy companies' demand for the maintenance of value in the long term. Meanwhile, the balance of domestic foreign exchange loans of companies fell by USD 100.6 billion. Third, companies and individuals made net payments in foreign exchange such as overseas investments, consumption and repayment of debt. In 2015, non-banking sectors such as domestic companies and individuals made net cross-border payments of USD 253.8 billion in foreign exchange, for ODI, securities investments under QDII, repayment of overseas financing, studying abroad and travel. But huge net inflows of foreign exchange were registered under FDI and overseas securities financing by Chinese companies. Fourth, as defined by the IMF on foreign exchange reserves, foreign exchange reserves used to support the "going global" effort would be deducted from total foreign exchange reserves when being calculated. As the economic and financial environments both at home and abroad are still complex and changing, it is normal to see foreign exchange reserves fluctuating. As the formation mechanism for the marketization of the RMB exchange rate is improved, the balance of payments will achieve basic equilibrium and fluctuations of foreign exchange reserves may become a new normal. Q: China's foreign exchange reserves have been shrinking recently, which have sparked concerns that the liquidity of foreign exchange reserves may be exhausted. What would you say about this? A: The increase and decrease in foreign exchange reserves are the results of macroeconomic operation. The recent changes in the size of foreign exchange reserves are reflective of the adaptive adjustments of assets and liabilities in domestic and foreign currencies by domestic market players, which send some positive signals, and future changes need to be viewed in a sensible way. As far as liabilities are concerned, China's external liquidity risk is in a good order and within control. Of the outstanding external debt of USD 1.53 trillion as at the end of September 2015, USD 506.3 billion was mid- and long-term external debt and half of the short-term external debt was trade-related credit. 47% of external debt was denominated in the RMB. Moreover, companies are actively pushing forward deleveraging of external debt. After their balance sheets are recovered, the financial situation will become healthy, which will be more favorable for structural adjustment. The amount of external debt is within the bearable range of foreign exchange reserves, which are more than USD 3 trillion at the moment. As for assets, companies are the key holders of foreign exchange in the effort of letting people hold more foreign exchange, and they focus on ODI, which has produced significant results in recent years. The International Investment Position data show that the ODI assets of Chinese market players went up by USD 52.5 billion as at the end of September 2015 from the end of March. Individuals purchase foreign exchange mainly for two purposes: first, traveling, shopping and studying abroad, which are the objective results of Chinese economic growth. Second, individuals' wealth management demand to allocate foreign currency assets. Given the real interest differentials between domestic currency and foreign currencies, the benchmark yields of RMB financial products in China still can reach 4%, much higher than the US dollar deposit interest rates and the yields of financial products in other currencies in China, indicating foreign currency assets are not the ideal wealth management channels for Chinese individuals. As for individual use of foreign exchange, no changes have occurred to the policies for purchases of foreign exchange within the quota of USD 50,000 or for purchases of foreign exchange of over USD 50,000 under the current account based on the transaction certificates. Therefore, individuals need to purchase and hold foreign exchange in a sensible way. Overall, measured by the absolute amount of foreign exchange reserves or by other adequacy indicators such as the shares of foreign exchange reserves in GDP, imports and external debt, China's foreign exchange reserves are abundant, which lays a strong foundation for the state to withstand external impact. Q: Will the SAFE introduce new management measures in respect of cross-border capital flows? Will measures be taken to restrict purchases of foreign exchange and capital outflows? A: Given the current situation of cross-border capital flows, the logic that the risk bottom line should be safeguarded while the overall principle of supporting reform and opening up should be followed in foreign exchange administration will remain unchanged. In recent years, under the uniform arrangements of the CPC Central Committee and the State Council, efforts have been made to support the development of the real economy, promote administration streamlining and power delegation, and facilitate trade and investment activities in foreign exchange administration. At the same time, further efforts have been made to strengthen monitoring and early warning of the balance of payments statistics, improve ongoing, ex-ante and macro-prudential management, and enhance offsite verification and onsite inspections so as to guard against unusual cross-border capital flows. This is the direction that has been followed in foreign exchange administration as boosting reform while guarding against risks have been the responsibilities and primary tasks of foreign exchange authorities. As a result, the principle of supporting and facilitating normal and reasonable use of foreign exchange by market players has not been changed. To prevent drastic fluctuations of cross-border capital, the SAFE has taken some measures, particularly heightened monitoring, standardization of business, crackdown of speculations and irregularities, but no new regulations on restricting purchases and payments of foreign exchange have been introduced. For example, the policy for individual purchases and payments of foreign exchange remains unchanged. The annual quota for individual purchases of foreign exchange of USD 50,000 per person or the equivalent has not been restricted or slashed and such purchases can be done through multiple channels including bank counters, online banking, self-service terminals, telephone banking and mobile banking. Purchases of foreign exchange under the current account of more than USD 50,000 or the equivalent can be handled at bank counters by presenting transaction certificates provided that the transaction background is authentic. Meanwhile, the requirements for heightening regulation of the authenticity and compliance of foreign exchange receipts and payments have not been changed either. The prerequisites for the facilitation and liberalization of foreign exchange administration remain to be authenticity and compliance. The requirements for authenticity and compliance do not conflict with facilitation. As the demand of the real economy is satisfied and the normal order of the foreign exchange market is maintained, trade and investment facilitation could obtain real and effective guarantee, and benefit the absolute majority of market players. Going forward, foreign exchange authorities will supervise the implementation of the regulatory requirements for authenticity and compliance through offsite monitoring and onsite inspections. Foreign exchange authorities will focus their monitoring and verification on foreign exchange receipts and payments by banks and companies, guide banks to handle foreign exchange business under the principles of "knowing you customer", "understanding your business" and "due diligence" to perform their responsibilities for authenticity and compliance reviews. Moreover, foreign exchange authorities will continue to conduct related inspections of foreign exchange business, crack down on regulatory and legal offences such as fabricated foreign exchange transactions without an authentic transaction background and underground banks. 2016-02-14/en/2016/0214/1186.html
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On December 31, 2015, governor of the People's Bank of China (PBC), Zhou Xiaochuan, accompanied by Yi Gang and Pan Gongsheng, deputy governors of the PBC, and Yin Yong, assistant governor of the PBC, paid a visit to the SAFE Investment Center to call on officials devoted to administering foreign exchange reserves. On behalf of the PBC's CPC Committee, Zhou Xiaochuan showed his concerns and care for all the officials devoted to administering foreign exchange reserves and confirmed the achievements they made. The year 2015 was the closing year of the 12th Five-Year Plan period, said Zhou Xiaochuan. A review of the past five years shows that profound changes have taken place in China's foreign exchange situation. In face of complex economic and financial environments both at home and abroad, the SAFE Investment Center followed the leadership of the CPC Central Committee and the State Council, and conducted the Mass Line campaign and the special educational campaign of "Three Stricts and Three Earnests", adapted to the new normal, and pushed forward the operational and management work, thus ensuring the security, flows, and value maintenance and increase of foreign exchange reserve assets and making significant contributions to the deepening of the national reforms and the achieving of the development goals. Zhou also pointed out that the SAFE Investment Center made risk prevention its top priority in respect of foreign exchange reserves in 2015. To serve the national development strategy, the SAFE Investment Center overcame the challenge of drastic fluctuations in international financial markets and successfully completed its operational and management tasks, taking a new step toward building a world-class asset management institution and playing active roles in supporting the development of the real economy and the national key strategies. Zhou stressed that the year 2016 is the first year when China enters the crucial period to build a moderately well-off society in an all-round way. While implementing the spirit of the 18th CPC National Congress, the Third, Fourth and Fifth Plenary Sessions of the 18th CPC Central Committee and the Central Economic Work Conference, people engaging in the operation and management of foreign exchange reserves are required to seek progress while maintaining stability, make innovations, improve the bottom line thinking, and deliver a good performance in the operation and management of foreign exchange reserves in a strict and down-to-earth manner, so as to better serve the national development and ensure a good start of the 13th Five-Year Plan period. 2016-01-13/en/2016/0113/1183.html
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The People's Bank of China (PBC) and the State Administration of Foreign Exchange (SAFE) recently announced that the foreign exchange trading time would be extended and qualified foreign players would be introduced. An official from the PBC answered press questions on relevant issues. Q: What are your major considerations in extending the foreign exchange trading time and introducing qualified foreign players? A: As the RMB exchange rate liberalization, convertibility and internationalization accelerate, there is a growing demand for speeding up the development of the domestic foreign exchange market, especially boosting the opening up of the market. This move is aimed at diversifying the players in the domestic foreign exchange market, expanding their trading channels and boosting the formation of consistent RMB exchange rate both at home and abroad. This is a reformative measure to deepen the development of the foreign exchange market. Q: What adjustments will be made to the operating time of the trading system of China Foreign Exchange Trade System (CFETS)? A: The foreign exchange trading hours will be adjusted from 9:30-16:30 to 9:30-23:30, Beijing time (the regional trading hours will remain unchanged at the moment). The operating time of the foreign currency pair and foreign currency lending system will be changed from 7:00-19:00 to 7:00-23:30, Beijing time. The market will not be closed in between. Q: Why will the strike price of spot inquiry about the exchange rate of the RMB against the USD at 16:30 Beijing time be regarded as the closing price of the day after the extension? A: After the extension, the market liquidity may still chiefly come from day trading in a fairly long time to come and will reflect to the largest extent the real supply-demand situation in China's foreign exchange market. But the liquidity in night trading will be poor and may heighten volatility in the market, making it easy for the exchange rate to be misstated and even be manipulated. If the exchange rate at 23:30 is regarded as the closing price, market makers may refer to this price to quote the central parity rate for the second day, thereby weakening the representativeness of the central parity rate as a benchmark. But if the market markers quote the central parity rate for the second day without referring to the closing price due to its lack of representativeness, the authoritativeness of the central parity rate quotation mechanism will be impacted, leading to a structural deviation of the closing price from the second-day central parity rate. As a result, the strike price at 16:30 will continue to be the closing price of the interbank foreign exchange market. Q: Will the CFETS publish more reference rates for different time after the extension? A: To facilitate foreign exchange pricing and trading and provide more reference rates for market players, the CFETS will publish reference rates for 17:00, 18:00, 19:00, 20:00, 21:00, 22:00 and 23:00 respectively on chinamoney.com.cn, in addition to those for 10:00, 11:00, 14:00, 15:00 and 16:00 as it currently does. The calculation method will remain unchanged. Q: What will be the way of trading and trading categories allowed for qualified foreign players after their entry into the interbank foreign exchange market? A: After entry into the interbank foreign exchange market, qualified foreign players will be allowed to participate through bidding and inquiry as provided by the CFETS trading system in the trading of all listed trading categories, including spot, forward, foreign exchange swap, currency swap and options transactions. Q: Do qualified foreign players have to meet some qualifications for becoming members of the interbank foreign exchange market? Q: Currently, qualified foreign players to access the interbank foreign exchange market are primarily the foreign participating banks boasting a large scale of the RMB purchase and sales business, an international reputation and regional representativeness. They will be allowed to access the market by the CFETS based on their willingness and in accordance with the laws. The application procedures, technical standards and charging for qualified foreign players to become members of the interbank foreign exchange market are the same as those for existing members. Q: Will qualified foreign players be required to sign a master agreement with their counterparties to participate in the trading activities in the interbank foreign exchange market? A: It is a universal practice in both domestic and foreign financial markets to sign a master agreement. To trade derivatives in China's interbank foreign exchange market, foreign players need to sign the master agreement of NAFMII or ISDA with their counterparties through their independent negotiations. Q: Can qualified foreign players become market makers given that a market maker system is currently adopted in the interbank foreign exchange market? A: As it takes time for qualified foreign players to adapt at the early stage after entering the interbank foreign exchange market, they will be allowed to participate in the trading activities in the market as a general member only and cannot become market markers at the moment. Q: What adjustments will be made to the existing model of the RMB purchases and sales business after foreign participating banks access the interbank foreign exchange market? Q: There are two business models for the foreign participating banks approved to conduct the RMB purchases and sales business to select in China's interbank foreign exchange market: First, continuing to conduct the RMB purchases and sales business directly with their domestic correspondent banks; second, applying to the CFETS for becoming a member of the interbank foreign exchange market and conducting foreign exchange trading in the market through the CFETS trading system. Foreign participating banks are allowed to choose one model only, based on their wish. Q: Is it still necessary for a domestic bank to report through RMB Cross-Border Payment & Receipt Management Information System (RCPMIS) the information on trading with a foreign participating bank allowed to conduct the RMB purchases and sales business in the interbank foreign exchange market? A: A foreign participating bank choosing to become a member in the interbank foreign exchange market is required to report to the CFETS at the close of the trading day the information relating the RMB purchases and sales it conducts in the interbank foreign exchange market through the CFETS trading system, and its counterparty does not need to report relevant information through RCPMIS. 2015-12-30/en/2015/1230/1179.html
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To further enhance the transparency of foreign exchange administration policies, the State Administration of Foreign Exchange (SAFE) has stepped up efforts to introduce legislations and streamline regulations in key areas since the very beginning of 2015. Legislations introduced involve centralized operation and management of foreign exchange funds by MNCs, administration of individuals' foreign exchange, receipts and payments of foreign currency banknotes by domestic institutions, funds management in cross-border issuance and sales of mainland and Hong Kong securities investment funds, engagement in the trading of domestic specified futures products by overseas trading participants and overseas brokers, exchange business by franchised institutions of domestic and foreign currency exchange for individuals through the internet, and foreign exchange account management for foreign central banks and similar institutions investing in inter-bank markets. Regulation streamlining is focused on nullifying or announcing ineffective some foreign exchange administration regulations that cannot adapt to the requirements for business development and reforms. To facilitate public enquiry and application, the SAFE then upgraded the Catalogue of Major Existing Laws and Regulations in Effect on Foreign Exchange Administration (Catalogue) and released it at its official website. The upgraded Catalogue contains 222 policies and regulations on foreign exchange administration released as of December 31, 2015, which fall into 8 categories including general foreign exchange administration, foreign exchange administration under the current account, foreign exchange administration under the capital account, regulation of the foreign exchange business of financial institutions, the RMB exchange rate and the foreign exchange market, balance-of-payments and foreign exchange statistics, foreign exchange inspections and application of the laws and regulations, and the scientific administration of foreign exchange, and several sub-categories by specific business type. This is the sixth straight year that the SAFE has regularly updated and published the list of currently effective regulations. The SAFE will make further efforts to build and improve a long-term mechanism for streamlining regulations, and sort out and update the Catalogue regularly to enhance policy transparency, facilitate banks, companies, and individuals to understand and apply foreign exchange administration regulations, promote law-based foreign exchange administration and support development of the real economy. 2016-02-02/en/2016/0202/1185.html
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To standardize and facilitate operation by banks and individuals in respect of foreign exchange business, the State Administration of Foreign Exchange (SAFE) recently issued the Circular of the State Administration of Foreign Exchange on Further Improving the Administration of Individual Foreign Exchange (Huifa No. 49 [2015], the Circular). The Circular is highlighted as follows: First, the individual foreign exchange business monitoring system will be launched nationwide on January 1, 2016 and at the same time, the management information system for foreign exchange settlement and sales for individuals will be no longer in use. Second, the watch list management for individual foreign exchange business will be improved. An individual who borrows another individual's quota to handle foreign exchange settlement and sales will be put on a watch list; a risk reminder will be first issued to individuals who lend their quotas to help another individual for split settlement and sales of foreign exchange and then these individuals will be put on a watch list if they lend their quotas again. Third, regulations will be streamlined. Five foreign exchange administration regulations involving settlement and sales of foreign exchange for individuals will be nullified for deepening the understanding of and facilitating the execution by market players. Launched as the Circular is issued, the individual foreign exchange business monitoring system is designed to further facilitate foreign exchange handling by banks and individuals and improve the monitoring efficiency in respect of individual foreign exchange business, under the existing framework for the administration of individual foreign exchange. To acquire full-scale data, this system supports over-the-counter individual foreign exchange business as well as individual foreign exchange business through other channels and will run more stably. Moreover, the system, interfaced with the operating systems of banks, can effectively reduce repeated inputting by operators at banks. With this system, foreign exchange authorities will strengthen the watch list management and offsite monitoring, by acquiring, analyzing, and disseminating relevant data in a centralized manner and sharing the watch list across the country. The Circular shall come into force on January 1, 2016. 2016-01-13/en/2016/0113/1182.html
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To facilitate domestic and foreign currency exchange franchised business for individuals and diversify domestic supply of foreign currency banknotes, the State Administration of Foreign Exchange (SAFE) has recently issued the Reply of the State Administration of Foreign Exchange to Franchised Institutions Providing Domestic and Foreign Currency Exchange for Individuals to Engage in Transport of Foreign Currency Banknotes into or out of the Territory and Foreign Currency Wholesale Business (Huifu No.169 [2015], hereinafter referred to as the “Reply“), approving TransForex (Tianjin) Currency Exchange Co., Ltd, Travelex Currency Exchange (China) Co., Ltd and Beijing United Money Exchange Co., Ltd ( “Three Franchised Institutions”) to engage in transport of foreign currency banknotes into or out of the territory and foreign currency wholesale business (“banknote transport and wholesale business”). The Reply is highlighted as follows: I. specifying the scope of the banknote transport and wholesale business, and permitting the Three Franchised Institutions to determine in their sole discretion the currency for transport and which bank or franchised institutionacross the country for sales and purchases offoreign currency banknotes. II. requiring the Three Franchised Institutions to manage the operating and accounting of the banknote transport and wholesale businessand the retail businessseparately, and handle theclearing through special accounts for the banknote transport and wholesale business of a franchised institution. III. regulating other obligations of the Three Franchised Institutions, such as statistics and reporting, as well as anti-money laundering. 2015-07-01/en/2015/0701/1162.html
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The State Administration of Foreign Exchange (SAFE) recently wrote letters to the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) respectively, confirming its official participation in the Coordinated Portfolio Investment Survey (CPIS) and the International Banking Statistics (IBS). The CPIS collects information on the stock of cross-border portfolio investment holdings (by country or region). The BIS reflects the stock of the cross-border financial assets and liabilities of a country's banking industry. The compiling principles of the CPIS and IBS are consistent with the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) published by the IMF. Participation in the CPIS and IBS is one of the motions of the G20 on data gaps. The SAFE will release China's CPIS and IBS statistics soon. 2016-01-19/en/2016/0119/1184.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, and the branches of the SAFE in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo; and all designated Chinese-funded foreign exchange banks: To further deepen the reform of foreign exchange administration system, better serve and facilitate the business and capital operations by domestic enterprises, the SAFE decides to implement the reform of the administrative approach to foreign exchange settlement of the external debt of enterprises across the country, based on the experience from the preliminary pilot program conducted in some regions, while standardizing the management for discretionary settlement and payment of foreign exchange receipts under the capital account in a uniform manner. Relevant issues are notified as follows: First, pushing nationwide the reform of the way to manage settlement of corporate external debt Based on the experience gained by China (Shanghai) Pilot Free Trade Zone, China (Tianjin) Pilot Free Trade Zone, China (Guangdong) Pilot Free Trade Zone, and China (Fujian) Pilot Free Trade Zone, efforts will be made to roll out nationwide the reform of the way to manage settlement of corporate external debt. Since this Circular becomes effective, domestic players, Chinese or foreign-funded enterprises, but not financial institutions, can go through foreign exchange settlement procedures for their external debt at their discretion. Second, unifying the policy for discretionary settlement of foreign exchange receipts under the capital account by domestic institutions Discretionary settlement of foreign exchange receipts under the capital account means that if foreign exchange receipts under the capital account including foreign exchange capital, external debt and funds recovered from overseas listing could be for discretionary settlement according to relevant policies, settlement can be handled with a bank based on the real needs of domestic institutions. Restrictive provisions on the settlement of foreign exchange receipts of domestic institutions under the capital account in existing regulations shall prevail. The proportion of discretionary settlement of foreign exchange receipts of domestic institutions under the capital account is temporarily 100% at present. The SAFE may adjust the aforesaid proportion in due time based on the BOP situations. During the course of implementing the discretionary settlement of foreign exchange receipts under the capital account, the domestic institutions can still choose the existing procedures for settlement upon payment for the use of foreign exchange receipts. For each foreign exchange settlement for domestic institutions, based on the principle of foreign exchange settlement upon payment, banks shall examine the authenticity and compliance in the use of the funds for prior transaction of foreign exchange settlement (including discretionary settlement of foreign exchange and foreign exchange settlement upon payment). Domestic transfers in original currency and cross-border outward payments of foreign exchange receipts of domestic institutions shall be processed pursuant to the prevailing regulations on foreign exchange administration. Third, RMB funds from the discretionary settlement of foreign exchange receipts under the capital account of domestic institutions shall be included in management of accounts for FX settlement and pending payment The domestic institutions shall, in principle, open accounts with their banks for capital account – foreign exchange funds settled and to be paid (“accounts for FX settlement and pending payment”) for the deposits of RMB funds from the discretionary settlement of foreign exchange receipts under the capital account on a one-on-one basis, and make various payments through these accounts. The capital account, domestic asset realization account, domestic reinvestment account, special account for external debt, special account for overseas listing and other qualified accounts under the capital account under the same name which are opened by a domestic institution with the same bank outlet may share an account for FX settlement and pending payment. The RMB funds of domestic institutions from foreign exchange settlement upon payment shall not be used for payments through the accounts for FX settlement and pending payment. The scope of the receipts in the accounts for FX settlement and pending payment includes: funds transferred through foreign exchange settlement from capital account, domestic asset realization account and domestic reinvestment account, special account for external debt, special account for overseas listing and other qualified accounts under the capital account under the same name or held by an enterprise for domestic equity investments; funds transferred from the account for FX settlement and pending payment under the same name or held by an enterprise for domestic equity investment; funds returned after transfer from these accounts, pursuant to the regulations; funds returned due to revocation of the transactions; eligible RMB income, interest income in the account; and other receipts registered by the foreign exchange authority (bank) or approved by the foreign exchange authority. The scope of payments in the accounts for FX settlement and pending payment includes: payments within the business scope, payments of funds for domestic equity investments and security deposits in RMB, funds transferred to the special account for centralized funds management and the account for FX settlement and pending payment under the same name; foreign exchange purchases and payments or direct outward repayments of external debt; funds transferred to the special account for repayment of principal and interest; foreign exchange purchases and payments or direct outward remittance for repurchase of overseas shares or other payments related to overseas listing; foreign exchange purchases and payments or direct outward payments owing to capital reductions or withdrawals by foreign investors; taxes withheld and remitted by the company for overseas institutions to pay domestic authorities; proceeds from share decrease by state-owned shareholders transferred to social security fund; foreign exchange purchases and payments or direct outward payments under the current account; and other payments under the capital account registered by the foreign exchange authority (bank) or approved by the foreign exchange authority. RMB funds in the accounts for FX settlement and pending payment shall not be transferred back to foreign exchange account under the capital account through purchase of foreign exchange. RMB funds transferred from the accounts for FX settlement and pending payment for the purpose of guarantees or payments of other security deposits, unless guarantee contract is performed or deductions occur due to default, shall be returned to the accounts for FX settlement and pending payment through the original route. Fourth, use of foreign exchange receipts under the capital account by domestic institutions shall comply with the authenticity and self-use principle and not go beyond the business scope A domestic institution's foreign exchange receipts under the capital account and RMB funds gained from foreign exchange settlement could be used as expenses under the current account within its business scope as well as legitimate expenses under the capital account. A domestic institution shall comply with the following regulations in using foreign exchange receipts under the capital account and the RMB funds gained from foreign exchange settlement: (I) They shall not be used directly or indirectly as the expenses beyond the business scope or the expenses prohibited by laws and regulations; (II) Unless otherwise expressly specified, they shall not be used directly or indirectly in securities investment or other investment and wealth management than banks' principal guaranteed products; (III) They shall not be used to issue loans to non-associated companies, except the cases expressly allowed in the business scope; (IV) They shall not be used to build or buy non-self-use real estate (excluding real estate developer). Where a domestic institution and other parties have entered into a contract with regard to the use scope of receipts under the capital account, relevant funds shall not be used beyond the scope as agreed upon in the contract. Unless otherwise specified, any contract between a domestic institution and other parties shall not conflict with this Circular. Fifth, standardizing payment management with regard to receipts under the capital account and funds from settlement of foreign exchange (I) A domestic institution shall fill out the Order on Payment with Funds under the Capital Account (see Appendix) when going through foreign exchange settlement or make payments with receipts under the capital account. Where RMB funds from foreign exchange settlement are directly transferred into the account for FX settlement and pending payment, a domestic institution does not need to present to a bank any materials evidencing the purposes of funds. A domestic institution, when applying for making payments with the receipts under the capital account, including directly making outward payments after settlement of foreign exchange, without transferring the money into the account for FX settlement and pending payment, making outward payments in RMB through the account for FX settlement and pending payment, or making outward payments in foreign exchange directly through the foreign exchange account under the capital account, shall present to a bank the authenticity supporting materials that are related to the purposes of funds. (II) The banks shall, according to the business development principles of “knowing your customers,” “understanding your businesses,” and “due diligence reviews,” be responsible for verification of the authenticity of settlement and payment of foreign exchange receipts under the capital account for domestic institutions. When handling each payment with such funds, the authenticity and compliance of the supporting documents with respect to the prior payment transaction shall be examined. The banks shall keep the supporting documents relevant to the settlement and use of the foreign exchange receipts under the capital account of domestic institutions for five years for future reference. The banks shall report the data, including the accounts related to the capital accounts, domestic asset realization accounts, domestic reinvestment account, special account for external debt, special account for overseas listing, other accounts under the capital account and accounts related to account for FX settlement and pending payment (account nature code: 2113), cross-border receipts and payments, domestic transfers, foreign exchange settlement and sales within the accounts, on a timely basis and in accordance with the Circular of the State Administration of Foreign Exchange on Issuing the Standards Version 1.0 for Collecting Data on Foreign Exchange Transactions by Financial Institutions (Huifa No. 18 [2014]). In case of transfers of funds between the accounts for FX settlement and pending payment and other RMB accounts, the information on the domestic transfers shall be reported by filling in the documents for domestic payments and receipts and indicating the fund purpose code under the “invoice number” column (according to “7.10: Code of Purpose for Foreign Exchange Settlement” in the Circular Huifa No. 18 [2014]) ; the transaction code for other transfers than that for payments under verification of trade in goods shall be indicated as “929070”. (III) When domestic institutions fail to provide documents evidencing the authenticity for special reasons at the moment, the banks may make payments for the enterprises, provided that the obligation of due diligence investigation has been performed and the authentic background of the transactions has been verified, and may file with the foreign exchange authority through its business system with respect to the special issues on the date of payment. Banks shall collect and examine the full set of relevant supporting documents resubmitted by the domestic institutions within 20 working days upon completion of the payment and report to the foreign exchange authority through relevant business system with respect to the resubmission of the documents evidencing the authenticity of the filing of special issues. Where domestic institutions use receipt under the capital account for the purpose of reserve funds, the banks may not require submission of the aforesaid documents evidencing authenticity. The cumulative amount of payments for reserve funds by a single institution each month (including discretionary settlement of foreign exchange and foreign exchange settlement upon payment) shall not exceed an equivalent of USD 200,000. Where a domestic institution applies for settlement upon payment with all foreign exchange receipts under the capital account on a one-off basis, or payments with all the RMB funds in the account for FX settlement and pending payment, but fails to provide relevant documents evidencing the authenticity, the bank concerned shall not handle the foreign exchange settlement and payment for the institution. Sixth, further strengthening ex-post supervision and investigation of irregularities by foreign exchange authorities (I) The foreign exchange authorities shall strengthen the guidance and examination on the compliance of banks in handling such business as settlement, payment and utilization of receipts under the capital account for domestic institutions in accordance with relevant regulations including the Regulations of the People’s Republic of China on Foreign Exchange Administration (Decree No. 532 of the State Council), Circular of the State Administration of Foreign Exchange on Promulgating the Measures for Administration of External Debt Registration (Huifa No. 19 [2013]), Circular of the State Administration of Foreign Exchange on Printing and Distributing the Provisions on Foreign Exchange Administration of Domestic Direct Investments by Foreign Investors and the Supporting Documents (Huifa No. 21 [2013]), Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Foreign Exchange Administration of Overseas Listings (Huifa No. 54 [2014]). The manner of examination includes request for submission of written explanatory and transaction documents by relevant entities, an interview with the persons in charge, field inspections or duplication of relevant documents of the entities, and notification of any irregularities. (II) For domestic institutions and banks with violations against this Circular with respect to foreign exchange settlement, payment and utilization of receipts under the capital account, the foreign exchange authorities shall investigate and treat them according to the Regulations of the People's Republic of China on Foreign Exchange Administration and other relevant provisions. Any bank that maliciously or seriously violates regulations may be duly required to suspend foreign exchange settlement and sales under the capital account. Any domestic institution that maliciously or seriously violates regulations may be disqualified for handling discretionary settlement of foreign exchange in accordance with the law, or have its businesses controlled by the SAFE capital account information system. Further, no services shall be provided to it with regard to other businesses under the capital account or no cancelation of business control made before they present the written notes and make rectifications. This Circular will come into effect as of the date of issuance. For the previous regulations such as the Circular of the State Administration of Foreign Exchange on Promulgating the Measures for Administration of External Debt Registration (Huifa No. 19 [2013]), Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Foreign Exchange Administration of Overseas Listings (Huifa No. 54 [2014]), 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]), Circular of the State Administration of Foreign Exchange on the Printing and Distributing of the Regulations on the Centralized Operation and Management of the Foreign Exchange Funds of MNCs (Huifa No. 36 [2015]), if there is any discrepancy between the above regulations and this Circular, this Circular shall prevail. Upon receipt of this Circular, the SAFE branches and foreign exchange administrative departments should immediately forward it to the central sub-branches, sub-branches, urban commercial banks, and foreign banks within their respective jurisdiction. All the designated Chinese-funded foreign exchange banks shall, upon receipt of this Circular, forward it to their respective branches and sub-branches under their jurisdiction as soon as possible. Please contact the Capital Account Administration Department of the SAFE in a timely manner if any problems are encountered in implementation of this Circular. Appendix: Order on Payment with Funds under the Capital Account State Administration of Foreign Exchange June 9, 2016 FILE: Order on Payment with Funds under the Capital Account 2016-12-19/en/2016/1219/1301.html
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The Shanghai headquarters, branches, business management departments of the People’s Bank of China (PBC), and central sub-branches of the PBC in the capital cities of provinces (autonomous regions) and in sub-provincial cities; 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, and the branches of the SAFE in cities specifically designated in the state plan; China Development Bank, all policy banks, state-owned commercial banks, and joint-stock commercial banks and Postal Savings Bank of China, In order to regulate the management of domestic securities investment by RMB qualified foreign institutional investors (RQFIIs), relevant issues are notified as follows, in accordance with the Measures for the Pilot Program on Domestic Securities Investment by RMB Qualified Foreign Institutional Investors (Decree No. 90 of the China Securities Regulatory Commission, the People’s Bank of China, and the State Administration of Foreign Exchange), and relevant provisions: I. The PBC, SAFE and their branches and sub-branches shall supervise, manage and inspect RQFIIs' investment quota (investment quota), capital account, capital receipts and payments in accordance with the law. II. An RQFII approved by the China Securities Regulatory Commission (CSRC) to invest in domestic securities markets shall entrust its domestic custodian (custodian) with handling the procedures set forth in the Circular. An RQFII can mandate no more than three custodians. In the event of many custodians, the RQFII shall designate one custodian as the primary rapporteur (Only one custodian, if available, is the primary rapporteur as default) to be responsible for going through investment quota record filing, approval application and main information registration on behalf of the RQFII. III. The SAFE shall organize record filing or approval management with regard to the investment quota of a single RQFII. The RQFII, after obtaining the qualification from the CSRC, may obtain an investment quota (basic quota) no higher than a certain proportion of its assets or the securities assets under management ("asset size") through record filing; application of an investment quota higher than the basic quota is subject to approval by the SAFE. The investment quotas to institutions such as overseas sovereign wealth funds, central banks and monetary authorities are not required to be within a certain proportion of assets. They may obtain an investment quota based on their needs to invest in domestic securities markets, and will be subject to record filing management. IV. Criteria of basic quotas for RQFIIs: 1. Where the assets or AUM of an RQFII or the group it is subordinated to are located overseas, the formula is: equivalent of USD 100 million + average asset size over the past three years ＊0.2% - quota for the QFII already obtained (in RMB terms, "QFII quota"). 2. Where the assets or AUM of an RQFII or the group it is subordinated to are located in China, the formula is: RMB 5 billion + asset size of the previous year＊80% - QFII quota already obtained (in RMB terms). The foreign exchange rate involved above shall be calculated based on the conversion rates of various currencies against the USD published by the SAFE on the day of application for the previous month. The PBC and SAFE may adjust these criteria in consideration of balance of payments, and development and liberalization of capital markets. V. For record filing of an investment quota within the basic quota for an RQFII, the following submissions shall be provided to the primary rapporteur: 1. Description of the record filing of an investment quota, and the filled-out Registration Form for RMB Qualified Foreign Institutional Investors (see Appendix 1) 2. Audited balance of sheet of the RQFII for the past three years or the previous year (or audit report on securities assets under management, etc.) 3. Photocopy of qualification certificate from the CSRC. The primary rapporteur shall earnestly perform his/her responsibilities, carefully reviewing the materials evidencing the RQFII's assets size and QFII quota already obtained, and verifying the basic quota and the investment quota intended for record filing by relevant standards and based on the distribution of assets of its own or the group it is subordinated to, and collectively submit the record filing materials for the RQFII quota to the SAFE prior to the 10th day of every month (see Appendix 2 for format). The SAFE shall confirm the record filing materials and give feedback to the primary rapporteur. VI. For application for an investment quota beyond the basic quota for an RQFII, the following submissions shall be provided to the SAFE through the primary rapporteur: 1. Written applications of the primary rapporteur and the RQFII, detailing the reasons for increasing the quota and the use of existing quota. 2. Information of Record Filing Form for RQFII's Custodian (see Appendix 3 for format). 3. Audited balance of sheet of the RQFII for the past three years or the previous year (or audit report on securities assets under management, etc.) (4) Other materials required by the SAFE. An RQFII shall properly distribute the quotas between the primary rapporteur and other custodians, and effectively implement the requirements on quota management. The SAFE will regularly publish the information on the RQFIIs' investment quotas at its website, www.safe.gov.cn. VII. Where an RQFII that has obtained its investment quota before this Circular is issued applies for an additional investment quota, the following procedures shall be complied with: 1. The investment quota already obtained is within the basic quota: if the quota already obtained plus the extra quota applied for is within the basic quota, Article V herein shall be followed in record filing; if the quota already obtained plus the extra quota applied for is beyond the basic quota, application shall be made to the SAFE for approval in accordance with Article VI herein. 2. Where the investment quota already obtained is beyond the basic quota, application shall be made to the SAFE for approval in accordance with Article VI herein. VIII. The investment quota for RQFIIs is subject to balance management. This means that the RQFII's accumulated net inward remittances shall not surpass the already filed or approved investment quota. IX. Except open-end funds, the lock-up period of the principal of other products or funds of the RQFII is 3 months. The lock-up period shall be calculated as of the date when the RQFII's accumulated inward remittances as investment principal hits RMB 100 million. The aforesaid lock-up period refers to the period in which RQFIIs are prohibited from remitting the principal abroad. X. No RQFII shall sell or transfer the investment quota in any form to any other institution or individual. In case that an RQFII fails to effectively use the investment quota within one year following the day the quota is filed or approved, the SAFE shall have the right to recover the investment quota not yet used, in all or in part. XI. RQFIIs shall open a basic RMB deposit account for foreign institutions, in accordance with the Management Measures for RMB Bank Settlement Account for Foreign Institutions (Yinfa No. 249 [2010]), and the Circular of the People's Bank of China on Opening and Using RMB Bank Settlement Account for Foreign Institutions (Yinfa No. 183 [2012]). After opening a basic RMB deposit account, the RQFII shall open with a domestic commercial bank with the qualification for a QFII custodian a special deposit account for trading funds in the securities market of an exchange, and a special deposit account for settlement of trading funds in the interbank bonds markets, to be used for investing in the securities market of an exchange and the interbank bonds markets. Any RQFII who participates in stock index futures trading may open a special deposit account with a futures margin deposit and custodian bank for the settlement of the deposit of stock index futures. When opening such an account, the RQFII shall distinguish self-owned funds and AUM and open a separate account for each; A separate account for each open-end fund shall be opened. XII. An RQFII shall submit the following materials for opening a special deposit account: 1. Photocopy of the CSRC's qualification certificate for RQFIIs. 2. Record filing information or reply from the SAFE on quota. 3. Written custody qualification documents from a custodian bank. 4. Custody agreement between the RQFII and custodian bank. 5. Other documents required by the PBC. RQFIIs shall refer to the provisions in the Announcement No. 3 [2016] of the People’s Bank of China in investing in the interbank bonds markets. To open a special deposit account for settlement of trading funds in the interbank bonds markets, an RQFII shall also present the record filing notice for entry into the interbank bonds markets, and the written document on the custodian's qualification for commissioned settlement in the interbank bonds markets. XIII. The scope of receipts into an RQFII's special deposit account covers investment principal remitted from overseas by the RQFII, its gains from sales of securities, cash dividends, interest income, funds transferred from other special deposit accounts opened under this Circular, and other receipts prescribed by the PBC and SAFE. The scope of payments from an RQFII's special deposit account covers payment for securities bought, principal remitted outward, returns on investment, payment of investment-related taxes, funds transferred to other special deposit accounts opened under this Circular, and other spending prescribed by the PBC and SAFE. XIV. No transfer shall be allowed between an RQFII's special deposit accounts and other accounts it opened in China without approval; no transfer shall be allowed between the account for self-owned funds, the account for client funds and each account for open-end funds. Without approval, the funds in the RQFII's special deposit account shall not be used for purposes other than domestic securities investment. No cash shall be drawn from the RQFII's special deposit account. XV. The deposit rate of the funds in the bank settlement account an RQFII opens under this Circular is subject to the provisions developed by the PBC. XVI. In case of the following cases, an RQFII shall realize its assets and close its accounts within one month, with the corresponding investment quota nullified: 1. Its qualification has been revoked by the CSRC. 2. The SAFE cancels the investment quota of the RQFII in accordance with the law. 3. Other circumstances prescribed by the PBC and SAFE. XVII. For the open-end funds initiated by an RQFII, its custodian may handle the inward and outward remittances in RMB for it every day, based on the netting subscribed or redeemed. For other products or funds, the RQFII may entrust a custodian with handling the inward and outward remittances after the lock-up period expires. The custodian may handle the outward remittance of the realized accumulated income for the RQFII, based on the RQFII's written application or instruction, special audit report on returns on investment issued by Chinese certified accountants, and tax clearance or tax record filing certificates, if any. XVIII. A custodian, when handling inward and outward remittances for an RQFII, shall conduct the authenticity and compliance review of related receipts and payments, and perform its obligations of anti-money laundering and anti-terrorism. XIX. RQFIIs shall apply for a special institution code and undergo RQFII main information registration with the foreign exchange authority that governs the primary rapporteur within 10 working days after obtaining the investment quota for the first time via the primary rapporteur. Those that have obtained the special institution code in going through other cross-border or foreign exchange receipts and payments need not apply again. The custodian shall report the regulation and statistics data of the RQFII in accordance with the Circular of the State Administration of Foreign Exchange on Adjusting the Way of Data Reporting for QFIIs (Huifa No. 45 [2015]). XX. Where one of the following circumstances occurs to an RQFII, the primary rapporteur shall apply to the SAFE for alteration registration within 5 working days: 1. Major information of the RQFII such as its name and custodian changes. 2. Other circumstances prescribed by the PBC and SAFE. In case of the change of the primary rapporteur, the new primary rapporteur shall go through alteration registration for the RQFII. Where the RQFII or its major shareholders or actual controller face significant penalties by other regulatory authorities (including foreign authorities), and the penalties have a strong impact on the RQFII's investment operations, or lead to suspension or cancellation of its business qualifications, the primary rapporteur shall immediately report to the PBC and the SAFE. XXI. The custodian shall report an RQFII's account opening and cancellation, investment quota, cross-border capital receipts and payments, and asset allocation for domestic securities investment to the RMB cross-border receipts and payments information management system within 5 working days after the deal is made. XXII. The materials submitted as requested by this Circular shall be in Chinese. Should there be counterparts in both Chinese and a foreign language, the Chinese text shall prevail. XXIII. This Circular will come into force as of the date of issuance. In the meanwhile, the Circular of the People's Bank of China on Implementing the Pilot Program on Domestic Securities Investment by RMB Qualified Foreign Institutional Investors (Yinfa No. 105 [2013]), the Circular of the State Administration of Foreign Exchange on the Pilot Program on Domestic Securities Investment by RMB Qualified Foreign Institutional Investors (Huifa No. 9 [2013]) and the Circular of the Capital Account Management Department of the State Administration of Foreign Exchange on Issuing the Operating Guidance on Managing Investment Quotas of RMB Qualified Foreign Institutional Investors (Huizihan No. 2 [2014]) will be appealed. Appendices: 1. Registration Form for RMB Qualified Foreign Institutional Investors 2. Investment Quota Form 3. Information Record Filing Form for RQFII's Custodian People's Bank of China, State Administration of Foreign Exchange August 30, 2016 2016-11-08/en/2016/1108/1299.html