Index number:000014453-2016-00521 Dispatch date: 2016/12/19
Publish organization: State Administration of Foreign Exchange Reference number: Huifa No. 16[2016]
Name: Circular of the SAFE on the Policies for Reforming and Standardizing Management of Foreign Exchange Settlement under the Capital Account


Circular of the SAFE on the Policies for Reforming and Standardizing Management of Foreign Exchange Settlement under the Capital Account

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




相关信息:
                 
State Administration of Foreign Exchange
Addess:Huarong Plaza, No.18 in Fucheng Road, Haidian District, Beijing
Postcode:100048 Informants'hot-line telephone:+86-10-68402265