Provincial, autonomous regions, and municipal branches, foreign exchange administration departments, the Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo branches of the SAFE, and all designated Chinese-funded foreign exchange banks:

       To give full play to the decisive role of the market in resource allocation, support implementation of China's "going-global" strategy, make full use of domestic and overseas resources and markets, further streamline and offer conveniences for cross-border capital transactions involved in investment and financing activities by domestic residents via SPVs (special purpose vehicles), serve the development of the real economy, and improve the level of convertibility of cross-border and financial transactions in good order, issues regarding foreign exchange administration of overseas investments and financing and round-trip investments by domestic residents via SPVs are notified as follows, in accordance with the Regulations on Foreign Exchange Administration of the People's Republic of China:

       I. The "special purpose vehicle” (SPV) herein refers to overseas companies directly incorporated or indirectly controlled by domestic residents (including domestic institutions and individual domestic residents) using the assets or rights and interests of domestic companies that they legally possess or the overseas assets or rights and interests they legally possess for the purpose of investments and financing.

       "Round-trip investments" herein refer to the direct investment activities directly or indirectly carried out by domestic residents in China via SPVs, i.e., activities to incorporate foreign-funded companies or projects (hereinafter referred to as “foreign-funded companies”) in China through incorporation or M&As and to obtain rights and interests such as ownership, control rights, and management rights.

       "Domestic institutions" herein refer to legal persons of enterprises and public institutions and other economic organizations duly incorporated in China; "individual domestic residents" refer to Chinese citizens who have an ID card, military ID card, or armed police ID card, which are for Chinese residents, as well as foreign individuals who do not have a legitimate ID card for Chinese residents but reside in China because they have economic interests in China.

       "Control" herein refers to operating rights, income rights, or decision-making rights of SPVs obtained by domestic residents through acquisitions, trusts, entrusted holdings, voting rights, buy-backs, and convertible bonds. 

       II. The SAFE and its branches (hereinafter referred to as the “SAFE”) shall manage registration of the SPVs incorporated by domestic residents. This Circular shall apply to the registration and related foreign exchange administration of SPVs incorporated by individual domestic residents, while registration and related foreign exchange administration of SPVs incorporated by domestic institutions shall be conducted in accordance with the existing regulations and this Circular.

       III. Domestic residents shall apply to the SAFE to register foreign exchange for overseas investments before contributing money to SPVs using legitimate domestic and overseas assets or rights and interests. Where legitimate domestic assets or rights and interests are used, domestic residents shall apply to the foreign exchange bureau that has jurisdiction in the area where the SPV is registered or where the assets or rights and interests are located; where legitimate overseas assets or rights and interests are used, domestic residents shall apply to the foreign exchange bureau that has jurisdiction in the area where the SPV is registered or where his or her residence is registered.

       Individual domestic residents shall submit the following materials to register foreign exchange for overseas investments:

       1. A written application and the Registration Form for Foreign Exchange for Overseas Investments by Individual Domestic Residents.

       2. The personal identification documents for individuals.

       3. The registration documents of the SPV and evidence of the SPV's shareholders or actual controllers (such as the stock transfer book or the subscriber book).

       4. The resolution of the domestic and overseas relevant authorities of companies agreeing to the overseas investments and financing (providing a written statement of the owner’s agreement with the overseas investments and financing if the company has not been incorporated).

       5. Evidence regarding the assets or rights and interests that the individual domestic resident directly or indirectly possesses in the domestic enterprises that plan to conduct overseas investments and financing, or of the overseas assets or rights and interests that the individual domestic resident legally possesses.

       6. Mandatory supporting materials if the above materials do not adequately prove the authenticity of the transactions or the consistency of the application materials.

       Domestic institutions shall register foreign exchange for overseas investments in accordance with the Circular of the SAFE on the Release of Regulations on Foreign Exchange Administration for ODI by Domestic Institutions (Huifa No. 30 [2009]).

       Domestic residents must carry out the foreign exchange registration process for overseas investments before engaging in any subsequent business.

       IV. Domestic residents and their incorporated SPVs shall not threaten China's sovereignty, safety, or public interests; shall not violate China's laws and regulations; shall not damage relationships between China and other countries (regions); shall not violate the international treaties to which China is a signatory; and shall not be involved in technology or product exports that are prohibited by China for exported.

       The registration of overseas SPVs that cannot prove that their investment and financing activities are in conformity with the laws and regulations as required by the relevant industry authorities.

       V. In the event of any alteration in the basic information, such as shareholders, name and operating duration of the individual domestic residents, or key information, such as increases or decreases in capital, or equity transfers, swaps, consolidations, or splits, the registered overseas SPVs shall timely submit a change in the registration of the foreign exchange for overseas investments with the foreign exchange bureaus.

       Domestic residents must register the change in the foreign exchange for overseas investments before conducting any subsequent business (including re-exchanges of profits and bonuses).

       VI. If non-listed SPVs want to motivate directors, supervisors, and senior management of the domestic enterprises under their direct or indirect control or personnel who have employment or labor relationships with them using their equities or options, before performing their rights the relevant individual domestic residents shall submit the following materials to the foreign exchange bureau to register the SPV’s foreign exchange:

       1. A written application and the Registration Form for Foreign Exchange for Overseas Investments by Individual Domestic Residents

       2. Evidence of the registration of foreign exchange business for overseas investments by registered SPVs.

       3. Materials issued by the relevant domestic enterprises regarding the employment or labor relationship with the individual.

       4. Evidence issued by the SPV, or its actual controller, of the authenticity of the rights and interest motivation.

       5. Mandatory supporting materials if the above materials cannot adequately prove the authenticity of the transactions or the consistency among the application materials.

       Participation in equity incentive plans of overseas listed companies by individual domestic residents shall be handled in accordance with the relevant regulations on foreign exchange administration.

       VII. The transfer of funds raised overseas by SPVs back to China shall be handled in accordance with the regulations on foreign investments and external debt management in China. Foreign-funded companies incorporated through round-trip investments shall undergo the relevant foreign exchange registration in accordance with the existing regulations on foreign exchange administration for FDI, and shall truthfully disclose such information as the actual controllers of the shareholders.

       VIII. The transfer back to China of the profits and bonuses received by domestic residents from SPVs shall be handled in accordance with the regulations on foreign exchange administration under the current account. The transfer of foreign exchange income back to China due to capital changes shall be handled in accordance with the regulations on foreign exchange administration under the capital account.

       IX. Domestic residents shall promptly submit authenticity evidence and go through the alteration or writing-off registration procedures with the foreign exchange bureau if they no longer possess the registered SPV's rights and interests or they no longer need to register the SPV due to transfers of shares, bankruptcy, dissolution, liquidation, the maturity of the operating duration, or a change in identification.

       X. Domestic enterprises controlled by domestic residents, directly or indirectly, can lend money to registered SPVs in accordance with the existing regulations, provided that the demand is true and rational. 

       XI. Domestic residents can repurchase remitted capital for the incorporation, share repurchases, and the delisting of SPVs, provided that the demand is true and rational.

       Domestic residents shall submit a statement to the foreign exchange bureau to explain why it has contributed money to the SPV using legitimate domestic and overseas assets or rights and interests but has not registered foreign exchange for investment as required. The foreign exchange bureau shall carry out the registration based on the principles of legitimacy and rationality, and shall impose administrative penalties on those domestic residents who violate the regulations on foreign exchange administration.

       XIII. The BOP statistics shall be declared in accordance with the existing regulations for cross-border receipts and payments between domestic residents and overseas SPVs.

       XIV. The SAFE shall regularly analyze the overall situation of the overseas investments and financing and round-trip investments by domestic residents through SPVs, pay close attention to their impact on the BOP, and enhance interim and post regulation.

       XV. If domestic residents or the domestic companies that they control, directly or indirectly, remit capital to SPVs through false or structured transactions, they shall be punished by the SAFE in accordance with Article 39 of the Regulations on Foreign Exchange Administration of the People's Republic of China.

       Domestic residents who fail to carry out the foreign exchange registration, to truthfully disclose information on the actual controller of the companies that make the round-trip investments, or make false commitments shall be punished by the SAFE in accordance with Paragraph 5 of Article 48 of the Regulations on Foreign Exchange Administration of the People's Republic of China.

       Domestic residents who fail to carry out the foreign exchange registration, to truthfully disclose information on the actual controller of the companies that make the round-trip investments, or make false commitments but have capital outflows shall be punished by the SAFE in accordance with Article 39 of the Regulations on Foreign Exchange Administration of the People's Republic of China. If these residents have capital inflows or foreign exchange settlements, they shall be punished by the SAFE in accordance with Article 41 of the Regulations on Foreign Exchange Administration of the People's Republic of China.

       Domestic residents and SPVs that fail to declare the required BOP statistics for cross-border receipts and payments shall be punished by the SAFE in accordance with Paragraph 1 of Article 48 of the Regulations on Foreign Exchange Administration of the People's Republic of China.

       XVI. This Circular will come into force on the day of its release and the Circular of the SAFE on Foreign Exchange Administration for Financing and Round-Trip Investments by Domestic Residents via Overseas SPVs (Huifa No. 75 [2005]) shall be repealed. Where there is any discrepancy between the previous regulations and this Circular, this Circular shall prevail.

       Upon receipt of this Circular, the branches and foreign exchange administration departments of the SAFE shall immediately forward it to the central sub-branches, sub-branches, urban commercial banks, rural commercial banks, foreign banks, and rural credit cooperatives, and the Chinese banks shall forward it immediately to the branches under its jurisdiction. Please contact the Capital Account Administration Department of the SAFE if any problems are encountered in implementation of this Circular.

       Appendices: 1. Operating Guide for Foreign Exchange Administration of Round-trip Investments

       2. Application Form for Direct Investments of Foreign Exchange under the Capital Account

State Administration of Foreign Exchange

July 4, 2014