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 national Chinese-funded banks:
To advance the reform of "combining power delegation with regulation & optimizing services", better serve the real economy and promote cross-border trade and investment facilitation, the SAFE decides to further optimize foreign exchange policies and measures to facilitate foreign exchange handling by market players in compliance with regulations. Relevant issues are notified as follows:
I. Expanding piloting for the facilitation of foreign exchange receipts and payments under trade
Piloting shall be expanded for the facilitation of foreign exchange receipts and payments under trade in goods. Based on pilot efforts in the Guangdong-Hong Kong-Macao Greater Bay Area, Shanghai and Zhejiang, efforts shall be made to provide due support to other regions to pilot the optimization of document reviews for foreign exchange receipts and payments under trade in goods, cancellation of registration for foreign exchange refunding, and simplified verification of foreign exchange payments for imports.
Pilot programs shall be carried out for the facilitation of foreign exchange receipts and payments under trade in services. When processing foreign exchange receipts and payments under trade in services for creditworthy domestic institutions, qualified, prudent and compliant banks may follow the principles of "know your customers, understand your business and carry out due diligence investigation". Efforts shall also be stepped up to boost electronic filing of tax documents for foreign exchange payments under trade in services to help banks to complete digital reviews through information sharing.
II. Removing restrictions on domestic equity investments by non-investment-oriented foreign investors with their capital
While investment-oriented foreign investors (including foreign investment companies, foreign venture capital investment companies and foreign equity investment companies) are allowed for domestic equity investments with their capital in compliance with laws and regulations, non-investment-oriented foreign investors shall also be allowed to make domestic equity investments with their capital, provided that they comply with the existing special management measures on market access for foreign investors (negative list) and the projects they intend to invest in are authentic and comply with regulations.
Where a non-investment-oriented foreign investor makes equity investment in China through transfer of capital in original currency, the invested shall register for acceptance of domestic reinvestments as required and open a foreign exchange capital account to receive the transferred money, with no need to register for the recognition of contribution in cash. Where a non-investment-oriented foreign investor makes equity investment in China with the money from the settlement of foreign exchange capital, the invested shall register for acceptance of domestic reinvestments as required and open an account pending payment after foreign exchange settlement under the capital account to receive the money.
III. Expanding piloting for the facilitation of foreign exchange receipts and payments under the capital account
Any eligible company in the pilot regions can make payments in China using receipts under the capital account like foreign exchange capital, external debt and overseas IPO funding without presenting in advance the authenticity supporting materials transaction-by-transaction to the bank, provided that its use of the money is authentic and complies with the existing management regulations on use of the receipts under the capital account. Pilot banks shall control the risks arising from pilot businesses following the business development principles. Local foreign exchange authorities shall intensify monitoring, analysis, ongoing and ex-post regulation.
IV. Easing the restrictions on foreign exchange settlement and use under the capital account
Restrictions on foreign exchange settlement and use under the domestic asset realization account shall be removed. To receive the consideration from a foreign investor for equity transfer under FDI, the domestic transferor can open an account, receive remittances and go through foreign exchange settlement with the bank directly by presenting relevant registration certificates.
Restrictions on the use and foreign exchange settlement of margins by foreign investors shall be eased. When a deal is closed, margins remitted in from abroad or transferred in from domestic accounts by foreign investors can be directly used for legal domestic capital contributions or for the payment of considerations both at home and abroad. Prohibition on foreign exchange settlement in the margin account shall be removed. Margins can be directly used for foreign exchange settlements or payment when a deal is closed or deductions are made in case of default.
V. Simplifying receipts and payments procedures under trade in goods for micro and small cross-border ecommerce players
When payment institutions or banks handle foreign exchange receipts and payments under trade in goods according to the Circular of the State Administration of Foreign Exchange on the Issuance of Measures for the Administration of Foreign Exchange Business by Payment Institutions (Huifa No. 13, ), micro and small cross-border ecommerce players whose annual cumulative foreign exchange receipts or payments under trade in goods are below USD 200,000 (exclusive) can be waived of registering in the directory of enterprises with foreign exchange receipts and payments under trade ("directory registration"). Such players will be subject to supervision and inspection by the SAFE in compliance with laws.
VI. Reforming the external debt registration management
Non-banking debtors shall no longer be required to register external debt write-offs with local foreign exchange authorities. Instead, such registration by non-banking debtors can be done with the bank within the jurisdiction of the local SAFE branch (or foreign exchange administrative department). No time limit shall be set for such registration.
Non-financial companies shall no longer be required to go through transaction-by-transaction registration for external debt in pilot regions. In these regions, non-financial companies can register external debt amounting to two times its net assets with local foreign exchange authorities. Within that amount, such companies can borrow funds under external debt at their own discretion, directly go through inward and outward remittance or foreign exchange purchase and settlement with a bank and declare the balance of payments as required.
VII. Removing restrictions on the number of foreign exchange accounts opened under the capital account
Restrictions like "a maximum of three special external debt accounts for one transaction", "one special margin account for inward remittances from abroad per customer" and "one domestic asset realization account for one equity transfer per transferor" shall be removed. Market players shall be allowed to open more than one foreign exchange account under the capital account when necessary, provided that the prudent supervision requirements are met.
VIII. Optimizing reporting of foreign exchange under trade in goods
Enterprises shall no longer be required to report their business in the coaching period to the local foreign exchange authorities. Enterprises in the coaching period with unusual or suspicious foreign exchange receipts and payments under trade in goods shall be subject to monitoring, verification and standard classified management by the SAFE.
Trade credit and trade finance can be reported online through the monitoring system (enterprise end) for foreign exchange under trade in goods, with no need to visit and report to local foreign exchange authorities (excluding special businesses under different trading companies)
XI. Allowing discretion to open accounts pending verification for export revenues
For revenues under trade in goods, enterprises can open an account pending verification for export revenues ("account pending verification") at their discretion. If such an account is not opened, revenues under trade in goods that have been reviewed by the bank in compliance with existing regulations can be recognized into the foreign exchange account under the current account or be settled directly. The revenue declaration sheet for the account pending verification that is currently required to be submitted to the SAFE can be waived.
X. Facilitating the directory registration of branches and sub-branches
When applying for directory registration, alteration or deregistration, branches or sub-branches shall go through the procedures in accordance with the current requirements on enterprises as legal persons, by presenting the original or duplicates of their own business licenses, without the need to provide the Business License for Enterprises as Legal Persons.
XI. Expanding piloting for the transfer of domestic credit assets
Guided by the principles of risk controllability and prudent management, the scope of players that can participate in the transfer of domestic credit assets, the channels of transfer and the scope of credit assets that can be transferred, including banks' non-performing assets and trade finance, are allowed to be expanded in pilot regions.
XII. Allowing centralized management of their offshore funds by engineering contractors
By registering with the SAFE, engineering contractors can open an account for centralized funds management overseas in compliance with the laws and regulations of the country or region where the account is located. The receipts in the account shall include engineering payments from overseas project owners or domestic accounts, and from the same owner's other accounts for contracted engineering projects in the same country (region). The payments in the account shall include engineering receipts remitted back to China, relevant overseas engineering payments and funds transferred into the same owner's other accounts for contracted engineering projects in the same country (region).
This circular will become effective as of the date of issuance (Paragraph 2 of Article 8 will come into force as of January 1, 2020 as the monitoring system for foreign exchange under trade in goods needs upgrading).
This Circular shall prevail where there are inconsistencies between previous provisions and this Circular.
Upon receipt of this Circular, the branches and foreign exchange administrative 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 national China-funded banks should promptly forward it to the branches under their jurisdictions. Please report any problems encountered in the implementation to the SAFE in time.
Tel: 010-68402450, 68402163, 68402250
State Administration of Foreign Exchange
October 23, 2019