Notice of the State Administration of Foreign Exchange on Fu
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Notice of the State Administration of Foreign Exchange on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment (No. 13 [2015] of the State Administration of Foreign Exchange) The branches and foreign exchange administrative departments of the State Administration of Foreign Exchange (“SAFE”) of all provinces, autonomous regions, and municipalities directly under the Central Government; the SAFE branches in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo; and all designated Chinese-funded foreign exchange banks: To further deepen the reform of foreign exchange administration under capital accounts, enhance and facilitate fund operations in the cross-border investment of enterprises, regulate the foreign exchange administration of direct investment, and improve management efficiency, the SAFE decided to, on the basis of summarizing prior experience in the pilot operation in some areas, further simplify and improve policies for the foreign exchange administration of direct investment around the entire nation. The relevant matters are hereby announced as follows: |
| I. Canceling two administrative approval items: confirmation of foreign exchange registration under domestic direct investment and confirmation of foreign exchange registration under overseas direct investment, instead, banks shall directly examine and handle foreign exchange registration under domestic direct investment and foreign exchange registration under overseas direct investment (hereinafter collectively referred to as “foreign exchange registration of direct investment”) pursuant to this Notice and the Annex—Operating Guidelines for Foreign Exchange Business in Direct Investment, and the SAFE and its branch offices (hereinafter referred to as “foreign exchange authorities”) shall indirectly regulate the foreign exchange registration of direct investment through banks. |
| 1. After this Notice comes into force, banks that have obtained financial institution identification codes from foreign exchange authorities and have connected to the Capital Account Information System with the local foreign exchange authorities may directly handle the foreign exchange registration of direct investment for domestic foreign-funded enterprises and overseas enterprises' domestic investors (hereinafter referred to as “relevant market entities”) through the Capital Account Information System. |
| 2. Banks and the branch offices thereof shall engage in businesses related to the foreign exchange registration of direct investment under the guidance of local foreign exchange authorities, and shall fulfill approval, statistical monitoring and reporting and filing obligations within their extent of competence. |
| 3. Relevant market entities may choose to undergo the foreign exchange registration of direct investment with banks at their places of registration, and may not open relevant accounts, exchange funds and conduct other follow-up transactions (including the outward or inward remittance of profits and bonus) related to direct investment until they have undergone the foreign exchange registration of direct investment. |
| II. Simplifying the procedures for some foreign exchange transactions under direct investment |
| 1. Simplifying the registration procedure for confirmation of the capital contribution of foreign investors under domestic direct investment. The registration for confirmation of the non-cash capital contribution of foreign investors under domestic direct investment and the registration for confirmation of the capital contribution made by foreign investors for acquisition of the equity interests of the Chinese side shall be cancelled. The registration for confirmation of the capital contribution of foreign investors shall be changed into the entry registration of cash contribution under domestic investment. When a foreign investor makes capital contribution in monetary form (including cross-border foreign cash and RMB), the bank with which the account is opened shall directly enter the capital contribution under domestic direct investment into accounts through the Capital Account Information System of the foreign exchange authority after receiving relevant capital payments, and such capital may not be used until it has been entered into accounts. |
| 2. Canceling the foreign exchange recordation of overseas reinvestment. Overseas enterprises formed or controlled through overseas reinvestment by overseas enterprises formed or controlled by domestic investors do not need to undergo the foreign exchange recordation procedure. |
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3. Canceling the annual foreign exchange inspection of direct investment and replacing it by the registration of inventory interests. Relevant market entities shall, before or on September 30 of each year, file data about their inventory interests under domestic direct investment and/or overseas direct investment (hereinafter collectively referred to as “inventory interests under direct investment”) by the end of the last year through the Capital Account Information System of foreign exchange authorities either by themselves or through accounting firms or banks. For market entities that fail to undergo relevant procedures as required by the preceding paragraph, foreign exchange authorities will control their business operations through the Capital Account Information System, and banks shall not handle foreign exchange transactions under capital accounts for them. After they have made up the said procedures and produced covering letters to foreign exchange authorities to explain their justifiable reasons, foreign exchange authorities shall cancel the control over their business operations. Administrative punishments shall be imposed on those suspected of violating provisions on foreign exchange administration. Foreign-funded enterprises and other relevant market entities participating in the sampling investigation conducted by foreign exchange authorities on the inventory interests of direct investment shall file relevant information with the foreign exchange authorities at their places of registration on a quarterly basis in accordance with the requirements for the sampling investigation on the inventory interests of direct investment. |
| III. Banks shall improve their compliance awareness in handling the foreign exchange registration of direct investment |
| 1. Banks shall develop internal management rules for the foreign exchange registration of direct investment and retain them for future reference. Such internal management rules shall at the minimum contain the following: |
| (1) The operating procedures for the foreign exchange registration of direct investment, including the flows and operating standards for business acceptance, compliance and veracity examination of materials and other relevant operations. |
| (2) The risk management rules for the foreign exchange registration of direct investment, including compliance risk examination rules, review rules, and hierarchical examination rules. |
| (3) The statistical reporting rules for the foreign exchange registration of direct investment, including channels and operating procedures for gathering data. |
| 2. Banks shall, on their own, carry out access management for their branch offices that have obtained financial institution identification codes from foreign exchange authorities in the foreign exchange registration of direct investment. |
| 3. Banks shall, in strict accordance with the requirements of this Notice and the Annex—Operating Guidelines for Foreign Exchange Business in Direct Investment, seriously fulfill the veracity examination obligation, handle the foreign exchange registration of direct investment through the Capital Account Information System of foreign exchange authorities, and retain relevant registration materials in their integrity for future reference. |
| 4. Where, in the course of handling the foreign exchange registration of direct investment, a bank finds out that the governing provisions are ambiguous, the data is inaccurate or there is any other abnormal circumstance, it shall report the circumstance to the foreign exchange authority at the place of registration of the market entity concerned in a timely manner. |
| IV. Foreign exchange authorities shall strengthen training, guidance to and ex post supervision of banks |
| 1. Foreign exchange authorities shall strengthen training, guidance to and ex post supervision of banks so as to keep themselves informed of the banks' foreign exchange business for direct investment and filing of relevant data, statements and other materials, conduct ex post inspections and examinations of the compliance of the foreign exchange registration matters handled by banks and their implementation of internal control rules, fully know the foreign exchange registration as handled by banks for direct investment, report abnormal circumstances in a timely manner , and correct and handle violations in a timely manner. |
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2. For banks that fail to perform the examination, statistical and reporting responsibilities for the foreign exchange registration of direct investment, foreign exchange authorities shall impose punishments in accordance with relevant provisions on foreign exchange administration, and may also suspend them from handling the foreign exchange registration of direct investment. If the circumstances of a bank's violation are particularly serious or the bank fails to effectively rectify within the suspension period, the foreign exchange authority may disqualify the bank from handling the foreign exchange registration of direct investment. This Notice shall come into force on June 1, 2015. After this Notice comes into force, for any discrepancy between any previous provisions and this Notice, the latter shall prevail. Areas participating in the pilot program to reform the mode of management of the settlement of foreign exchange capital of foreign-funded enterprises shall continue to be governed by the willingness exchange settlement policy in accordance with the Notice of the State Administration of Foreign Exchange on Issues concerning Launching in Some Areas the Pilot Program to Reform the Mode of Management of the Settlement of Foreign Exchange Capital of Foreign-Funded Enterprises (No. 36 [2014], SAFE) and other relevant provisions. After receiving this Notice, all branches and foreign exchange administrative departments of the SAFE shall forward it to all central sub-branches, sub-branches, urban commercial banks, rural commercial banks, foreign-funded banks and rural cooperative banks within their respective jurisdictions, and all Chinese-funded banks shall forward it to all branch offices within their respective jurisdictions in a timely manner. If you encounter any problem in implementation, please report it to the Capital Account Management Department of the SAFE in a timely manner. Annex: Operating Guidelines for Foreign Exchange Business in Direct Investment State Administration of Foreign Exchange February 13, 2015 |
