Foreign Currency Debt and Conversion Controls Tightened for Strong RMB Era

July 02, 2004 | BY

clpstaff &clp articles

The State Administration of Foreign Exchange has issued a new circular that aims to tackle both FIE debts and speculative inflows of foreign capital.

By Neal Stender, Sherry Yin & Jiaolin Song, Coudert Brothers, Hong Kong, Beijing and Shanghai

Tighter restrictions on foreign debts of foreign-invested enterprises (FIEs) are now being implemented, and "hot money" inflows into RMB1 are now subject to as many restrictions as "capital flight" outflows.2

These changes are set out in the Improving the Verification of Foreign Exchange Settlement for Capital Account Items and Administration of Foreign Debt Registration of Foreign-invested Enterprises Circular (the 2004 Debt Circular), issued by the State Administration of Foreign Exchange (SAFE) on May 17 2004 and effective from July 1 2004.

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