State Administration of Foreign Exchange, Circular on Issues Relevant to Delegating the Examination and Approval Authority Regarding Foreign Exchange Transactions of Some of the Capital Account Items

Issued: August 25 2005

Main contents: According to the Circular, the following are now subject to the examination and approval of the local branches of the State Administration of Foreign Exchange (SAFE):
(1) all forms of security to foreign entities (including security for housing mortgages of foreign entities with overseas institutions or overseas natural persons as the secured parties) other than security to overseas institutions (Item One);
(2) purchase of foreign exchange to replenish foreign exchange capital funds (or foreign exchange working capital), settlement of foreign exchange profits and settlement of foreign exchange capital funds (or foreign exchange working capital) in excess of the required amount by securities companies, trust and investment corporations, finance companies of enterprise groups and lease financing companies engaging in foreign exchange business (Item Three); and
(3) application for allocation of the reduced holding of foreign exchange income to the National Social Security Fund by domestic work units whose equity interests are held by offshore listed companies with foreign-invested shares and offshore Chinese-controlled listed companies (Item Four).
Where an offshore listed company with foreign-invested shares repurchases its own tradable shares listed offshore and it involves the examination and approval for the purchase and payment of foreign exchange and the opening of an offshore account, it shall be subject to the examination and approval of the local SAFE branch if the amount of purchase and payment of foreign exchange is less than US$25 million and subject to the examination and approval of SAFE through the local SAFE branch if the amount of purchase and payment of foreign exchange is US$25 million or more (Item Two). The limit of designated foreign exchange accounts of foreign investors (payment accounts) shall be adjusted from the previous US$100,000 to either US$100,000 or 5% of the total investment amount approved by the competent investment department; and the valid period of the account shall be extended from the previous three months to six months (Item Five). The examination and approval method for external transfer of personal property with a value exceeding the equivalent of Rmb500,000 will also be simplified (Item Six).
Related legislation: Administrative Licensing Law, Aug 27 2003, CLP 2003 No.7 p.7; Provisions for the Administration of the Settlement, Sale and Payment of Foreign Exchange, Jun 20 1996, CLP 1996 No.8 p.39 and Operational Rules for Foreign Exchange Transactions of Capital Account Items