State Administration of Foreign Exchange, Circular on Adjusting the Measures for the Administration of the Positions for Settlement and Sale of Foreign Exchange of Banks

Issued: September 22 2005
Effective: as of date of issue
Applicability: The term "consolidated positions for settlement and sale of foreign exchange" refers to foreign exchange positions resulting from transactions between renminbi and foreign currencies held by designated foreign exchange banks (hereafter, Banks). Such foreign exchange positions are formed from foreign exchange settlement and sale transactions for clients, Banks' own foreign exchange settlement and sale transactions and inter-bank foreign exchange market transactions handled by Banks in compliance with foreign exchange control provisions (Item One). In the event of a conflict between previous provisions and this Circular, this Circular shall prevail (Item 10).

Main contents: The State Administration of Foreign Exchange and its branches (hereafter, SAFE) shall, in accordance with such factors as the balance of payments position, volume of Banks' foreign exchange settlement and sale transactions, capital (or working capital) in renminbi and foreign currencies, and assets positions, approve Banks' consolidated positions for settlement and sale of foreign exchange, and implement quota control. At the current stage, the lower limit for the regulatory range of consolidated positions for settlement and sale of foreign exchange shall be set at zero, whilst the upper limit shall be that approved by SAFE (Item Two).
The control of consolidated positions for settlement and sale of foreign exchange of urban commercial banks, rural commercial banks, rural cooperative financial institutions and foreign-invested banks (branches of foreign commercial banks shall be deemed as legal persons) shall be carried out by branches and offices of the State Administration of Foreign Exchange (hereafter, SAFE Branches) at the place where such banks or financial institutions are located. Foreign commercial banks with two or more branches in China may, in accordance with the relevant provisions of State Administration of Foreign Exchange, Circular on the Centralized Administration of the Positions for Settlement and Sale of Foreign Exchange of Foreign-invested Banks in China, implement centralized administration on the consolidated positions for settlement and sale of foreign exchange of each of the branches in China. Consolidated positions for settlement and sale of foreign exchange of foreign-invested banks performing market maker functions in the inter-bank foreign exchange market shall, subsequent to preliminary examination by local SAFE Branches, be submitted to the State Administration of Foreign Exchange for central approval (Item Four). Foreign-invested banks that have not handled renminbi transactions shall, in accordance with the Implementing Rules on the Settlement, Sale and Payment of Foreign Exchange Businesses of Foreign-invested Banks, still be under the control on the balance of renminbi designated accounts for settlement and sale of foreign exchange. Foreign-invested banks shall, within one month from the date of approval by the China Banking Regulatory Commission for the handling of renminbi transactions, apply to SAFE for approval of the quota for the consolidated positions for settlement and sale of foreign exchange (Item Seven).
Related legislation: PRC Foreign Exchange Control Regulations (2nd Revision), Aug 5 2008, CLP 2008 No.8 p.77; Tentative Measures for the Administration of Foreign Exchange Settlement and Sale Business by Designated Foreign Exchange Banks, Nov 16 2002, CLP 2003 No.2 p.7; Circular on the Centralized Administration of the Positions for Settlement and Sale of Foreign Exchange of Foreign-invested Banks in China, Jul 12 2005, CLP 2005 No.9 p.7 and Implementing Rules on the Settlement, Sale and Payment of Foreign Exchange Businesses of Foreign-invested Banks, 1996
Repealed legislation: Circular on Strengthening the Administration on the Operating Quota for the Settlement and Sale of Foreign Exchange of Designated Foreign Exchange Banks, 1996; Urgent Circular on Reiteration of Proper Filling out of the and Amendment to the Relevant Record Filing Contents, 1998 and Circular on Issues Relevant to Adjustment to Statements on Positions for Settlement and Sale of Foreign Exchange, etc. of Banks, 2003