People's Bank of China, Announcement [2006] No.5

(Issued by the People's Bank of China on April 13 2006.)

With a view to intensifying the reform of the foreign exchange control system, supporting the simplification of trade and investment, further nurturing the foreign exchange market and promoting a basic balance in international receipts and payments, we hereby announce, after approval by the State Council, the following matters concerning the revision of certain foreign exchange control policies:

1. The system for opening, amending and closing current account-related foreign exchange accounts by enterprises shall be changed from one requiring advance examination and approval to one in which matters shall be handled directly by banks in line with foreign exchange control requirements and commercial practice and reported to the foreign exchange bureau for the record. The limits on current account-related foreign exchange accounts of enterprises shall be increased. Enterprises that have a genuine trading background and a need to make payments to foreign parties shall be permitted to purchase foreign exchange in advance.

2. Foreign exchange sale and payment vouchers for trade in services shall be simplified and the authority for examination shall be delegated downward.

3. The procedures for the purchase of foreign exchange by individual residents in China shall be further simplified, the limit on such purchases shall be increased and control of the total annual amount of foreign exchange purchased shall be implemented. When an individual wishes to purchase foreign exchange within the limit, he/she shall do so at a bank on the strength of his/her genuine proof of identity and shall declare the purpose of such foreign exchange. If an individual wishes to purchase foreign exchange in excess of the limit, the bank shall, after examining the relevant documents, provide the foreign exchange as actually required.

4. Overseas foreign exchange financial management services by domestic banks for their customers shall be expanded. Qualified banks shall be permitted to pool the renminbi denominated funds of organizations and individuals in China, purchase foreign exchange within a certain limit and invest the same overseas in fixed return products.

5. Qualified fund management companies and other such securities institutions shall be permitted to pool own foreign exchange of organizations and individuals in China within a certain limit and use the same for securities portfolio investment overseas, including investment in stocks.

6. Investment in securities overseas by insurance institutions shall be expanded. Qualified insurance institutions shall be permitted to purchase foreign exchange and invest the same overseas in fixed return products and money market instruments. The amount of foreign exchange that may be purchased shall be kept below a certain percentage of the total assets of the insurance institution.

The People's Bank of China together with the relevant departments shall arrange for the separate implementation of each of the foregoing policy measures at the appropriate time. Additionally, it shall closely track and analyze the international balance of payments, revise the relevant policies in a timely manner and duly guard against risks so as to safeguard the economic and financial security of the state.