People's Bank of China, Circular on Clarifying Issues Relevant to Cross-border Renminbi Transactions

Main contents: The Circular states that banks may issue letters of guarantee in renminbi (Rmb) for clients on the contracting of overseas projects, overseas construction projects and cross-border financing. The letters of guarantee in Rmb issued by banks and the balance of Rmb settlement bank accounts of overseas organisations shall not fall under the scope of the existing foreign debt control (Articles 6 and 7). Entrepôt trade may be settled in Rmb (Article 8).

At the moment, projects that fall under the state's restricted category and key macroeconomic control category shall not be eligible for the pilot project for Rmb settlement of foreign direct investment. To regulate foreign investors' investment in China using lawfully derived Rmb during the pilot period, including capital contribution for newly-established enterprises, acquisition of domestic enterprises (excluding round-trip acquisition), equity transfer as well as capital increase in the current enterprise and provision of loans to shareholders, Rmb settlement of foreign direct investment in the non-financial sector shall be conducted according to the specified workflow (Article 14).

Related legislation: Measures for the Administration of Pilot Projects for Cross-border Trade Settlement in Renminbi, Jul 1 2009, CLP 2009 No.6 p.46; and Measures for the Administration of Pilot Projects for Settlement of Overseas Direct Investment in Renminbi, Jan 6 2011