State Administration of Foreign Exchange, Circular on the Operating Guidelines for Issues Relevant to Requests for Confirmation of Capital Verification Required in the Re-investment of Foreign-invested Companies with an Investment Nature

Main contents: According to the Circular, when a foreign-invested company with an investment nature re-invests lawful income derived in China (including renminbi profits, capital reductions, liquidation, capital withdrawals, equity transfers, early investment recovery or other lawful income) in an enterprise in China, the exchange control bureau of the place where the company is located shall first issue a capital-account foreign exchange transaction approval document for a foreign investor increasing the registered capital of the company using renminbi profits or other such lawful income derived in China (Article 1). After the foreign-invested company with an investment nature has converted the lawful income derived in China into an increment in registered capital, it may re-invest the same in an enterprise in China (Article 2).

When an enterprise in China in which a foreign-invested company with an investment nature has re-invested wishes to remit foreign exchange profits back to the said company, it may carry out the transfer procedures directly with a designated foreign exchange bank on the strength of the Foreign Exchange Registration Certificate for a Foreign-invested Enterprise, profit distribution resolution of the board of directors and proof of tax payment (Article 6).

Related legislation: Supplementary Provisions on the Investment in, and Establishment of, Companies with an Investment Nature by Foreign Investors, May 26 2006, CLP 2006 No.7 p.68