Circular on Issues Relevant to Cross-border Direct Investment in Renminbi

(Issued by the Ministry of Commerce on, and effective as of, October 12 2011.)

Shang Zi Han [2011] No.889

Competent commerce departments of provinces, autonomous regions, municipalities directly under the central government, cities with independent development plans, the Xinjiang Production and Construction Corps, Harbin, Changchun, Shenyang, Jinan, Nanjing, Hangzhou, Guangzhou, Wuhan, Chengdu and Xi'an Municipalities, and state-level economic and technology development zones and border economic cooperation zones:

With a view to adapting to the development of the new situation, promoting the simplification of investment and improving the work of utilising foreign investment, we hereby, pursuant to relevant provisions, such as laws and regulations on foreign investment, notify you on matters relevant to cross-border direct investment in renminbi as follows:

1. For the purposes of this Circular, the phrase “cross-border direct investment in renminbi” means the activity whereby a foreign investor invests directly in China in accordance with the law with lawfully-obtained offshore renminbi.

2. For the purposes of this Circular, the term “offshore renminbi” means:

(1) renminbi that a foreign investor has obtained through cross-border trade settlement in renminbi as well as renminbi lawfully obtained in China as renminbi profit or as the result of an equity transfer, capital reduction, liquidation or early recovery of investment and remitted abroad; and

(2) renminbi obtained abroad by a foreign investor through legal means, including but not limited to that obtained through means such as renminbi-denominated bonds issued abroad and renminbi-denominated shares issued abroad.

3. Cross-border direct investment in renminbi and reinvestment by foreign-invested enterprises in which such investment has been made shall conform with the requirements of laws and regulations on foreign investment and relevant provisions, and comply with the state policy on foreign investment in industry and relevant provisions on security review of acquisition by foreign investors and anti-monopoly review.

4. Cross-border direct investment in renminbi may not be directly or indirectly used in China to invest in negotiable securities or financial derivatives (except as provided in Article 11 hereof) or used to make entrusted loans.

5. Competent commerce departments at every level shall examine and approve cross-border direct investments in renminbi in accordance with current provisions on the examination, approval and administration of foreign investment and within their purviews. In addition to submitting relevant documents in accordance with laws and regulations on foreign investment and relevant provisions, investors and foreign-invested enterprises shall submit the following documents to the competent commerce department:

(1) proof of the source of the renminbi funds or a document giving an account of the same;

(2) an account of the purpose to which the funds are to be put; and

(3) a Form of the Details of a Cross-border Direct Investment in Renminbi.

If in a cross-border direct investment in renminbi the original currency in which a capital contribution is made is to be changed from a foreign currency to renminbi, the same shall additionally be reported to the competent commerce department for its approval and, in addition to the aforementioned materials, the resolution of the board of directors or other such highest authority of the enterprise and the amended contract/articles of association (or amendment agreement) shall be provided.

6. The competent local commerce department shall input the Form of the Details of a Cross-border Direct Investment in Renminbi into the system for examination, approval and administration of foreign investment, and cross-border direct investments in renminbi to which the following circumstances apply shall be forwarded to the Ministry of Commerce for review after the competent provincial-level commerce department has affixed its stamp to the Form of the Details of a Cross-border Direct Investment in Renminbi:

(1) the amount of the capital contribution in renminbi is Rmb300 million or more;

(2) it is in the financing security, lease financing, micro-credit or auctioning industry or other such industry;

(3) it is in a foreign-invested company with an investment nature or foreign-invested venture investment or equity investment enterprise; or

(4) it is in an industry subject to macroeconomic control by the state, such as cement, iron and steel, electrolytic aluminum or shipbuilding.

7. The Ministry of Commerce shall complete its review or put forward its comments upon review within five working days after receipt of the Form of the Details of a Cross-border Direct Investment in Renminbi forwarded by the competent provincial-level commerce department. If the investment passes the review, the competent local commerce department may issue an official reply and shall issue an approval certificate of a foreign-invested enterprise.

8. The competent commerce department at the each level shall indicate the words “offshore renminbi capital contribution”, the amount of the capital contribution and the requirements of Article 4 hereof on its official reply for a cross-border direct investment in renminbi and add the words “offshore renminbi capital contribution” and the amount of the renminbi capital contribution in the space for remarks on the approval certificate of a foreign-invested enterprise.

9. The competent commerce department at each level shall send a copy of its official reply for a cross-border direct investment in renminbi to departments such as the People's Bank of China, customs, tax department, administration for industry and commerce and foreign exchange control department at the same level in a timely manner.

10. A cross-border direct investment in renminbi in the real property sector shall be handled in accordance with current provisions for the administration of the approval and record filing of foreign investment in real property. A successful record filing shall be posted on the website of the Ministry of Commerce (in the “Release of results” section of the Department of Foreign Investment Administration sub-site of www.mofcom.gov.cn). In accordance with relevant administrative provisions, the foreign-invested enterprise shall carry out relevant procedures on the strength of the information posted on the Ministry of Commerce's website (which can be accessed by logging onto the site), the official reply document from the competent commerce department and the approval certificate of a foreign-invested enterprise.

11. If a foreign investor wishes to use lawfully obtained offshore renminbi to participate in a private placement of shares or a transfer by agreement of shares of a listed company in China, it shall carry out the relevant examination and approval procedures with the Ministry of Commerce in accordance with the requirements of the Measures for the Administration of Strategic Investments in Listed Companies by Foreign Investors.

12. If a foreign investor directly invests renminbi profit derived from a foreign-invested enterprise that it has invested in in China but which profit it has not remitted outward, or renminbi derived from an equity transfer, capital reduction, liquidation or early recovery of investment of the foreign-invested enterprise, matters shall continue to be handled in accordance with relevant provisions.

13. At the time of the joint annual inspection of foreign-invested enterprises, competent commerce departments at every level shall inspect cross-border direct investments in renminbi by referring to Article 4 hereof.

14. This Circular shall apply mutatis mutandis to cross-border direct investments in renminbi by investors from Taiwan, Macao and Hong Kong.

15. The requirements for business statistics on cross-border direct investments in renminbi will be specified in a separate circular.

16. This Circular shall be effective as of the date of issuance. In the event of a discrepancy between this Circular and previous provisions of the Ministry of Commerce on cross-border direct investment in renminbi, this Circular shall prevail.

With a view to promoting the compliant and healthy development of cross-border direct investment in renminbi, the competent provincial-level commerce departments are asked to transmit the requirements of this Circular to the competent commerce departments at each level in their jurisdictions and strengthen their examination, approval and oversight work. If an issue arises in the course of implementation, please do not hesitate to contact the (Department of Foreign Investment Administration of the) Ministry of Commerce and communicate the relevant circumstances to it.

Attachment

跨境人民币直接投资情况表