FDI Rmb settlement details released

The PBoC has stated that foreign investors can apply for permits to make direct investments in China. Its regulations “form a permissive regime”, said the head of Allen & Overy's PRC regulatory practice, Jane Jiang. It merely requires that overseas investors adhere to certain formalities and does not impose substantive regulatory limitations.

Mofcom's rules outline restrictions on the usage of Rmb invested in cross-border transactions and may create a complicated situation for some overseas companies. “The prohibition of using such Rmb for entrustment loans is likely to cause a challenge for multinationals that seek to rely on intra-group funding or cash pooling arrangements onshore,” said Jiang.

Lawyers point out that the new PBoC regime overlaps with Circular 38 (the Circular on Matters concerning Regulating the Operation of Cross-border RMB Capital Account Business (关于规范跨境人民币资本项目业务操作有关问题的通知) ), which was issued by the State Administration of Foreign Exchange (Safe) in April. Circular 38 provides operating procedures on the account opening process for Rmb FDI. “The relevant parties should consider how to reconcile the two regimes,” said Jiang.

As a result of the promulgation of the new laws, market analysts predict there will be a new wave of dim sum bond issuances since the approval process for the repatriation of the proceeds will be more simplified. Issuers will be allowed more control over the timing of the issuance.

Jiang is also hopeful for increased activity on the funds front: “We expect to see more offshore funds – especially private equity funds – to be raised in Rmb in order to acquire equity stakes in onshore companies.” CM