State Administration of Foreign Exchange, Circular on Further Promoting Convenience in Cross-Border Trade and Investment

Regions for pilot projects for facilitating trade-related foreign exchange receipts and expenditures will be expanded by supporting, on the basis of the pilot projects in the Guangdong-Hong Kong-Macao Greater Bay Area, Shanghai and Zhejiang in accordance with provisions, the carrying out of pilot matters such as optimizing the review of trade in goods-related foreign exchange receipt and expenditure documents, abolishing registration for special remittance refund matters, and simplifying the verification of foreign exchange payments in connection with imports in other regions.

2 .     Lifting of Restriction on Domestic Equity Investments by Non-Investment Type Foreign-Invested Enterprises Using Their Investment Capital

Provided that they do not violate the current Special Administrative Measures for Foreign Investment Access (Negative List) and that domestic projects invested in by them are genuine and compliant, non-investment type foreign-invested enterprises shall be permitted to engage in domestic equity investments using their investment capital, in accordance with the law and on the basis of investment-type foreign-invested enterprises (including foreign-invested companies with an investment nature, foreign-invested venture capital firms and foreign-invested equity investment enterprises) being permitted to engage in domestic equity investments using their investment capital in accordance with laws and regulations.

Where a non-investment type foreign-invested enterprise does an account transfer of investment capital in its original currency to engage in domestic equity investment, the investee entity shall, in accordance with provisions, carry out registration for the acceptance of domestic reinvestment and open an investment capital account to receive the funds, and shall not be required to carry out registration of the crediting to the account of a monetary capital contribution. If a non-investment type foreign-invested enterprise converts investment capital to engage in domestic equity investment, the investee entity shall, in accordance with provisions, carry out registration for the acceptance of domestic reinvestment and open a "capital account – conversion awaiting payment account" to receive the relevant funds.

3 .     Expanding the Pilot Project for Facilitating Payments from Income on the Capital Account

When a qualified enterprise in a pilot region uses income on the capital account, such as investment capital, foreign debt or proceeds from a foreign listing to make a domestic payment, it shall be exempted from providing to the bank in advance proof of genuineness for each payment, but its use of the funds shall be genuine and compliant, and comply with current provisions for the administration of the use of income on the capital account. Banks involved in the pilot project shall comply with business operation principles in managing and controlling the risks associated with pilot matters. Local foreign exchange authorities shall strengthen their monitoring, analysis and during-the-event and post-event oversight.

4 .     Relaxation of the Restrictions on the Use of Proceeds from the Conversion of Foreign Exchange Funds on the Capital Account

The restriction on the use of proceeds from the conversion of funds in domestic asset realization accounts is abolished. When a transferor of domestic equity that is being acquired through a direct foreign investment receives the equity transfer consideration from the foreign investor, it may carry out procedures for account opening, inward fund remittance and conversion for use directly with the bank on the strength of the relevant business registration document.

Relaxation of the restriction on the use and conversion of foreign investors' deposits. A foreign investor may, after completion of the transaction, directly use a deposit remitted inward from abroad or transferred in from a domestic account to make its lawful domestic capital contribution, a payment of consideration in or outside of China. The restriction forbidding the conversion of funds in a deposit account is abolished, and the direct conversion of, and payment from, the deposit once the transaction is completed or a deduction is made for a breach of contract are permitted.

6 .     Reform of the Administration of Enterprise Foreign Debt Registration

The administrative requirement that a non-bank debtor is obliged to carry out registration of the cancellation of a foreign debt with the foreign exchange bureau of the place where it is located is abolished, instead, non-bank debtors may directly carry out registration of the cancellation of a qualified foreign debt with a bank in the jurisdiction of the foreign exchange branch (office) where it is located. The time limitation on the carrying out of matters relating to registration of the cancellation of a foreign debt by non-bank debtors is abolished.

7 .     Lifting of the Restriction on the Number of Capital Account Foreign Exchange Accounts That Can Be Opened

Restrictions such as "a maximum of three dedicated foreign debt accounts may be opened for each foreign debt", "in principle, one account opening subject may open only one dedicated account for the inward remittance of an offshore deposit" and "the equity transferor to any one equity transfer transaction may open only one domestic asset realization account" are abolished. A relevant market entity may open multiple capital account foreign exchange accounts as actually required for its business, but the number of accounts opened shall comply with the requirements of prudent regulation.

8 .     Improving the Reporting Method for Trade in Goods-Related Foreign Exchange Transactions

The requirement that an enterprise report its transactions to the local foreign exchange bureau during its tutelage period is abolished. With respect to an enterprise in its tutelage period that has irregularities in, or suspicious, trade in goods-related foreign exchange receipts or expenditures, the foreign exchange bureau shall conduct focused monitoring and checking, and administer the same by class.

9 .     Relaxation of the Opening of Accounts for Export Income Awaiting Verification

When an enterprise carries out the procedures for trade in goods-related income, it may decide on its own initiative whether to open an account for export income awaiting verification (a Verification Awaiting Account). Where an enterprise has not opened such an account, its trade in goods-related income may, after review by the bank in accordance with current provisions, directly enter its current account foreign exchange account or be converted. Where, in accordance with current provisions, the submission of a Verification Awaiting Account income declaration form to the foreign exchange bureau is required, the enterprise may be exempted from the submission thereof.

11 .    Promotion of a Pilot Project for the Transfer of Domestic Credit Assets to Foreign Parties

In line with the principles of risk controllability and prudent regulation, pilot regions are permitted to expand the scope of subjects that participate in transfers of domestic credit assets to foreign parties and the transfer channels, and to expand the scope of credit assets that can be transferred to foreign parties, including non-performing bank assets and trade financing.

12 .    Project Contracting Enterprises Are Permitted to Centrally Manage Their Funds Offshore

Following registration with the foreign exchange bureau, a project contracting enterprise may open offshore an account for the centralized management of its funds, and such account shall comply with the laws and regulations of the country (or region) where the offshore account is located. The scope of the income of an offshore account for the centralized management of funds shall be relevant project moneys transferred in from offshore owners or from inside China, as well as funds transferred thereinto from other contracting project accounts opened in the same country (or region) by the same subject; the scope of the expenditures from such an account shall be project moneys remitted back to China, expenditures relating to offshore project moneys, as well as funds transferred therefrom into other contracting project accounts opened in the same country (or region) by the same subject.