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    Q: What rules have been issued regarding administration of the accounts, utilisation of funds and settlement and sale of foreign exchange of foreign debts?

      According to the application by Non-bank Debtor, banks may directly open and close foreign debts accounts and go through formalities for withdrawal, settlement and sale of foreign exchange and repayment of foreign debts after performing necessary examination procedures.

       

      The funds of foreign debts borrowed by foreign-invested enterprises may be used for settlement of foreign exchange. Unless otherwise provided, the funds of foreign debts borrowed by domestic financial institutions and Chinese-funded enterprises may not be used for settlement of foreign exchange.

       

      When dealing with the settlement of foreign exchange for funds of foreign debts, the debtor shall follow the principle of actual needs and directly go through the formalities with the banks upon the strength of the required certification documents.

       

      Banks shall go through the formalities for settlement of foreign exchange for the debtor after examining the certification documents in accordance with relevant regulations.

    Related FAQs From the topic Foreign Exchange

    • 1.What system does China have regarding foreign exchange (FOREX) control?


      China’s current FOREX control system was first introduced in 1996. According to this system, all FOREX transactions are classified into two categories: capital account items and current account items.

       

      Capital account items are capital inflow or outflow transactions which serve either to increase or decrease a company’s debt or equity, including foreign direct investment, all types of loans, loan-related security transactions and securities investments. All capital account transactions are subject to approval by the State Administration for Foreign Exchange (SAFE).

       

      Current account items are transactions of an ordinary recurrent nature, including payments for foreign trades and services and interest payments for FOREX debts.

    • 2.What does the abbreviation SAFE stand for?


      SAFE is the State Administration for Foreign Exchange. SAFE creates balance sheets for international payments, recommends exchange rate policies and recommends policies for balancing international payments. SAFE also regulates foreign exchange and standardises the FOREX (Foreign Exchange) market. It regulates remittances, forecasts supply and demand and oversees FOREX reserves.

    • 3.How is China reforming its foreign exchange control regulations?


      Following the relaxation of foreign exchange restrictions in the last decade, the State Administration of Foreign Exchange (SAFE) issued the Administrative Regulations of the People’s Republic of China on Foreign Exchange in 2008. In recent years, SAFE has further liberalised foreign exchange control and also simplified the related procedures to improve efficiency.

    • 4.How SAFE controls foreign exchange on Current Accounts?


      Current account foreign exchange income may, in accordance with relevant provisions of the state, be retained or sold to any financial institution engaged in foreign exchange settlement and sales business.

       

      Foreign exchange payments from current accounts, shall be in accordance with the State Council Foreign Exchange Administrative Department’s provisions relating to foreign exchange payments and purchases, be made out of one’s own foreign exchange funds on the strength of valid documents or be made with foreign exchange purchased from any financial institution engaged in foreign exchange settlement and sales business.

    • 5.How SAFE controls foreign exchange on Capital Accounts?


      Any foreign organisation or individual that seeks to make a direct investment in China, must first obtain approval from the relevant competent department prior to making the appropriate registrations with the relevant foreign exchange administrative authority.

       

      Any foreign organisation or individual that seeks to engage in the issuance or trading of negotiable securities or derivatives shall comply with state provisions relating to market access and shall make the appropriate registrations in accordance with the State Council foreign exchange administrative department provisions.

       

      The state exercises scale management on the administration of foreign debts. Foreign currency borrowings shall be handled in accordance with relevant provisions of the state and registered as foreign debts with the relevant foreign exchange administrative authority.

       

      The State Council foreign exchange administrative department shall be responsible for the compilation of China’s foreign debt statistics and shall periodically publish foreign debt information.

    • 6.What is the requirement for SAFE registration to open a Capital Account?


      After being issued a Corporate Legal Person Business Licence, a foreign-invested enterprise (FIE) must apply for registration of foreign exchange with SAFE at the place of its business registration. They must present their FIE Background Information Registration Form, official approval documents and a Certificate of Establishment of the FIE, a Corporate Legal Person Business Licence issued by the State Administration for Industry and Commerce, approved valid articles of association and other documents as required by SAFE.

    • 7.What were the rules on the registration of FOREX debts?


      The latest regulation of FOREX debts and Administrative Measures for Registration of Foreign Debts, was issued by National SAFE and came into effect on May 13, 2013.

    • 8.What rules have been issued regarding foreign debts registration?


      Foreign debt registration states that the debtor shall register or report the information on the signing of contracts, withdrawal, repayment, settlement and sale of foreign exchange for foreign debts with and to the local Foreign Exchange Bureau pursuant to the required method.

       

      In case of any change to the foreign debt loan contract, the debtor shall go through the formalities for registration of any change in foreign debt contract with the Foreign Exchange Bureau as required.

       

      Where the outstanding foreign debts balance is zero and the debtor has no more withdrawal, the debtor shall go through the formalities for foreign debt cancellation with the Foreign Debt Bureau as required.

    • 9.What is the registration process for Foreign Debts?


      The registration process for Foreign Debts is as follows:

       

      1) SAFE Registration for a Foreign Debts Certificate, Foreign Debts Statement and Bank Opening Approval

       

      2) Foreign Debt Account opening in bank.

       

      3) Fund injection into China.

    • 10.How can FIEs use the capital in cash?


      The Types of Capital Conversion are as follows:

       

      a) Reserve Settlement (equivalent to USD 50,000 or less)

       

      b) Large Settlement

       

      For Capital Settlement, the enterprise needs to provide the necessary documents to the bank. Such as the SAFE IC card, a letter of payment order for the RMB funds derived from its capital settlement, certificates demonstrating the purposes for which RMB funds derived from the capital settlement are to be used and the most recent capital verification report, etc.

       

      Where the settlement is to be made for the reserve funds of a foreign-invested enterprise equivalent to USD 50,000 or less, the enterprise may directly go through the settlement procedure with respect to the accrued interests to its capital account using the relevant interest bill issued by any of the banks.

       

      The Large Settlement should be transferred to the payee’s bank account directly after submitting the application documents. However, the Reserve Settlement with the amount of USD 50,000 or less is allowed to be transferred and kept in a basic RMB bank account.

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