Laws of the People's Republic of China

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange (SAFE) on Further Adjusting Policies on the Administration of Foreign Exchange Accounts Under Current Account

HuiFa [2002] No.87

September 9, 2002

SAFE branches in all provinces, autonomous regions, municipalities directly under the Central Government, exchange administration offices, and SAFE branches in the cities of Shenzhen, Dalian, Qingdao, Xiamen, Ningbo, head offices of all designated Chinese-funded foreign exchange banks:

In order to adapt to new circumstances after China's entry into the WTO, further improve the foreign exchange administration under current account, lower enterprises' operational costs, and promote the development of foreign trade and economic cooperation, the SAFE has decided to adjust policies on the administration of foreign exchange accounts under current account. A circular on relevant issues is given hereunder:

1.

Further lower the threshold for Chinese-funded enterprises to open foreign exchange accounts, unify the requirements for opening foreign exchange accounts under current account for both Chinese-funded and enterprises with foreign investment. Any domestic entity authorized by or put on record in the competent administration agency to conduct foreign business or having foreign exchange proceeds under current account (including enterprise with foreign investment) may apply to the SAFE office in its locality for opening a foreign exchange account under current account.

2.

The existing foreign exchange settlement account under current account and special foreign exchange account of an enterprise shall be consolidated into a foreign exchange account under current account. Foreign exchange account under current account shall be credited with foreign exchange proceeds from current transactions and debited with foreign exchange payments for current transactions and payments for capital transactions approved by a SAFE office.

3.

Balance ceiling shall be set for all foreign exchange accounts under current account. The balance ceiling of a domestic entity's foreign exchange account under current account shall be 20 percent of the amount of its foreign exchange proceeds from current transactions for the previous year in principle. If an entity that has no foreign exchange proceeds under current account for the previous year opens a new foreign exchange account under current account, the initial balance ceiling shall not exceed the equivalent of US$100,000 in principle.

SAFE offices in all localities have the right to appropriately adjust the balance ceilings of foreign exchange accounts under current account of domestic entities under their jurisdiction in accordance with the business characteristics and actual needs of the entities and the regional grand total quota ratified by the SAFE, provided that the total of the balance ceilings of all the domestic entities' foreign exchange accounts under current account do not exceed the regional quota.

4.

Foreign exchange settlement accounts and special foreign exchange accounts opened before the implementation of this circular may be used in accordance with the original scope of receipts and payments and balance ceiling. However, domestic entities shall go through procedure of consolidating the accounts and deciding the new balance ceilings at the SAFE offices in their localities before December 31, 2003.

SAFE offices in all localities may schedule the account consolidation and new balance ceiling ratification for domestic entities in their respective localities before December 31, 2003 in accordance with their supervision ability and the local conditions.

5.

Employment of the management information system for foreign exchange account (hereinafter referred to as "MIS") shall be energetically prompted. In areas where the MIS has been used and supervision over foreign exchange account under current account has been exercised through the MIS, the SAFE offices there may take flexible measures in supervising foreign exchange account under current account, such as further loosing the restriction on the number of foreign exchange accounts under current account, making no more annual inspection on foreign exchange accounts under current account, giving up the requirement on banks to submit paper-made statements related to foreign exchange accounts under current account.

6.

This circular shall be implemented as from October 15, 2002. For matters clearly stipulated in this circular, this circular shall be followed, otherwise, current rules on the administration of foreign exchange account shall be followed.

On receiving this circular, all SAFE branches shall immediately transmit it to the sub-branches and foreign-funded banks under their jurisdiction. Head offices of all designated Chinese-funded foreign exchange banks shall transmit it to their branches and sub-branches as soon as possible. Any problem encountered during the implementation shall be reported in time to the Current Account Management Department of the SAFE.

Attachment:

Detailed Implementing Rules on the Administration of Domestic Entities' Foreign Exchange Accounts under Current Account Attachment:Detailed Implementing Rules on the Administration of Domestic Entities' Foreign Exchange Accounts under Current Account

Chapter I General Provisions

Article 1

In accordance with Regulations on the Exchange System of the People's Republic of China, the Rules on the Administration of Domestic Foreign Exchange Accounts, and the Circular on Further Adjusting Policies on the Administration of the Foreign Exchange Accounts Under Current Account, this Rules is enacted for the purpose of satisfying the needs of the new circumstances after China's entry into the WTO, lowering enterprises' operational costs, and further improving foreign exchange administration under current account.

Article 2

Domestic entities in this Rules refer to government agencies, enterprises and institutions, social organizations, and armed forces etc., including enterprises with foreign investment but not financial institutions.

Chapter II Opening and Use of a Foreign Exchange Account under Current Account

Article 3

A domestic entity satisfying either of the two conditions listed below may apply for opening a foreign exchange account under current account at the SAFE office in its locality.

1.

Authorized by or put on record in a competent administration agency to run foreign business or having foreign exchange proceeds under current account;

2.

Having foreign exchange proceeds from special sources and for prescribed purposes, such as donation, aid, and international postal remittance.

Article 4

A foreign exchange account under current account shall be credited with foreign exchange proceeds from current transactions and debited with foreign exchange payments to current transactions and payments under capital account approved by a SAFE office.

The scope of receipts and payments of a foreign exchange account under current account with special sources of proceeds and prescribed purposes, such as donation, aid, and international postal remittance shall be checked and ratified in accordance with related contract or agreement.

Article 5

A domestic entity shall apply to the SAFE office in its locality for opening a foreign exchange account under current account by presenting the materials listed below:

1.

A written application for the opening of a foreign exchange account under current account;

2.

The original and a photocopy of the business license or certificate of corporation registration;

3.

The original and a photocopy of the permit of foreign business issued by the competent administration agency, or the Certificate of Registration of enterprise with foreign investment (hereinafter referred to as Certificate of Registration) (see attachment 1), or evidential materials for the foreign exchange proceeds under current account (such as memo of foreign exchange sale);

4.

The original and a photocopy of the certificate of institutional identification code;

5.

Other materials required by the SAFE office.

Article 6

The SAFE office shall examine the materials submitted by the applying domestic enterprise, and issue a "Certificate of Approval for Opening a Foreign Exchange Account under Current Account" (hereinafter referred to as "Approval for Opening an Account" or AOA) (see attachment 2).

Article 7

When approving the application by a domestic entity for opening an account, the SAFE office shall prescribe the balance ceiling of the foreign exchange account under current account, and record it in the AOA.

Article 8

Balance ceiling of a domestic entity's foreign exchange account under current account shall be 20 percent of the amount of its foreign exchange proceeds from current transactions in the previous year.

Balance ceiling of a foreign exchange account under current account for earmarked proceeds from special sources, such as donation, aid, and international postal remittance shall be 100 percent of the amount of the foreign exchange proceeds from the aforesaid special sources.

The SAFE office may prescribe an initial balance ceiling up to the equivalent of USD100,000 for the foreign exchange account under current account opened by a qualified domestic entity that does not have foreign exchange proceeds under current account in the previous year.

The SAFE may adjust the criteria for prescribing balance ceilings of domestic entities' foreign exchange accounts under current account.

Article 9

The balance ceiling of a foreign exchange account under current account of a domestic entity shall be prescribed exclusively in US dollar. Balance ceiling of such account in other currencies shall be converted into US dollars by the SAFE office at applicable internal converting rate on the date when the account is opened.

Article 10

The SAFE shall prescribe a regional grand quota for balance ceilings of foreign exchange accounts under current account for each SAFE branch in January of every year in accordance with foreign exchange proceeds under current account reflected in the BOP statistical reporting for the previous year submitted by the branch. The regional grand quota shall be 25 percent of the region's foreign exchange proceeds under current account in the previous year.

The SAFE may adjust the criteria for prescribing the regional grand quota in accordance with the development of balance of payments of China.

Article 11

A SAFE office may adjust upward or downward once a year in principle the balance ceiling of the foreign exchange account under current account of a domestic entity in accordance with the regional grand quota prescribed by the SAFE, the local actual situation, and real need of the domestic entity if the entity's foreign exchange proceeds has changed significantly, provided that the total of the balance ceilings of all the domestic entities' foreign exchange accounts under current account does not exceed the regional grand quota prescribed by the SAFE.

Article 12

A domestic entity shall open a foreign exchange account under current account at a bank or other kind of financial institution conducting foreign exchange business (hereinafter referred to as "account opening financial institution" or AOFI) by presenting the AOA issued by a SAFE office.

After opening a foreign exchange account under current account for a Chinese-funded domestic entity, the AOFI shall record the account number, currency, date of opening, and balance ceiling in corresponding columns of the "AOA", and return to the Chinese-funded entity the fourth copy of the "AOA". The Chinese-funded domestic entity shall present the fourth copy of the "AOA" to the SAFE office in the locality where the account has been opened, and apply for a Certificate for the Use of Foreign Exchange Account (see attachment 3) within 10 working days after the date of opening the account.

After opening a foreign exchange account under current account for an enterprise with foreign investment, the AOFI shall record the account number, currency, date of opening, and balance ceiling in corresponding columns of the Certificate of Registration and the "AOA". The AOFI shall send the fourth copy of the "AOA" to the SAFE office in the locality where the account has been opened within the first 5 working days of the succeeding month.

After opening a foreign exchange account under current account for a domestic entity, the AOFI in an area where the MIS has been employed and supervision over foreign exchange account under current account is exercised through the MIS (hereinafter referred to as MIS area) shall report the information of account opening to the SAFE office in accordance with the Standard on the Interface between the MIS and Data of designated foreign exchange banks. The AOFI needs not to return the fourth copy of the AOA to the Chinese-funded domestic entity; and the Chinese-funded domestic entity needs not to apply for a Certificate for the Use of Foreign Exchange Account.

Article 13

A domestic entity can only open one foreign exchange account under current account in principle. Separate approval of the SAFE office is not needed for opening a foreign exchange account under current account in a different currency in the same bank.

In an MIS area, a qualified domestic entity may apply to the SAFE office for opening two or more foreign exchange accounts under current account in accordance with its actual need. There is no restriction on the number of accounts and the choice of AOFI. The AOFI shall open account for the domestic entity in strict accordance with rules and transmit the information of account opening to the SAFE office concerned via the MIS.

In case a domestic entity opens accounts in two or more currencies, or opens two or more accounts under current account, the SAFE office shall prescribe a separate balance ceiling for every account under current account in every currency. The specific breakdown of its prescribed balance ceiling may be decided by the domestic entity on its own, provided that the total of the balance ceilings of all its accounts under current account do not exceed its prescribed balance ceiling.

Article 14

A domestic entity may either enter its foreign exchange proceeds from current transactions into its foreign exchange account under current account or sell them to the bank. Once the balance of the foreign exchange account under current account exceeds the ceiling, the surplus shall be sold to the bank.

Article 15

If the balance of a domestic entity's foreign exchange account under current account exceeds the ceiling, the AOFI shall inform the entity to sell the surplus in good time. IF the domestic entity fails to go through the procedure of selling the surplus in good time, the AOFI has the right to compulsively exchange the surplus into renminbi in 10 working days after the occurrence of the excess, and inform the domestic entity in 5 working days after the exchange.

Article 16

A domestic entity shall, in principle, not transfer its deposits in the foreign exchange account under current account into time deposit. If the transfer is indeed necessary, the entity shall apply for it to the SAFE office in the locality where the account is opened by presenting a written application, the Certificate for the Use of Foreign Exchange Account or the Certificate of Registration, the original AOA, and account statement. Time deposit transferred from the foreign exchange account under current account shall be included in calculating the balance ceiling of the source account under current account.

In an MIS area, a domestic entity may transfer its deposits in foreign exchange account under current account into time deposit with the same AOFI. The time deposit shall be included in calculating the balance ceiling of the source account. The AOFI shall send the information on the account opening for the time deposit to the local SAFE office in accordance with the serial number of the original AOA for the source account.

Article 17

Transfer of foreign exchange funds between foreign exchange accounts under current account of the same nature opened by a domestic entity with different AOFIs is permitted.

Chapter III Change of a Foreign Exchange Account under Current Account

Article 18

If a domestic entity needs to change the name of account holder or adjust the balance ceiling as required by business after opening a foreign exchange account under current account, it shall apply to the SAFE office in the locality where the account has been opened by presenting a written application, the Certificate for the Use of Foreign Exchange Account or the Certificate of Registration, the original AOA, and account statement. Then the change shall be made at the AOFI by presenting the Certificate of Approval for Change of Account (see attachment 4) issued by the said SAFE office. After handling the change, the AOFI shall send the fourth copy of the Certificate of Approval for Change of Account to the said SAFE office in the first 5 working days of the succeeding month.

Article 19

If a domestic entity needs to open a foreign exchange account under current account outside its locality of registration as required by business, it shall report to the SAFE office in its locality of registration for record, and apply to the SAFE office in the locality where the account is going to be opened by presenting the Certificate for Outside Account Opening (see attachment 5) issued by the former SAFE office and documents stipulated in Article 5 of this Rules, and then handle the procedure of opening the account at an AOFI by presenting the AOA issued by the latter SAFE office. The latter SAFE office shall promptly inform the former SAFE office in written form of the account opened.

A domestic entity's foreign exchange account under current account opened outside its locality of registration shall be supervised by the SAFE office in the locality where the account is opened. The balance ceiling of the outside account shall be prescribed by this SAFE office in accordance with the entity's foreign exchange proceeds reflected in the local BOP statistics reporting for the previous year; and be included in calculating the balance ceiling of the region where the account is opened.

Chapter IV Closure and Cancellation of a Foreign Exchange Account under Current Account

Article 20

If a domestic entity wants to close a foreign exchange account under current account, it shall apply to the SAFE office, and handle the closing procedure by presenting the "Certificate of Approval for Account Closing" (see attachment 6) issued by the SAFE office. After closing the foreign exchange account, the AOFI shall send the fourth copy of the said Certificate to the SAFE office in the locality where the account was opened within the first 5 working days of the succeeding month.

After an outside foreign exchange account of a domestic entity is closed, the SAFE office in the locality where the account was opened shall inform in time the SAFE office in the entity's locality of registration of the closure of the account in written form.

If a domestic entity holds another foreign exchange account under current account of the same nature as the closed one, balance in the closed account may be transferred to that account. If there is no account of the same nature, balance in the closed account shall be sold.

Article 21

If a domestic entity's foreign exchange account under current account has neither receipts nor payments in one year after it is opened, the AOFI shall report the case to the local SAFE office in January of the succeeding year. The SAFE office shall issue a "Notice for the Cancellation of Account" (see attachment 7) to the entity and to the AOFI simultaneously.

The domestic entity shall go to the AOFI to handle the account closing procedure within 5 working days after receiving the said Notice. If the entity fails to do so beyond the time limit, the AOFI may compulsively close the account and exchange the account balance into renminbi 5 working days after receiving the said Notice. Renminbi from the exchange shall be dealt with in accordance with relevant stipulations of the People's Bank of China. After closing the account, the AOFI shall send the fourth copy of the "Notice for the Cancellation of Account" to the SAFE office in the locality where the account was opened within the first 5 working days of the succeeding month.

Article 22

Once the balance of a foreign exchange account under current account opened by a domestic entity with earmarked proceeds from special sources such as donation, aid, and international postal remittance comes to zero, the account shall be closed in accordance with Article 20 of this Rules.

Chapter V Supervision over a Foreign Exchange Account under Current Account

Article 23

An AOFI shall submit to the SAFE office "Monthly Statement of Domestic Entities' Foreign Exchange Accounts under Current Account" (see attachment 8) for the previous month within the first 5 working days of every month. All SAFE branches shall collect the "Monthly Statement of Domestic Entity's Foreign Exchange Account under Current Account" submitted by SAFE offices under their respective jurisdiction and then present itemized reports to the SAFE within the first 10 working days of every month.

AOFIs in MIS areas shall transmit to SAFE offices the information on foreign exchange accounts under current account via the MIS on a daily basis. AOFIs and SAFE offices there do not have to submit the statement stipulated in the previous paragraph.

Article 24

SAFE offices shall conduct annual inspection on the foreign exchange accounts under current account of the domestic entities under their respective jurisdiction Annual inspection shall not be conducted on foreign exchange accounts under current account of domestic entities in MIS areas.

Article 25

If a domestic entity that has not opened a foreign exchange settlement account or special account under current account before the implementation of this Rules applies for the opening of a foreign exchange account under current account after the implementation of this Rules, the SAFE office concerned shall approve its application in accordance with this Rules and prescribe a balance ceiling for its account.

If a domestic entity that has opened a foreign exchange settlement account and special account under current account before the implementation of this Rules applies for the opening of a foreign exchange account under current account after the implementation of this Rules, the SAFE office concerned shall consolidate its settlement account and special account in accordance with this Rules, approve its application for opening account, and prescribe a balance ceiling for the account ratified.

If a domestic entity that has opened a foreign exchange settlement account and special account under current account before the implementation of this Rules does not apply for opening a foreign exchange account under current account after the implementation of this Rules, its foreign exchange settlement account and special account may be used in accordance with the original scope of receipts and payment and balance ceiling until December 31, 2003.

SAFE offices may schedule the account consolidation and balance ceiling ratification for domestic entities under their respective jurisdiction before December 31, 2003 at latest in accordance with their own supervision ability, actual need of work and local conditions.

Article 26

The foreign exchange accounts under current account of domestic entities in special economic zones approved by the State Council and subject to close supervision by customs (including bonded areas, export processing zones, and the diamond exchange) shall still be opened and used in accordance with existing relevant regulations. However, foreign exchange account of said domestic entities in MIS areas shall be incorporated into the MIS.

Article 27

A domestic entity or an AOFI violating this Rules shall be punished by the relevant SAFE office in accordance with Regulations on the Exchange System of the People's Republic of China, Rules on the Administration of Domestic Foreign Exchange Account, and other relevant regulations.

Chapter VI Supplementary Provisions

Article 28

The Certificate for the Use of Foreign Exchange Account and the Certificate of Registration shall be printed exclusively by the SAFE. The "AOA", the "Certificate of Approval for Change of Account", the "Certificate of Record for Outside Account", the "Certificate of Approval for Account Closing" and the "Notice for the Cancellation of Account" shall be designed exclusively by the SAFE and printed by SAFE branches of their own accord. Their term of validity shall be one month after issuance.

Article 29

The SAFE shall be responsible for the interpretation of this Rules. Article 30 This Rules shall enter into force as from October 15, 2002.