Laws of the People's Republic of China

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange on Issuing the Provisional Procedures on the Foreign Exchange Administration in Export Processing Areas

HuiFa [2000] No.116

August 17, 2000

Each branch of the State Administration of Foreign Exchange (hereinafter as the SAFE in brief), Beijing and Chongqing Departments of the SAFE, and each Chinese-funded designated foreign exchange bank:

Provisional Procedures on the Foreign Exchange Administration in Export Processing Areas have been formulated for implementation by SAFE in accordance with the State Council's instructions on launching export processing areas pilot project.

After receiving this Circular, each SAFE branch shall study it seriously, implement it strictly, and transmit it to each branch and sub-branch of SAFE, foreign-funded bank and relevant unit under its jurisdiction. Each Chinese-funded designated foreign exchange bank shall transmit it to each branch and sub-branch under its jurisdiction. Domiciled branches and sub-branches where the export processing areas are located (hereinafter the SAFE Branches) shall formulate detailed rules for implementation to be distributed and put into force after being reported to and approved by the SAFE. All the relevant certificates shall be independently designed and printed by the SAFE Branches.

Any problems or questions arising in its implementation shall be reported promptly to the SAFE. Attachment:Provisional Procedures on the Foreign Exchange Administration in Export Processing Areas

Chapter I General provisions

Article 1

This set of provisional procedures has been formulated with a view to normalize the foreign exchange administration in export processing areas, to ensure healthy foreign exchange flows, to promote export and the development of export processing areas, and to encourage foreign investment inflows.

Article 2

Export processing areas referred to in this set of provisional procedures are the special economic areas for export processing on the territory of the People's Republic of China (hereinafter China) established with the approval of the State Council to be put under closed supervision of the customs.

Article 3

The departments responsible for the foreign exchange administration are the State Administration of Foreign Exchange (hereinafter the SAFE) and its subsidiaries.

The SAFE is responsible for formulating foreign exchange regulations in export processing areas. Domiciled branches of the SAFE where the export processing areas are located (hereinafter the SAFE Branches) are responsible for formulating detailed rules for implementing relevant regulations. The SAFE Branches are also responsible for supervising foreign exchange revenue and expenditure, as well as other foreign exchange business in the export processing areas according to relevant regulations and corresponding detailed rules for implementation.

Article 4

The "inside areas" referred to in this set of procedures are the areas inside the export processing areas, while the "outside areas" are the areas inside China other than the export processing areas.

The "in-area entities" referred to in this set of procedures are enterprises, public institutions and other economic organizations inside the export processing areas.

The "out-area entities" referred to in this set of procedures are enterprises, public institutions and other economic organizations inside China other than the export processing areas.

Article 5

Foreign exchange revenue and expenditure as well as other foreign exchange business of in-area entities and individuals shall be regulated by this set of procedures.

Article 6

All the economic transactions between in-area and out-area entities as well as individuals shall be subject to balance of payment reporting procedures in accordance with Procedures on Reporting Balance of Payment Statistics.

Article 7

All the economic transactions between in-area and out-area entities as well as individuals shall be exempt from balance of payment reporting procedures.

Chapter II Foreign Exchange Registration

Article 8

Within 30 days after acquiring industrial and commercial business license, in-area entities shall handle formalities of foreign exchange registration with the SAFE Branches and fill out Registration Form of Basic Information upon the following documents:

1.

approval documents for establishment;

2.

industrial and commercial business licenses;

3.

the entity's contracts, articles of association already approved.

The SAFE Branches, after examining and verifying the validity of the documents, shall issue a Foreign Exchange Registration Certificate of Export Processing Areas (hereinafter the Registration Certificate) to the applicant.

The Registration Certificate shall be designed by the SAFE and printed by the SAFE Branches.

Article 9

In any case of altering name, address registered capital, and business scope, of transferring shares, and of merger and separate, in-area entities shall handle formalities of registration alteration with the SAFE Branches by presenting the Registration Certificate and other prescribed documents within 30 days after acquiring altered industrial and commercial business license.

Article 10

In liquidation due to closing or expiration of the business term, in-area entities shall handle formalities of nullifying foreign exchange registration with the SAFE Branches by presenting the Registration Certificate and other prescribed documents within 30 days after the liquidation approved.

Article 11

The SAFE Branches shall inspect foreign exchange revenue and expenditure as well as other foreign exchange business of in-area entities annually. They shall write down the inspection result in and affix a seal to the Registration Certificate.

In-area foreign-funded enterprises shall take joint annual inspection by seven ministries of the State Council. The SAFE Branches shall inspect foreign exchange revenue and expenditure as well as other foreign exchange business of in-area foreign-funded enterprises according to Circular on Implementing Joint Annual Inspection of Foreign-funded Enterprises and other relevant regulations.

The SAFE Branches shall inspect foreign exchange revenue and expenditure as well as other foreign exchange business of other in-area entities in the light of the regulation on annual inspection of in-area foreign-funded enterprises.

Article 12

If they do not engage in foreign exchange business within one year after foreign exchange registration, or for a successive year, in-area entities shall report on their own initiative to the SAFE Branches within 5 working days after the year passed. If there are no justified reasons, the SAFE Branches shall have the power to nullify their foreign exchange registration, terminate their qualification of relevant foreign exchange businesses, require them surrender all the foreign exchange purchased for paid-in capital, and suggest the administration of industry and commerce nullify their business license.

Article 13

The Registration Certificate shall not be forged, altered, rented, lent, transferred, or sold to other entities.

Article 14

In-area entities, when handling formalities of foreign exchange revenue and expenditure, shall present inspected and valid Registration Certificate and other prescribed valid certificates and commercial vouchers.

For in-area entities that have not taken or not passed the annual inspection, the SAFE Branches shall order them rectify within a stated time. Their foreign exchange revenue and expenditure during the period of rectifying shall be verified by the SAFE Branches case by case.

Chapter III Administration of Foreign Exchange Accounts

Article 15

In-area entities, when opening a foreign exchange account, shall acquire approval of the SAFE Branches.

Article 16

Foreign exchange accounts of in-area entities shall not be classified as settlement accounts and specialized accounts. All foreign exchange receipts shall be deposited in a unified foreign exchange account; and all foreign exchange expenditures shall be made from the account.

Article 17

In-area entities shall open foreign exchange accounts with in-area financial institutions in principle. In case of no in-area financial institutions, they shall open accounts with out-area financial institutions designated by the SAFE Branches.

The SAFE Branches shall independently determinate the number of foreign exchange accounts and out-area financial institutions with which the accounts shall be opened according to in-area entities' operation needs and their own supervising ability.

In-area entities, if they want to open overseas foreign exchange accounts, shall conform to Procedures on the Administration of Overseas Foreign Exchange Accounts.

Article 18

In-area entities, if they want to open foreign exchange accounts, shall first apply with the SAFE Branches by presenting application and the Registration Certificate. They shall open accounts with the financial institutions by presenting Account-opening Notice issued by the SAFE Branches and the Registration Certificate.

Article 19

The financial institutions, when opening foreign exchange accounts for in-area entities, shall fill in the related blanks of the Registration Certificate with their own name, account number, currency denomination and date of opening, and affix their seal to the Registration Certificate.

Article 20

The account-opening financial institutions, when opening foreign exchange accounts for in-area entities, shall add a "C" to the account number to differentiate from other entities strictly.

Financial institutions shall not add a "C" to other entities' account number.

Article 21

In-area entities, if they want to alter relevant items of the foreign exchange accounts, shall apply with the SAFE Branches by presenting relevant documents.

Article 22

In-area entities, if they want to close a foreign exchange account, shall handle formalities of closing accounts with the SAFE Branches by presenting the Registration Certificate and the account-closed certificate issued by account-opening financial institution within 10 days after the account closed.

In case of opening a new account after a current one closed, foreign exchange in the current one shall be transferred into the approved new one. In case of terminating operation, foreign exchange in the accounts belonging to foreign investors shall be transferred or remitted abroad. Those belonging to domestic investors shall be repatriated to outside areas and be disposed according to relevant regulations.

Article 23

In-area entities shall open and use foreign exchange accounts according to this set of procedures. They shall not open foreign exchange accounts without permission, rent or lend their foreign exchange accounts, and shall not use their accounts collecting, depositing, or making payment in foreign exchange for other entities as well as individual either.

Chapter IV Administration of Foreign Exchange Collection, Payment, Sales and Purchases

Article 24

In-area entities' foreign exchange revenue, except that approved by the SAFE Branches, shall be repatriated home and deposited in their foreign exchange accounts.

Article 25

In-area entities, when they need Renminbi to pay employees' salaries and life expenses, to pay charges for water and electricity, and to pay administrative fees, shall apply with the SAFE Branches by presenting relevant documents. They shall sell their foreign exchange for Renminbi to designated in-area and out-area banks by presenting the approval documents issued by the SAFE Branches.

Article 26

Overseas payments of in-area entities shall be proceeded upon valid certificates and commercial vouchers prescribed in Procedures on the Administration of Sale, Purchase of and Payment in Foreign Exchange. In case of declaration form of imported goods required, original record list of goods entering inside areas shall be substitution. This kind of payments except that specially prescribed in this set of procedures shall be made without approval by or record with the SAFE Branches E.

Designated foreign exchange banks shall keep relevant certificates and vouchers on file for reference.

Article 27

In case of transporting or exporting goods to overseas, in-area entities need not to handle formalities of verification and cancellation of export collection in foreign exchange.

In case of making payments for imports from overseas, in-area entities need not to handle formalities of verification and cancellation of import payment in foreign exchange.

Article 28

Formalities of foreign exchange payments by in-area entities to out-area entities shall be handled by out-area entities by presenting certificates of contracts or agreements, vouchers and etc.. The designated foreign exchange banks shall handle formalities of foreign exchange surrender or entering into the foreign exchange accounts for the out-area entities according to this set of Procedures.

Article 29

Foreign exchange payments by out-area entities to inside areas shall be regarded as payments to overseas. They shall be made after being verified bona bide by the designated foreign exchange banks upon relevant valid certificate and commercial vouchers prescribed in Procedures on the Administration of Sales, Purchase of and Payment in Foreign Exchange.

Article 30

Out-area entities, when exporting goods to inside areas, shall declare at customs by presenting verification and cancellation certificate of export collection in foreign exchange according to Procedures on the Administration of Verification and Cancellation of Export Collection in Foreign Exchange and detailed rules for implementing it. The designated foreign exchange banks shall issue special copy of verification and cancellation certificate of export collection in foreign exchange to the out-area entities after foreign exchange collected. It is the out-area entities that handle formalities of verification and cancellation of export collection in foreign exchange.

Out-area entities, when making payments to in-area entities for imported goods, shall handle formalities of verification and cancellation of import payment in foreign exchange according to Provisional Procedures on Supervision over Verification and Cancellation of Import Payment in Foreign Exchange and relevant regulations.

Article 31

Foreign exchange payments between in-area entities shall be made from their foreign exchange accounts upon relevant certificates of contracts or agreements and vouchers etc.. In-area entities are not allowed to purchase foreign exchange for these payments.

Article 32

Foreign exchange payments by in-area entities to overseas and outside areas shall be made from the entities' foreign exchange accounts. In-area entities are not allowed to purchase foreign exchange for these payments except those specially provided in this set of procedures.

Article 33

In-area entities whose registered capital was paid in Renminbi with approval, when making foreign exchange payment to overseas or outside areas, shall use the foreign exchange owned by themselves first. They shall apply with the SAFE Branches by presenting relevant documents for the short part,. The documents include the Registration Certificate, approval documents for paying registered capital in Renminbi, verification certificate of the capital contribution issued by CPA, business license, statements of all foreign exchange accounts issued by account-opening financial institutions, and valid certificates and commercial vouchers prescribed in this set of procedures. They shall purchase foreign exchange with paid-in capital in Renminbi from the designated foreign exchange banks upon the approval documents issued by the SAFE Branches. The Renminbi used for purchasing foreign exchange shall not exceed paid-in capital.

Article 34

In-area entities whose products can be partly sold domestically with the approval by the Moftec or its branches and the customs, when selling goods to outside areas, shall purchase foreign exchange by collected Renminbi from the designated foreign exchange banks upon approval documents issued by the SAFE Branches. The approval documents shall be applied for by presenting the Registration Certificate, approval documents for selling product domestically issued by the domiciled administration of export processing area, contracts of sales, original declaration form of imported goods issued by the customs verifying that the buyer is located in outside areas.

When verifying purchase application for foreign exchange of in-area entities, the SAFE Branches shall stamp the original declaration form of imported goods with "foreign exchange supplied", and keep it for record. The SAFE Branches shall verify the original electronic accounts of the declaration form from the verification network system for import customs declaration form and wind up the case as in-area entities have handled formalities of verification and cancellation of import payment in foreign exchange.

Article 35

In-area entities are allowed to borrow foreign exchange from home and abroad to meet their operation need without the SAFE's approval. However, the borrowing shall be registered with the SAFE according to Provisional Rules on External Debts Statistics and Supervision and detailed rules for implementing it, as well as Procedures on the Administration of Foreign Exchange Lending (on-lending) Registration.

Foreign exchange financing between in-area and out-area non-financial institutions is prohibited.

Article 36

Guarantees provided by out-area entities for in-area entities to overseas entities and individuals, out-area entities, and to other in-area entities shall be regarded as external guarantees. They shall be subject to Procedures on the Administration of External Guarantees by Domestic Entities and detailed rules for implementing it. In-area entities, when providing guarantees to overseas entities, shall register the guarantee with the SAFE Branches within 15 days after the guarantee contracts being signed.

Article 37

When repaying external debts to overseas, repaying foreign exchange loans extended by out-area financial institutions, or performing external guarantees to overseas, in-area entities shall acquire the approval from the SAFE Branches.

Article 38

In-area entities are not allowed to make overseas or our-area investment of any kind.

Article 39

In liquidation due to closing or expiration of the business term, in-area entities shall liquid all of their assets according to relevant regulations. Assets belonging to foreign investors shall be remitted abroad according to relevant regulations. Those belonging to domestic investors shall be repatriated to outside areas and be disposed according to relevant regulations.

Chapter V Punishments

Article 40

The SAFE Branches shall conduct regular or irregular supervision and inspection in in-area entities on their balances of foreign exchange. As to violations of this set of procedures and other foreign exchange regulations, the SAFE Branches shall mete out punishments in accordance with Regulations on the Foreign Exchange Administration and other relevant regulations.

Article 41

Designated foreign exchange financial institutions shall provide in-area entities with services in accordance with this set of procedures and other foreign exchange regulations.

As to violations of this set of procedure, SAFE shall punish the designated foreign exchange financial institutions, the responsible personnel, and directly responsible personnel-in-charge in accordance with Regulations on the Foreign Exchange Administration and other relevant regulations.

Article 42

In case that in-area entities purchase or sell foreign exchange in violation of this set of procedures, SAFE shall nullify their Registration Certificate and suspend their qualification of purchasing or selling foreign exchange besides above-mentioned punishments.

Chapter VI Supplementary Provisions

Article 43

Foreign exchange revenue and expenditure as well as other foreign exchange businesses of in-area entities and individuals not touched upon in this set of procedures shall be subject to relevant foreign exchange regulations in out-areas.

Article 44

This set of procedures shall be interpreted by the SAFE Branches may formulate detailed rules for the implementation of this set of procedures to be put into force after being reported to and approved by the SAFE.

Article 45

This set of procedures shall enter into force as of September 1, 2000.