Laws of the People's Republic of China

(Promulgated by the State Council on April 2, 1985)

   Article 1. These Regulations are formulated with a view to expanding international economic and financial cooperation so as to be conducive to the bringing in of foreign capital and technology to promote the growth of the special economic zones.

   Article 2. In these Regulations, "foreign banks" means the branches set up in the special economic zones by banks the head offices of which are located in foreign countries or the Xianggang (Hong Kong) and Aomen (Macao) regions and which have been registered in accordance with local laws, and also banks with foreign capital the head offices of which are located in the special economic zones and which have been registered in accordance with the laws of the People's Republic of China.

In these Regulations, "joint Chinese-foreign banks" means banks operated in the special economic zones by banks or financial institutions with foreign capital jointly with banks or financial institutions with Chinese capital.

   Article 3. Foreign and joint Chinese-foreign banks shall abide by the laws and regulations of the People's Republic of China; their legitimate business operations and legal rights shall be protected by the laws of the People's Republic of China.

   Article 4. For the establishment of a foreign or joint Chinese-foreign bank in a special economic zone, an application shall be filed with the People's Bank of China, which shall examine and consider the application in the light of the needs of the economic growth of the special economic zone concerned and on the principle of equality and mutual benefit.

The branches of the People's Bank of China in the special economic zones shall exercise control and supervision over foreign and joint Chinese-foreign banks.

The State Administration of Exchange Control issues licences for foreign exchange operations to foreign and joint Chinese-foreign banks.

   Article 5. An application for the establishment of a foreign and joint Chinese-foreign bank shall be made in accordance with the following provisions:

(I) A bank with foreign capital that wishes to set up a branch in a special economic zone shall file an application through its head office and furnish the following documents and date:

1. A written application signed by the chairman or general manager of the bank with the authorisation of its board of directors and certified by a notary public, embodying the name of the branch to be set up, the amount of operating funds allocated to it by the head office, a brief personal history and a letter of authorisation in regard to each of the chief responsible officers and the kinds of business applied for;

2. Articles of association, a list of the members of the board of directors, and the balance sheets, profit and loss statements and business reports for the three years preceding the application;

3. A copy of the business licence issued by the competent authorities of the county or region where the bank is located; and

4. A written guarantee from its head office committing itself to be responsible for taxes and liabilities.

(II) An application for the establishment of the head office of a foreign bank in a special economic zone shall be filed by the foreign investors, along with the following documents and data:

1. A written application for the establishment of a foreign bank which shall include the name of the head office to be set up, registered capital and paid-in capital,a list of the chief responsible officers and the kinds of business applied for;

2. Articles of association;

3. A list of the chairman, vice-chairmen and members of the board of directors nominated by the investors; and

4. A statement of the investors' assets and liabilities, along with the certification of a notary public.

(III) An application for the establishment of a joint Chinese-foreign bank in a special economic zone shall be filed jointly by the investing parties, along with the following documents and data:

1. A written application for the establishment of the joint bank, including the name of the joint bank to be set up, the names of the joint parties, registered capital and paid-in capital, the proportions of equity capital contributed by the joint parties, a list of the chief responsible officers nominated, and the kinds of the business applied for;

2. A feasibility report jointly prepared by the joint parties;

3. The drafts of the agreement, contract and articles of association relating to the joint parties; and

4. A list of the chairman, vice-chairmen and members of the board of directors of the joint bank nominated by the joint parties.

(IV) Foreign and joint Chinese-foreign banks in a special economic zone that intend to set up additional branches within the same zone shall apply to the branch of the People's Bank of China in the same zone for approval.

A Chinese version shall be attached where the documents and data indicated in section (I) of this Article are in a foreign language.

   Article 6. Based on an application submitted, the People's Bank of China may grant its approval to foreign and joint Chinese-foreign banks to engage in part or all of the following business operations:

1. Granting loans in local and foreign currencies and discounting bills;

2. Inward remittances from foreign countries and the Xianggang (Hong Kong) and Aomen (Macao) regions, and foreign exchange collections;

3. Settlement of export transactions and outward documentary bills;

4. Exchange in foreign currencies and foreign currency bills;

5. Local and foreign currency investments;

6. Local and foreign currency guarantees;

7. Buying and selling of stocks and securities;

8. Trust, safe deposit box, credit investigation and consultation services;

9. Outward remittances by overseas Chinese enterprises, foreign enterprises, Chinese-foreign joint ventures and Chinese-foreign cooperative enterprises, settlement of import transactions and inward documentary bills;

10. Local and foreign currency deposits and overdrafts by overseas Chinese enterprises, foreign enterprises, Chinese-foreign joint ventures and Chinese-foreign cooperative enterprises; and local and foreign currency deposits and overdrafts by foreign nationals, overseas Chinese and Chinese compatriots in Xianggang (Hong Kong) and Aomen (Macao);

11. Handling foreign exchange deposits and loans in foreign countries and the Xianggang (Hong Kong) and Aomen (Macao) regions; and

12. Other business operations.

   Article 7. A foreign bank head office or a joint Chinese-foreign bank in a special economic zone shall have a registered capital in foreign exchange no less than the equivalent of RMB$80 million and a paid-in capital no less than 50 per cent of the registered capital; the branch office of a foreign bank in a special economic zone shall hold operating funds allocated to it by its head office in an amount of foreign exchange no less than the equivalent of RMB$40 million.

The paid-in capital or the operating funds of a foreign or joint Chinese-foreign bank shall be fully in hand within 30 days from the date its establishment is approved, and this shall be certified by an accountant registered in the People's Republic of China.

   Article 8. A foreign or joint Chinese-foreign bank shall, within 30 days from the date of its being approved, register with the Administration for Industry and Commerce and obtain from it a business licence; it shall also register with the local tax authorities for tax purposes within 30 days from the date of its operation.

Where a foreign or joint Chinese-foreign bank fails to open business within twelve months after the date of its being approved, the original certificate of approval shall automatically become null and void.

   Article 9. The loans granted by a foreign bank head office or a joint Chinese-foreign bank in a special economic zone to any enterprise in the same zone shall not exceed 30 per cent of the aggregate of the bank's paid-in capital and reserve funds; and its total investment in the special economic zone shall not exceed 30 per cent of the aggregate of its paid-in capital and reserve funds.

   Article 10. The exchange and settlement between the local currency and foreign currencies by a foreign and joint Chinese-foreign bank shall be effected in accordance with the exchange rates quoted by the State Administration of Exchange Control and in pursuance of the pertinent regulations.

The interest rates applied by a foreign and joint Chinese-foreign bank to local or foreign currency deposits, loans, overdrafts and bill discounts within a special economic zone shall be fixed by reference to those prescribed by the branch of the People's Bank of China in the same zone.

   Article 11. A foreign or joint Chinese-foreign bank accepting local or foreign currency deposits within a special economic zone shall keep on deposit with the branch of the People's Bank of China in the same zone a reserve fund against its deposits.

   Article 12. A foreign or joint Chinese-foreign bank shall submit to the branch of the People's Bank of China in the special economic zone concerned the following business reports:

(1) A balance sheet as at the end of the previous month, to be submitted before the tenth of each month;

(2) An analytical statement of deposit and loans, an analytical statement of outward and inward remittances and settlement of import and export transactions, and an analytical statement of investment items for the previous quarter; and

(3) The balance sheet, profit and loss statement, and statement of the balances of accounting items for the previous year, along with an audit report by an accountant registered in the People's Republic of China, to be submitted before the end of March in each year.

   Article 13. The branches of the People's Bank of China in the special economic zones shall have the right to examine the business and financial conditions of foreign and joint Chinese-foreign banks, request them to submit or furnish the related information and data, and send officers to examine their books, records, etc.

   Article 14. The profit that a branch of a foreign bank makes after paying taxes in accordance with the law may be remitted abroad.

For the profit that a foreign bank head office or a joint Chinese-foreign bank in a special economic zone makes after deduction for taxes, the reserve fund, workers' bonuses, welfare fund and enterprise development fund in accordance with the pertinent regulations, the portion distributed to investors outside China may be remitted abroad.

The foreign staff and workers and the Hong Kong and Macao staff and workers of a foreign and joint Chinese-foreign bank may remit abroad their wages, salaries and other legitimate earnings after paying taxes in accordance with the law.

   Article 15. A foreign or joint Chinese-foreign bank that intends to terminate its business operations shall submit a written report for approval to the People's Bank of China 30 days prior to their termination.

A foreign or joint Chinese-foreign bank that winds up business in accordance with the law shall be liquidated under the supervision of the branch of the People's Bank of China in the special economic zone concerned and other competent authorities in accordance with the regulations of the People's Republic of China governing the dissolution and liquidation of foreign enterprises and Chinese-foreign joint ventures, and after the satisfaction of all taxes and liabilities, the funds of the foreign bank or the funds owned by or distributed to overseas investors of the joint Chinese-foreign bank may be remitted abroad.

After liquidation, the foreign or joint Chinese-foreign bank mentioned in the previous section shall approach the department that originally issued the registration certificate to have its registration cancelled.

   Article 16. The branches of the People's Bank of China in the special economic zones are empowered to issue a warning or impose a fine on any foreign or joint Chinese-foreign bank acting in contravention of these Regulations or other financial regulations according to the seriousness of each case; if there is objection to the measure meted out, an appeal may be made to the People's Bank of China for its decision.

In particularly serious cases, the foreign or joint Chinese-foreign bank may be ordered to stop its business operations or even to dissolve its institution.

   Article 17. These Regulations shall also apply to banks or financial institutions with overseas Chinese capital, Xianggang (Hong Kong) capital or Aomen (Macao) capital.

   Article 18. The People's Bank of China shall be responsible for the interpretation of these Regulations.

   Article 19. The implementation of these Regulations shall commence on the date of their promulgation.