Laws of the People's Republic of China

The State Administration of Foreign Exchange

Reply of the State Administration of Foreign Exchange on Issues Concerning the Exchange Rate Applicable to the Bilateral Investment Protection Agreement

HuiHan [1999] No.35

October 26, 1999

The Ministry of Foreign Trade and Economic Cooperation:

Your Letter for Consultation on Several Articles of the Bilateral Investment Protection Agreement (WaiJingMaoFaHanZi [1999] No.69) has been duly received. Please find our reply as follows:

In 1994, resulting from the reform our country's foreign exchange system, the mechanism of buying foreign exchange from and selling foreign exchange to banks was adopted, and a single and managed RMB floating exchange rate system based on market supply and demand was established. Accordingly, the People's Bank of China makes a daily announcement of the benchmark exchange rates of RMB against US dollar, Hong Kong dollar and Japanese yen respectively based on the prevailing rates in the inter-bank foreign exchange market the day before. All designated foreign exchange banks can, based on the benchmark exchange rate of RMB against US dollar and within the floating range set up by the People's Bank of China, decide their own exchange rates of RMB against all convertible currencies and conduct foreign exchange transactions accordingly. Therefore, in our opinion, the settling (or selling) of foreign funds to be paid (or remitted) shall be conducted at designated foreign exchange banks in compliance with the relevant stipulations on foreign exchange settlement and sales administration and at an exchange rate set by the designated foreign exchange bank based on the benchmark exchange rate and the floating range announced by the People's Bank of China.

This is the reply.