Branches and foreign exchange administrative departments of the State Administration of Foreign Exchange in all provinces, autonomous regions and municipalities directly under the Central Government, and branches of the State Administration of Foreign Exchange in Shenzhen, Dalian, Qingdao, Xiamen and Ningbo, and all Chinese-funded foreign exchange designated banks,
In accordance with the Regulation of the People¡¯s Republic of China on Foreign Exchange Administration and relevant provisions, for the purposes of improving the foreign exchange administration over foreign-funded enterprises, facilitating foreign-funded enterprises¡¯ handling such businesses as verification, payment and settlement of foreign currency capital, and regulating the relevant business operations of foreign exchange designated banks (hereinafter referred to as the ¡°banks¡±) and accounting firms, you are hereby notified of the following relevant operating issues concerning the administration of payment and settlement of foreign currency capital of foreign-funded enterprises after the direct investment foreign exchange information system of the State Administration of Foreign Exchange (hereinafter referred to as the ¡°investment system of the SAFE¡±) starts to run:
I. Where a foreign-funded enterprise applies to a bank for settlement of foreign currency capital, it shall, in advance, handle the capital verification in an accounting firm. After going through the confirmation request formalities for capital verification at the State Administration of Foreign Exchange or its branch (hereinafter referred to as the ¡°SAFE or its branch¡±), the accounting firm shall issue a capital verification report to the enterprise. No bank shall settle any foreign currency capital for which the capital verification formalities have not been completed.
The accumulative amount of capital settled by a bank for a foreign-funded enterprise shall not exceed the accumulative amount of verified capital of the said foreign-funded enterprise.
II. Such businesses as an accounting firm¡¯s confirmation request to the SAFE or its branch for information about the capital contribution by a foreign party for the purpose of verification of capital of a foreign-funded enterprise and a bank¡¯s settlement of foreign currency capital of a foreign-funded enterprise shall be handled through the investment system of the SAFE.
III. To handle the businesses of payment and settlement of foreign currency capital for foreign-funded enterprises, a bank shall comply with the administrative provisions of the SAFE on foreign exchange payment and settlement.
The RMB fund from the settlement of foreign currency capital of a foreign-funded enterprise shall be used within the business scope as approved by the examination and approval department of the government, and shall not be used for domestic equity investment unless it is otherwise provided for. Except a foreign-funded real estate enterprise, no foreign-funded enterprise shall use RMB fund from the settlement of foreign currency capital to purchase domestic real estate for any purpose other than its own use. A foreign-funded enterprise shall follow the relevant provisions of the state, when using the RMB fund from the settlement of foreign currency capital for any securities investment.
Where a foreign-funded investment enterprise formed with the approval of the commerce administrative department is engaged in the domestic equity investment, its transfer of capital within China may be handled only after being examined and approved by the SAFE or its branch.
IV. To apply to a bank for settlement of foreign currency capital, a foreign-funded enterprise shall submit the following materials:
1. The foreign-funded enterprise¡¯s foreign exchange registration IC card.
2. The order of payment out of the RMB fund from the settlement of foreign currency capital (see Annex 1 for the format). The term ¡°order of payment¡± refers to a written instruction signed and issued by an enterprise or individual, based on which a bank makes outward payment out of the RMB fund from the settlement of foreign currency capital.
3. Documents certifying the purposes of the RMB fund from the settlement of foreign currency capital, including a business contract or an advice of payment issued by the payee. The advice of payment shall contain the major clauses of the business contract, amount, name and bank account number of the payee, fund purposes, etc. An enterprise which intends to repay a RMB loan with the RMB fund from the settlement of foreign currency capital shall submit a statement that the loan has been used within the approved business scope under the contractual provisions.
4. The latest capital verification report issued by an accounting firm (which shall be accompanied by a letter in reply to the confirmation request for information about the capital contribution by a foreign party).
5. Relevant vouchers of the outward payments made under the Order of Payment out of the RMB fund from the immediately previous settlement of foreign currency capital and a detailed checklist on use thereof (see Annex 2 for the format), and photocopies of the invoices and relevant vouchers bearing the official seal or financial seal of the enterprise. If this settlement of foreign currency capital is one-time settlement or is the final installment of settlement of foreign currency capital, the enterprise shall, within 5 working days after the settlement, submit the aforesaid materials to the bank.
6. Other materials which the bank deems necessary to be supplemented.
In the case of settlement of foreign currency reserve of an enterprise in an amount equivalent to USD 50, 000 or less, the enterprise is not required to submit the documents mentioned in items (3) and (5) of the preceding paragraph, and may, upon the strength of the checklist of interest issued by the bank, directly conduct the formalities for foreign currency settlement of the interest in its capital account.
