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Administrative Rules for the Pilot Program of Settlement for RMB-denominated Outward Direct Investment (PBC Announcement [2011] No.1)
 

To support the pilot program of RMB settlement of cross-border trade transactions and to facilitate banking institutions and domestic entities to conduct settlement of RMB–denominated outward direct investment, the People’s Bank of China (PBC) has formulated the Administrative Rules for the Pilot Program of Settlement for RMB-denominated Outward Direct Investment. They are hereby announced for implementation.

6 January 2011

Administrative Rules for the Pilot Program of Settlement for RMB-denominated Outward Direct Investment

Article 1 The Rules are formulated in line with the Law of the People’s Republic of China on the People’s Bank of China and other laws and administrative rules to support the pilot program of RMB settlement of cross-border trade transactions and to facilitate domestic entities to conduct RMB-denominated outward direct investment, and to regulate the settlement business of RMB-denominated outward direct investment by banking institutions (hereinafter referred to as “banks”).

Article 2 The overseas direct investment mentioned in the Rules refers to the behaviors of domestic entities of establishing an overseas enterprise or project, or acquiring all or some rights and interests in an enterprise or project, such as ownership, control or management control, and etc.

The domestic institution mentioned in the Rules refers to non-financial enterprises established within the pilot areas for RMB settlement of cross-border trade.

The up-front expenses mentioned in the Rules refer to those that need to be paid overseas prior to the establishment of an overseas enterprise or project.
Article 3 The People’s Bank of China (PBC) and the State Administration of Foreign Exchange (SAFE) shall carry out supervision on the pilot program of settlement of RMB-denominated outward direct investment in accordance with the Rules.

Article 4 A domestic institution shall obtain approval from competent authorities before it makes RMB-denominated outward direct investment. When applying for such an investment, the domestic institution shall indicate the RMB amount of its investment.

Article 5 For the outward direct investment in which the upfront expenses of the overseas direct investment will be remitted overseas or there is no outward remittance of upfront expenses, the domestic institution shall submit the following documents to the local department of the SAFE in order to handle the outward remittance of up-front expenses or the registration of outward direct investment.

(1) A written application letter;

(2) The written approval issued by competent authorities responsible for outward direct investment and its photocopy or the outward direct investment application document submitted to the competent authorities responsible for outward direct investment and its photocopy;

(3) The photocopies of business license, organization code certificate and other documents.

The local department of the SAFE shall complete the relevant information registration procedures within 3 days after receiving the relevant application documents.

Where the remittance of up-front expenses has occurred, the domestic institution shall submit the relevant information to the local department of the SAFE within 30 days after obtaining the approval from the competent authorities responsible for outward direct investment.

Article 6 After a domestic institution has completed the registration of overseas remittance of up-front expenses or the outward direct investment in line with the first clause of Article 5, it can go to the banks to handle the outward remittance of the RMB funds for the outward direct investment or the overseas remittance of the RMB funds for up-front expenses.

When handling the RMB settlement business for outward direct investment, a bank shall request the domestic institution to submit the approval certificate/document and other relevant materials from the competent authorities responsible for outward direct investment and carefully examine these materials. In the examination process, the banks may log in to the Cross-Border RMB Receipts and Payments Information Management System (RCPMIS) and the direct investment foreign exchange management information system and make enquiry about relevant information.

Article 7 After examining the application documents submitted by the domestic institution to the competent authorities responsible for outward direct investment as well as the organization code certificate and other relevant materials, a bank can handle overseas remittance of RMB upfront expenses for the outward direct investment of the domestic institution. The cumulative remittance of upfront expenses by the domestic institution shall generally not exceed 15 percent of the total investment it has applied for to the competent authorities responsible for outward direct investment. For those investments where the up-front expenses exceed 15 percent of the investment quota due to genuine business needs such as overseas merger and acquisition, the domestic institution shall report to the local department of the SAFE and provide relevant proof documents.

Article 8 A banks shall, in line with the Administrative Rules for RMB Bank Settlement Accounts (PBC Decree Order of the People’s Bank of China [2003] No. 5) and other provisions, conduct RMB fund settlement of the outward direct investment via the RMB bank settlement accounts of the domestic institution. Besides, it shall submit the relevant information to the RCPMIS system.

Article 9 When the RMB-denominated outward direct investment also requires the use of foreign exchanges, the domestic institution and the bank shall go through the procedures for outward/inward remittance of foreign exchange funds for the overseas direct investment according to the relevant provisions on foreign exchange administration. When handling inward/outward remittance of the foreign exchange funds, a bank shall log in to the direct investment foreign exchange management information system and carry out due examination to ensure compliance with relevant regulations of the business.

Article 10 The sum of remittances of RMB and foreign exchange funds of the outward direct investment handled by a bank for the domestic institution shall not exceed the total amount of outward direct investment approved by the overseas direct investment authority.

The RMB upfront expenses which have been remitted overseas should be included in the total amount of outward direct investment of a domestic institution. When handling the remittance of RMB funds for the domestic institution, a bank shall deduct the amount of RMB upfront expenses which have been remitted from the total investment quota. The bank shall report to the RCPMIS system the payment information of upfront expense remittance.

Article 11 If no approval has been obtained for the outward direct investment from relevant authority within 6 months after the RMB upfront expenses have been remitted overseas, a domestic institution shall repatriate the remaining funds to the domestic RMB account from where the outward remittance of funds is made. The bank shall urge the domestic institution to repatriate the remaining funds back to its domestic RMB account. If the domestic institution refuses to do so, the bank shall file it with the local branch office of the PBC.

Article 12 A domestic institution may repatriate the RMB-denominated profits obtained from its overseas direct investment. After examining and verifying the documents and other materials submitted by the domestic institution regarding profit disposal resolutions approved by the board of directors of the overseas investment enterprise, a bank may handle the RMB funds repatriation of profits of the overseas direct investment for the domestic institution, and shall submit the information related to the RMB profit repatriation to the RCPMIS system.

Article 13 If RMB receipts and payments occur, such as on the occasions of capital increase, capital reduction, share transfer and liquidation in the overseas investment enterprise, a domestic institution may provide the approval document from the overseas direct investment authority to a bank for it to handle RMB inward/outward remittances. When handling the afore-mentioned businesses, a bank shall report the relevant cross-border RMB payment and receipt information to the RCPMIS system.

Article 14 When there are changes in the basic information of the registered overseas enterprise such as name, operating period, partners in the joint venture or cooperation and the methods of the joint venture or cooperation, or occasions such as capital increase, capital reduction, share transfer or replacement, merger or split liquidation, the domestic institution shall report the afore-mentioned changes and occasions to the local office of the SAFE within 30 days after such changes occur.

Article 15 A bank may, in accordance with relevant regulations, extend RMB loans to the overseas enterprises or projects invested by a domestic institution. For RMB loans issued by the bank’ overseas branches or by an overseas agency bank, the bank may transfer RMB funds to its overseas branches or lend RMB funds to its overseas agency bank and file with the local branch office of the PBC within 15 days. When handling the above businesses, the bank shall report the relevant information to the RCPMIS system.

Article 16 When handling the settlement business for RMB-denominated outward direct investment, a bank and a domestic institution shall conduct the reporting of balance of payments statistics in accordance with the Balance of Payments Statistical Reporting Methods and other relevant regulations.

Article 17 A bank shall earnestly fulfill its information reporting obligations and report to the RCPMIS system all sorts of RMB cross-border receipts and payments information related to the outward direct investment on a timely, actual and comprehensive basis.

Article 18 When handling settlement business for RMB-denominated overseas direct investment, a bank shall fulfill its obligations in terms of anti-money laundering and counter terrorism financing by observing the Law of the People’s Republic of China on Anti-Money Laundering and relevant PBC regulations, so as to prevent illegal and criminal activities that take advantage of RMB-denominated outward direct investment, such as money laundering and terrorism financing. A bank shall collect information related to anti-money laundering and anti-terrorist financing at the destination of overseas direct investment made by the domestic institution, assess the risks related to anti-money laundering and anti-terrorist financing at the destination of overseas direct investment and adopt appropriate risk management measures.

Article 19 The People’s Bank of China, the State Administration of Foreign Exchange, and the authorities responsible for outward direct investment shall establish an information-sharing mechanism and strengthen ex post supervision and inspection efforts in order to effectively regulate the RMB overseas direct investment activities.

The RMB cross-border payment information management system shall transmit the RMB cross-border receipt and payment information related to overseas direct investment to the direct investment foreign exchange management information system every day, and the latter system shall transmit the foreign exchange cross-border receipt and payment information related to overseas direct investment to the RMB cross-border receipt and payment information management system.

Article 20 Together with the State Administration of Foreign Exchange, the People’s Bank of China shall carry out-onsite inspections and off-site examination of the RMB-denominated overseas direct investment businesses and activities of the banks and domestic institutions, urge banks to earnestly fulfill their responsibilities with respects to authenticity verification of transactions, information reporting, anti-money laundering and others, and supervise domestic institutions to engage in businesses and other activities in accordance with the laws.

Article 21 If banks and domestic institutions violate the provisions in the Rules, the People’s Bank of China together with the State Administration of Foreign Exchange, may issue a circular to rebuke or punish the relevant parties in accordance with the laws. In the case of serious violations, they may prohibit the banks and domestic institutions from engaging in cross-border RMB businesses.

Article 22 When a bank violates relevant regulatory and prudential requirements in its handling of settlement of RMB-denominated overseas direct investment, the relevant departments shall impose penalty on the related parties in accordance with the laws. If a bank violates the regulations related to anti-money laundering, anti-terrorist financing and the management of RMB bank settlement accounts, the PBC will impose penalty in accordance with the laws.

Article 23 The Rules apply mutatis mutandis to the management of domestic financial institutions’ RMB settlement business for their overseas direct investments. Where the relevant regulatory departments have separate regulations on the RMB-denominated overseas direct investment of domestic institutions, such regulations shall be followed.

Article 24 The People’s Bank of China shall be responsible for interpreting the Rules.

Article 25 The Rules shall be effective on the day of its release. If there are any inconsistencies between the relevant regulations issued earlier and the Rules, the Rules shall prevail.


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