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Circular of the National Development and Reform Commission on Matters relating to RMB-denominated Bond Issuance in the Hong Kong Special Administrative Region by Domestic Non-Financial Institutions ([2012] No. 1162)
 

Since the launch of the pilot RMB settlement for cross-border trade, domestic institutions have made demands on various cross-border RMB businesses under capital account and the State Administration of Foreign Exchange has approved some institutions' applications on a case-by-case basis. With a view to standardizing the administration and promoting the successful operation of cross-border RMB capital account business, the following issues relating to the operation are hereby notified:

I. Operation of cross-border RMB business in connection with overseas direct investment

Domestic institutions (excluding financial institutions, hereinafter inclusive) that make overseas direct investment with RMB shall comply with the requirements of the Measures for Administration of Pilot Settlement in RMB for Overseas Direct Investments (Announcement of the People's Bank of China [2011] No. 1) and fulfill the formalities for overseas investment registration, alteration of registration, as well as registration of the quota for remitting the initial expenses outwards with the competent branches of State Administration of Foreign Exchange at their domiciles thereof. Domestic institutions shall comply with the following requirements if they intend to make overseas direct investment with both RMB and foreign currencies or to change the currency of overseas direct investment from RMB to foreign exchange.

1. Outward remittance of initial expenses

Domestic institutions remitting initial expenses in RMB outwards shallregister (including alteration of registration) the remitted amount of the initial expenses for overseas investment with competent branches of the State Administration of Foreign Exchange at their domiciles thereof. Banks shall make the outward remittance of initial expenses for domestic institutions according to the quota sheet generated by the direct investment foreign exchange administration information system of the State Administration of Foreign Exchange (hereinafter referred to as the "Direct Investment System"), and file the relevant information with the State Administration of Foreign Exchange through the Direct Investment System (please refer to the details in Appendix 1, hereinafter inclusive) at the same time.

2. Overseas direct investment registration

(1) Domestic institutions shall fulfill the formalities of overseas direct investment registration with the competent branches of State Administration of Foreign Exchange at their domiciles thereof. Banks shall handle the remittance of overseas direct investment for domestic institutions according to the quota sheet of remittable RMB capital generated by the Direct Investment System and file the relevant information with the State Administration of Foreign Exchange through the Direct Investment System at the same time.

(2) Domestic institutions which remit inwards overseas legitimate income in RMB obtained from the liquidation and capital reduction of the overseas invested enterprises or transferring equities to foreign entities shall conduct the registration of remittable cross-border RMB quota with the competent branches of State Administration of Foreign Exchange at their domiciles thereof. Banks shall make collections according to the quota sheet of remittable RMB capital generated by the Direct Investment System and file the relevant information with the State Administration.

II. Operation of cross-border RMB foreign direct investment

1. Registration and alteration registration of foreign invested enterprises

When overseas investors fulfill the contribution obligation in cross-border RMB (including the form of offshore RMB funds and funds in the domestic non-resident RMB accounts, hereinafter inclusive) or pay equity-transfer consideration to domestic residents, the target enterprise shall present relevant materials (including without limitation the approval document issued by competent commerce authority(ies) regarding to making contribution or paying consideration for equity transfer in RMB) and conduct the corresponding registration or alteration of registration of foreign invested enterprise with the competent branches of State Administration of Foreign Exchange at their domiciles thereof. Other operations shall be conducted by referring to relevant existing provisions on administration of foreign capital and foreign exchange.

2. File of credit funds into account

(1) After crediting cross-border RMB registered capital into the account for foreign invested enterprises and crediting the income from assets realization into the account for the equity transferor, the bank shall immediately file the relevant information with the State Administration of Foreign Exchange through the Direct Investment System.

(2) When overseas investors need to make cross-border payment of initial funds (including funds for the purpose of acquisition, expenses purpose and guarantee) in RMB prior to the establishment of the foreign invested enterprise, they shall conduct registration of cross-border RMB initial expenses quota with the competent branches of the State Administration of Foreign Exchange at the domicile for the foreign invested enterprise to be established. After crediting the cross-border RMB initial expenses into the account according to the quota registered in the Direct Investment System, the bank shall file the relevant information with the State Administration of Foreign Exchange through the Direct Investment System.

3. Enquiry and confirmation for capital verification

(1) When foreign invested enterprises make contribution in cross-border RMB conduct the formalities of enquiry and confirmation for capital verification, the competent branches of State Administration of Foreign Exchange at the domiciles of such foreign invested enterprises shall verify the authenticity of the fund inflow by referring to the transaction reference number of the receiving bank.

(2) When overseas investors pay the equity transfer consideration in cross-border RMB to the Chinese equity transferor (including foreign investment holding enterprise), the competent branches of State Administration of Foreign Exchange at the domicile of the equity transferor shall issue the Registration Certificate of Equity-transfer Collection through the Direct Investment System for the equity transferor in light of relevant filing records of cross-border RMB inflow.

(3) When foreign investment holding companies make domestic investment with income in cross-border RMB, the competent branches of the State Administration of Foreign Exchange at the domicile of the invested target enterprise shall handle the formalities of foreign exchange registration and enquiry and confirmation for capital verification based on the approval document for domestic investment with cross-border RMB issued by competent branch of the State Administration of Foreign Exchange at the domicile of such foreign investment holding company recorded in the Direct Investment System.

(4) With respect to remittance of legitimate incomes (including without limitation dividend and bonus) from capital reduction, equity transfer, liquidation and recovery in advance of investment in RMB for overseas investors, the bank shall handle the remittance according to the quota sheet of cross-border RMB fund generated by the Direct Investment System, and file with the State Administration of Foreign Exchange through the Direct Investment System.

III. Outbound lending operation by domestic enterprises

1. Domestic enterprise lending to the offshore enterprise invested by it in RMB shall apply with the competent branches of the State Administration of Foreign Exchange at its domicile thereof for registration of outbound lending quota. Banks shall handle the remittance of RMB fund for domestic enterprise according to quota sheet generated by the Direct Investment System and immediately file the relevant information with the State Administration of Foreign Exchange through the Direct Investment System.

2. Upon collection of the principal and interest under the outbound lending in cross-border RMB for domestic enterprises, the bank shall immediately file the relevant information with the State Administration of Foreign Exchange through the Direct Investment System.

IV. Operation of cross-border RMB foreign (contingent) debt

1. RMB foreign debt

Where any domestic institution (including financial institutions) borrows RMB foreign debt, the relevant operation shall be carried out pursuant to existing foreign debt administrative regulations in principle. No application for opening a special account for foreign debt with local branches of the State Administration of Foreign Exchange by any domestic institution (including financial institution) is required for the purpose of remittance and utilization of any RMB funds under the RMB foreign debt borrowed by such domestic institution.

2. RMB foreign security

The operation in connection with providing RMB foreign security by any domestic institution (including financial institution) shall be carried out pursuant to existing foreign security administrative regulations in principle.

V. Operation of cross-border RMB securities

1. Remittance of income from shareholding reduction and dividend in RMB by foreign shareholders of A-share listed companies

Foreign shareholders of A-share listed companies may apply with the competent branches of the State Administration of Foreign Exchange at the domicile of the listed companies to remit the fund gained from underweight of A-shares outbound in RMB by providing the documents indicated in Article 6 of the Circular of the General Office of People's Bank of China on Issues Relating to Account Opening and Foreign Exchange Management Involved in Shareholding Reduction by and Dividend to Foreign Shareholders of A-share Listed Companies (Yin Ban Fa [2009] No. 178). Foreign shareholder of A-share listed companies may conduct outbound remittance of the incomes from dividend in RMB though the account bank of its deposit account in accordance with Article 7 of Circular Yin Ban Fa [2009] No. 178. The account bank shall report in writing to the competent branch of the State Administration of Foreign Exchange at its domicile for filing of relevant information (including the date and amount of the remitted fund) within 5 working days upon the remittance of such RMB funds.

2. Remittance of dividend of foreign shareholders in RMB by H-share listed companies

Overseas listed (H-share) companies may apply with the bank to pay dividends to their overseas shareholders in RMB by submitting supportive documents (including without limitation written application, profit distribution resolution of the board of directors of the listed companies and certificate of full payment of tax) to the bank. For companies registered in the Direct Investment System, the bank shall reflect relevant information of the outbound remittance of dividends through the Direct Investment System. For companies yet registered in the Direct Investment System, the bank shall report in writing to the competent branch of the State Administration of Foreign Exchange for filing of relevant information (including date and amount of the remitted fund) within 5 working days upon the remittance of such funds.

VI. Enhancing the work of statistics and monitoring of the operation of cross-border RMB under capital account

All branches (and foreign exchange administration departments) shall intensify the monitoring of the operation of cross-border RMB under capital account, require domestic institutions to fulfill relevant formalities of registration, filing or verification according to the regulations in a timely manner, guide, supervise and urge banks to give feedback on relevant information in accordance with this Circular, enhance the work of statistics and monitoring, urge and guide banks as well as the declaring entities to fulfill the obligation of declaring international balance of payment, ensure the integrity and accuracy of the data, master relevant cash flow and exchange status and submit the report of the statistics and relevant information (see the detailed requirements in Appendix 2) of cross-border RMB under capital account of the previous month to the Capital Account Administration Division of the State Administration of Foreign Exchange within the first 5 working days of each month.

VII. Enhancing communication and coordination with relevant departments

All branches (and foreign exchange administration departments) shall enhance communication and coordination with relevant departments in branches (and sub-branches) of the bank as well as the local development and reform commissions, commerce departments etc., and establish information sharing and supervision cooperation mechanism.

This Circular shall take effect as of May 1, 2011. All branches (and foreign exchange administration departments) shall forward this Circular to the central sub-branches, branches and banks in the jurisdiction thereof as soon as possible upon receiving it. If any problems are encountered in the implementation, please inform the Capital Account Administration Division of the State Administration of Foreign Exchange in a timely manner.

Appendix 1: Filing and registration items at the bank terminal for cross-border RMB direct investment

1. Registration of overseas investment

(1) Filing of cross-border RMB outflow of initial expenses for overseas investment;

(2) Filing of cross-border RMB inflow under refund of initial expenses;

(3) Filing of cross-border RMB outflow of overseas investment;

(4) Filing of cross-border RMB inflow of income obtained from capital reduction, equity transfer and liquidation of overseas invested enterprises; and

(5) Filing of cross-border RMB inflow of profits of overseas investment.

2. Foreign direct investment registration

(1) Filing of inflow

A. Filing of cross-border RMB capital fund inflow;

B. Filing of cross-border RMB inflow under equity transfer from Chinese shareholders to overseas investors;

C. Filing of cross-border RMB capital fund inflow of initial expenses (such as for acquisition, guarantee and other items); and

D. Filing of cross-border RMB capital fund inflow in purchase of domestic assets by non-residents.

(2) Filing of outflow

A. Filing of cross-border RMB capital fund outflow of income obtained from liquidation by overseas investors;

B. Filing of cross-border RMB capital fund outflow of income obtained from equity transfer from overseas investors to domestic investors;

C. Filing of cross-border RMB capital fund outflow of income obtained from shareholding reduction by overseas investors;

D. Filing of cross-border RMB capital fund outflow of income obtained from recovery in advance of investment by overseas investors;

E. Filing of cross-border RMB capital fund outflow in realization of domestic assets by non-residents;

F. Filing of cross-border RMB capital fund outflow under refund of purchase price of domestic assets by non-residents; and

G. Filing of cross-border RMB capital fund outflow of profits obtained by overseas investors.

3. Registration of outbound lending by domestic institutions

(1) Filing of cross-border RMB outflow under outbound lending by domestic institutions; and

(2) Filing of cross-border RMB inflow of principal and interests under outbound lending by domestic institutions.

Appendix 2: Statistics Table of Cross-border RMB under Capital Account and requirements on the filling

I. Statistics Table of Cross-border RMB under Capital Account (see the details in the attached table)

The filling of the Table shall be made on item-by-item basis and the scope for the filling shall be the cross-border RMB capital account business (exclusive of the RMB business operated by the Cross-Border Division) approved by or filed with the State Administration of Foreign Exchange.

II. Filling of the item of Business Class

Please fill in the business class according to the following sequence letter:

Sequence letters for business classes

A. Contribution of the foreign party under foreign direct investment

B. Outward remittance of withdrawn capital of the foreign party under foreign direct investment

C. Outward remittance of profits of the foreign party under foreign direct investment

D. Contribution of the Chinese party under overseas direct investment

E. Inward remittance of withdrawn capital of the Chinese party under overseas direct investment

F. Inward remittance of profits of the Chinese party under overseas direct investment

G. Outward Remittance under the overseas lending

H. Inward Remittance under the overseas lending

I. Foreign debt

J. Foreign security

K. Shareholding reduction of overseas shareholders of A-share listed companies

L. Dividend to overseas shareholders of A-share listed companies

Businesses that could not be classified under the above sequence letters are not required to fill in the sequence letter and shall be specified directly in the Remarks.


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