Laws of the People's Republic of China

The People's Bank of China

Announcement of the People's Bank of China

[2006] No. 5

For the purpose of deepening the reform of foreign exchange management mechanism, supporting the facilitation of trade and investment, further cultivating the foreign exchange market and promoting the basic international balance of payments, we hereby announce, upon approval of the State Council, the issues concerning the adjustment of foreign exchange management policies as follows:

I.

Where an enterprise opens, alters or closes current accounts of foreign exchange, the procedure of examination and approval in advance shall be adjusted to direct handling by the bank according to the foreign exchange management requirements and business convention and the archival filing at the foreign exchange bureau. The quota for the current accounts of foreign exchange of the enterprises shall be enhanced. The enterprises that have real transactions and need to make external payment shall be allowed to purchase foreign exchange in advance.

II.

Banks shall simplify the vouchers for the sale and payment of foreign exchange in the service trade, and broaden the purview of examination and approval thereof.

III.

Banks shall further simplify the formalities for individual purchase of foreign exchange by domestic citizens, raise the quota of foreign exchange purchase and implement the management of total annual amounts. Where an individual purchases foreign exchange within the limit, he shall purchase foreign exchange from and declare its purposes to the bank upon the strength of his real identity certification; and where an individual purchases foreign exchange that exceeds the limit, the bank shall offer foreign exchange in light of the actual demands after examination of the relevant vouchers.

IV.

The business of overseas financial management of foreign exchange by domestic banks on behalf of their clients shall be broadened, and the qualified banks shall be allowed to gather the RMB capital of domestic institutions and individuals and use it for purchasing foreign exchange for the purpose of investing in the overseas products with fixed proceeds.

V.

The qualified fund management companies and other securities management institutions shall be allowed to gather the foreign exchange owned by domestic institutions and individuals within a certain amount for the purpose of investing in the overseas compound securities, including the stocks.

VI.

The business of overseas securities investments by insurance institutions shall be broadened, and the qualified insurance institutions shall be allowed to purchase foreign exchange for investing in overseas products with fixed proceeds and money market instruments, with the amount of foreign exchange purchase limited in light of a certain proportion of total assets of an insurance institution.

The People's Bank of China shall organize the implementation of the above-mentioned policies and measures in real time and item by item jointly with the relevant department. At the same time, the People's Bank of China shall closely follow up and analyze the international balance of payments, timely adjust the relevant policies, practically guard against risks and maintain the national economy and financial safety.

The People's Bank of China

April 13, 2006