Laws of the People's Republic of China

The State Administration of Foreign Exchange

Circular on Some Issues Concerning Capital Changes of Enterprises with Foreign Investment

HuiZiHanZi [1996] No.188

June 28, 1996

The branches of the State Administration of Foreign Exchange in various provinces, autonomous regions, municipalities directly under the Central Government, municipalities separately listed on the State plan and special economic zones:

According to Article 31 of Provisions on Administration of Settlement, Sales of and Payment in Foreign Exchange, we hereby make following notice on some issues concerning capital changes such as increase, transfers and etc., of enterprises with foreign investment, re-investment within Chinese territory by investment-orientated enterprises with foreign investment with their paid-in capital, or by the foreign party of existing enterprises with foreign investment with its profit obtained domestically. The aim of it is to improve the foreign exchange administration of enterprises with foreign investment, and make operation convenient.

1.

For making re-investment domestically in a new enterprise with foreign investment with its distributed foreign exchange or Renminbi profit, the foreign party of existing enterprises with foreign investments shall apply with the domiciled branch of the State Administration of Foreign Exchange (SAFE) by presenting following documents:

(1)

Capital assessment report issued by CPA;

(2)

Annual auditing financial report;

(3)

Pay taxes report;

(4)

The board of directors' profit distribution resolution;

(5)

The re-investor's confirms of re-investment with profits;

(6)

Foreign Exchange Registration Certificate of the existing enterprise with foreign investment;

(7)

Other documents required by SAFE.

After verifying the above-mentioned documents authentic, the domiciled branch of SAFE shall issue a proof verifying the source of profit. The proof shall serve as a certificate for the new enterprise with foreign investment to apply for Business License of Industry and Commerce and capital assessment report. The designated foreign exchange bank shall make payment for the re-investor from the foreign exchange settlement accounts or capital accounts of the existing enterprise with foreign investment on the strength of the proof issued by SAFE.

2.

In case of re-investment in the existing enterprise with foreign investment with its distributed profit, relevant approval documents for the re-investment project issued by the competent department shall also be provided in addition to documents prescribed in the previous article.

3.

For making re-investment domestically with its paid-in capital, the investment-orientated enterprise with foreign investment shall apply with SAFE by presenting following documents for capital remittance:

(1)

Capital assessment report issued by CPA;

(2)

Approval documents issued by the competent department, Business License of Industry and Commerce, approved contract and constitution of the new enterprise;

(3)

The re-investment resolution of the board of directors with the investment-orientated enterprise with foreign investment;

(4)

Foreign Exchange Registration Certificate of the enterprise with foreign investment;

(5)

Other documents required by SAFE.

4.

In case of capital increase, transfer, and other changes, enterprises with foreign investment shall apply with SAFE by presenting following documents:

(1)

Capital assessment report issued by CPA;

(2)

The resolution of the board of directors;

(3)

Approval documents issued by the original competent department;

(4)

Foreign Exchange Registration Certificate of the enterprise with foreign investment.

(5)

Other documents required by SAFE.

In case of capital transfer, transfer agreement shall also be provided.

After verifying above-mentioned documents authentic, SAFE shall issue Examination and Approval Form for Domestic Remittance of Foreign Exchange Capital to the Enterprises with Foreign Investment. The designated foreign exchange bank shall remit the foreign exchange capital on the strength of the Examination and Approval Form.

5.

This Circular shall enter into force as of July 1, 1996.