Laws of the People's Republic of China

The People's Bank of China, the State Administration of Foreign Exchange

Circular of the People's Bank of China and State Administration of Foreign Exchange on Adjusting Policies Concerning Foreign Exchange Purchase for Some Capital Account Transactions

YinFa [2001] No.304

September 19, 2001

Each branch, operation administrative department of the People's Bank of China (hereinafter referred to as "the PBC"), key subbranch of the PBC in each provincial capital, and in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo; Branch of the State Administration of Foreign Exchange (hereinafter "SAFE") in each province, autonomous region, municipality directly under the Central Government, foreign exchange administrative department, Shenzhen, Dalian, Qingdao, Xiamen, Ningbo branch of SAFE; each designated Chinese-capital foreign exchange bank:

The PBC and SAFE took some temporary measures to limit buying foreign for some capital account transactions in 1998 according to the special situation at that time. These measures have played positive role in stabilizing balance of payment and preventing foreign exchange evasion and arbitrage. Now, China's macroeconomic development and balance of payment are sound. In order to facilitate the enterprise's business, promote the bank to improve their asset, and implement the strategy of "Going Out", following adjustments have been made:

1.

Eliminate the limitation on buying foreign exchange for repaying overdue domestic foreign exchange loans. When examining and approving the application of foreign exchange purchase, each branch of SAFE shall adhere to principle of enterprise's application. In order to prevent large scale mass purchase, approval shall be made by stages and in groups.

2.

Relax the limitation on buying foreign exchange for repaying domestic foreign exchange loans, external debt on-relendings, and external debts before the due date. In case of advance repayment clauses included in concerned loan contract, with the approval of SAFE, advance repayment can be made with the borrower's own foreign exchange. With the approval of SAFE, following advance repayments can be made: 1) those approved by the State Council; 2) those needed for debt rearrangement, closure, suspend, merger, or shifting of the enterprise due to policy adjustments; 3) those pronounced by the court.

3.

Relax the limitation on buying foreign exchange for overseas investment. Foreign exchange needed for strategic overseas investment (approved by the State Council), processing project with exported materials, and foreign aid project may be purchased. Other kind of overseas investments shall mainly be financed by the investor's own foreign exchange.

In case of foreign exchange purchase for L/C advanced payment, separate notice shall be issued.

This circular shall enter into force as of the date of promulgation. In case of any contradiction with previous regulations, this circular shall prevail. On receiving this circular, each branch of SAFE shall transmit it to branch/sub-branch and related units under its jurisdiction in no time. The headquarter of each Chinese-funded foreign exchange designated bank shall transmit it to its branches. Any problem during implementation shall be reported to the Capital Account Department of SAFE in a timely fashion.

This is hereby the notification.