Laws of the People's Republic of China

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange Concerning the Sale and Purchase of Foreign Exchange for the Non-trade Items Unspecified in the Laws and Regulations Currently in Force

HuiFa [2003] No.35

March 6, 2003

Branches and Foreign Exchange Administration Offices under the State Administration of Foreign Exchange at levels of provinces, autonomous regions and municipalities directly under the Central Government, and branch administrations of Shenzhen, Dalian, Qingdao, Xiamen, Ningbo; and Sino-capital designated banks of foreign exchange:

For the purpose of improving the administration on foreign exchange for non-trade items, settling the issues on sale and purchase of foreign exchange for the non-trade items unspecified in the laws or regulations currently in force, and providing conveniences for the real economic and trading activities of domestic organizations, the State Administration of Foreign Exchange decided to classifiably administrate the non-trade items unspecified in the laws and regulations currently in force concerning foreign exchange administration in accordance with the prospective provisions of the Regulations of the People's Republic of China on Administration of Foreign Exchange, the Administrative Provisions on Settlement, Sale and Purchase of Foreign Exchange, the Circular Concerning Submission of Taxation Certificates for Sales and Purchase of Foreign Exchange under the Non-Trade Items and Partial Capital Items. A Circular on relative issues is hereby distributed:

I.

For the sale/purchase of foreign exchange for a non-trade item unspecified in the laws and regulations currently in force, which sum equivalent is no more than $50,000 (including $50,000), domestic organization may directly perform the transaction directly with the designated bank of foreign exchange by presenting correlative documents, and the banks shall perform the sale/purchase after verifying the authenticity. For the sale/purchase of foreign exchange for a non-trade item unspecified in the laws and regulations currently in force, which sum equivalent is over $50,000 and no more than $500,000 (including $500,000), the domestic organization shall apply to the branches of the State Administration of Foreign Exchange (hereinafter referred to as AFE). After obtaining the verification certificate for the authenticity, the organization may make transactions with the designated bank of foreign exchange by presenting the verification certificate issued by the AFE. For the sale/purchase of foreign exchange under non-trade items unspecified in the laws and regulations currently in force, which sum equivalent is over $500,000 (excluding $500,000), the domestic organization shall apply to the local AFE by presenting correlative documents for local AFE to report to the SAFE for approval. After being verified by the SAFE, the organization may perform the sale/purchase of exchange at the designated bank of foreign exchange by presenting verification certificate from the local AFE.

II.

The credit enterprises with export proceeds in foreign exchange without any violation of correlative regulations on foreign exchange administration, the influencing importers with biggish import volume within the jurisdiction, and the institutions with frequent foreign exchange incomes and expenses on non-trades, such as party, governmental and military organizations and scientific research institutions at State-level, with a approval of the local branch AFE, may transact the sales/purchases of foreign exchange for non-trades directly with the designated banks of foreign exchange by presenting relative documents, exempt from the limitation for the sum stipulated in Article 1 of this Circular. The local AFEs may, according to the actual circumstances of local jurisdictions, formulate specific approval requirements consistent with the provisions in this Article. The AFEs shall inform the local designated banks of foreign exchange after verifying such domestic organizations, and transmit the list of verified domestic organizations to the Current Account Transaction Administration Department of the State Administration of Foreign Exchange for record. For any verified domestic organization in violation of the regulations on foreign exchange administration, the AFE shall notify the designated bank of foreign exchange to immediately cancel its qualification.

III.

When designated banks of foreign exchange audit the authenticity of the sales/purchases of foreign exchange for non-trade items unspecified in the laws and regulations currently in force, they shall audit the written applications, contracts/agreements, invoices (payment notices) and taxation warrants provided by the domestic organizations.

IV.

When the AFEs audit the authenticities of the sales/purchases of foreign exchange for non-trade items unspecified in the laws and regulations currently in force, they shall audit the written applications, contracts/agreements, invoices (payment notices), taxation warrants and other relevant documents provided by the domestic organizations. Meanwhile, they shall also enhance the internal controls, establish and implement an administrative system of authorization by levels, and decide the items with biggish sum or with uncompleted documents through collective discussions.

V.

When the AFEs and the designated banks of foreign exchange audit the authenticity of the sales/purchases of foreign exchange for non-trade items unspecified in the laws and regulations currently in force, they shall audit the original documents, indicate the date and amount of the sales/purchases of foreign exchange on the original documents, seal the documents with official seals, and keep the copies for 3 years for future reference.

VI.

The designated banks of foreign exchange shall record all the transactions of sales/purchases of foreign exchange for non-trade items unspecified in the laws and regulations currently in force which have been handled by them, fill in the Registration Form of Sales/Purchases of Foreign Exchange for Special Non-Trade Items (Attachment) that shall be submitted to local AFEs within the first 5 working days at the beginning of each quarter and shall be submitted by the local AFEs (foreign exchange administration department) to the State Administration of Foreign Exchange within the first 10 working days at the beginning of each quarter.

VII.

This Circular shall enter into force as of April 1, 2003.

Each local AFE (foreign exchange administration department) shall transmit this Circular to the central branch offices and foreign-invested banks immediately within its jurisdiction upon receiving it. Each Sino-capital designated bank of foreign exchange shall transmit this Circular immediately to its branch banks after receiving it. They shall feedback any problem occurring in the course of implementation of this Circular immediately to the Current Account Transaction Administration Department of the State Administration of Foreign Exchange.

Attachment: Registration Form of Sales/Purchase of Foreign Exchange for Special Non-Trade Items (omitted)