Laws of the People's Republic of China

the State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange on Adjusting the Policies Concerning the Administration of Current Foreign Exchange Accounts

Hui Fa [2006] No. 19

April 13, 2006

To all branches and foreign exchange administration departments of the State Administration of Foreign Exchange (the SAFE) in all provinces, autonomous regions, and municipalities directly under the Central Government, the branches in Shenzhen, Dalian, Qingdao, Xiamen and Ningbo, and all designated Chinese-funded foreign exchange banks:

For the purpose of better satisfying the demands of domestic institutions and individuals for using foreign exchanges and promoting the trade facilitation, we hereby notify the relevant matters on adjusting the policies concerning the administration of current foreign exchange accounts as follows according to the Announcement No. 5 [2006] of the People¡¯s Bank of China:

I.

Annulling the beforehand examination and approval for the opening of current accounts of foreign exchange and raising the quota of current foreign exchange accounts

1.

The foreign exchange bureau shall not conduct advance examination and approval for the opening, alteration and closing of current foreign exchange accounts of domestic institutions any more. Where a domestic institution that has already opened any current foreign exchange account needs to open a new current foreign exchange account again, it may directly go through the account opening formalities at a designated foreign exchange bank (hereinafter referred to as the bank) upon the strength of an account opening application form, its business license (or registration certificate for social organizations) and its organization code. Where a domestic institution that has not opened any current foreign exchange account before needs to open a new current foreign exchange account, it shall firstly register its basic information at the foreign exchange bureau upon the strength of its business license (or registration certificate for social organizations) and its organization code before going through aforesaid formalities.

2.

The quota of the foreign exchange that can be preserved at the current foreign exchange accounts of a domestic institution shall be raised and be determined in light of the sum of 80% of the foreign exchange incomes under current accounts and 50% of the foreign exchange expenditures under the current accounts in the previous year. Where a domestic institution that has no foreign exchange expenditure under current accounts in the previous year and needs to open an account, the initial quota of its current foreign exchange account shall be adjusted to the equivalent not more than 500,000 US Dollars.

3.

Where a domestic institution that has carried out transactions before needs to pay foreign exchange for external payment, it may purchase foreign exchange in advance at the account-opening bank upon the strength of valid vouchers and business documents as prescribed by the Provisions concerning the Control of Settlement, Sale and Payment of Foreign Exchange and other relevant provisions on the administration of foreign exchange, and deposit the foreign exchange into its current account of foreign exchange.

II.

Simplifying the vouchers for the sales and payments of foreign exchange in the service trade and adjusting the quotas for the examination and approval of sales and payments of foreign exchange in the service trade

1.

Where a domestic institution or individual pays the equivalent of 50,000 US Dollars or less to an overseas institution or pays the equivalent of 5,000 US Dollars or less to an overseas individual for the expenses under the item of service trade, the domestic institution or individual shall, upon the strength of the contract (agreement) or the invoices (letter of payment), go through the formalities for purchasing foreign exchange; where a domestic institution or individual purchases foreign exchange exceeding the aforesaid quota, the original provisions shall prevail.

2.

Where a domestic institution or individual pays foreign exchange under the item of service trade through the internet or by any other method of electronic commerce, it or he may go through the formalities for purchasing foreign exchange upon the strength of the relevant contract (agreement), the notice on payment that are downloaded from the network and affixed with signature or seal.

3.

As to the sales or payment of foreign exchange under the item of service trade, for which the examination and approval of documents are not clearly prescribed by any law, it shall be subject to the examination and approval of the bank if the foreign exchange is the equivalent of 100,000 US Dollars or less and, or shall be subject to the examination and approval of the local foreign exchange bureau if the foreign exchange is the equivalent of more than 100,000 US Dollars.

4.

Where an international ocean shipping enterprise (including the international shipping transportation, non-vessel shipping, shipping agency and freight forwarding enterprises) pays the freight and relevant expenses under the item of international ocean shipping, it may, directly purchase the foreign exchange at the bank; and a consignor may, in light of the business requirements, directly pay the freight and the relevant expenses under the item of international ocean shipping to overseas shipping enterprises.

III.

Loosening the policies concerning the purchase of foreign exchange by domestic residents and implementing the administration of total annual amounts

1.

The purchase of foreign exchange by domestic residents shall be subject to the administration of total annual amounts, and the total annual amount shall be the equivalent of 20,000 US Dollars for each person per year. Where a domestic resident purchases foreign exchange within the total annual amount, he shall handle it after declaring the purposes to the bank upon the strength of his real identity certification; where he purchases foreign exchange that exceeds the total annual amount, he shall handle it after the bank examines the voucher on real demands as prescribed in the provisions on the administration of foreign exchange.

2.

The foreign exchange purchased by a domestic resident within the total annual amount can be deposited into his domestic foreign exchange account or used for the payment of foreign exchange under current accounts. Where he remits the foreign exchange abroad, withdraws foreign currencies or carries them abroad, he shall handle it according to the prior provisions on the administration of foreign exchange.

3.

The purchase of foreign exchange within the total annual amount by a domestic resident shall be conducted by himself or his lineal relative he entrusts. Where the purchase is conducted by a lineal relative of the resident, the identity certifications of both the trustor and the agent, the certification on the kindred and the letter of authorization issued by the trustor shall be provided.

4.

The foreign exchange bureau shall not undertake the cancellation administration of the purchase of foreign exchange by domestic residents.

IV.

Regulating the administration of operations and strengthening the monitoring and warning

1.

The foreign exchange bureau shall exercise the supervision over the foreign exchange incomes and expenses of domestic institutions and individuals through the information system, and adjust the quota for the current foreign exchange accounts and the total annual amounts of domestic residents for purchasing foreign exchange in light of the real requirements of the development of foreign-related economy and the situation of balance of payment in the world market.

2.

A bank shall strengthen the examination and approval of the authenticity of foreign exchange inflows and settlements of domestic institutions and individuals, and report the information on the opening and closing of foreign exchange accounts as well as the purchase of foreign exchange by individuals to the foreign exchange bureau according to relevant provisions.

3.

The foreign exchange bureau shall investigate and deal with any violation of the provisions in the present Notice according to the regulations on the administration of foreign exchange.

The present Notice shall come into force as of May 1, 2006. The matters as prescribed by the present Notice shall still be subject to the current provisions. Where any provision promulgated earlier conflicts with the provisions in the present Notice, the latter shall prevail.

All branches of the SAFE shall forward it to the sub-branches, foreign-funded banks, city commercial banks and rural credit cooperative banks in their respective jurisdictions upon receipt of the present Notice; and all designated Chinese-funded foreign exchange banks shall forward it to the branches in their respective jurisdictions upon receipt of the present Notice as soon as possible. In case of any problem encountered in the implementation of the present Notice, please timely report it to the SAFE.