Laws of the People's Republic of China

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange (SAFE) on Conducting Annual Inspection on Foreign Exchange Accounts under Current Account for the Year of 2001

HuiFa [2002] No.9

January 25, 2002

SAFE branches in all provinces, autonomous regions, and municipalities directly under the Central Government, exchange administration offices, and SAFE branches in the cities of Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo:

With a view to strengthening the supervision of foreign exchange accounts under current account, and normalizing annual inspection on foreign exchange accounts, a notice concerning annual inspection on foreign exchange accounts under current account for the year of 2001 is given as follows in accordance with the Provisions on the Administration of Domestic Foreign Exchange Accounts and the Interim Provisions on Annual Inspection on Foreign Exchange Accounts under Current Account of Domestic Entities (hereinafter referred to as Provisions on Annual Inspection):

1.

Schedule of the inspection

All SAFE branches shall conduct the annual inspection in their respective jurisdiction from March to May of 2002, and submit the inspection report to the Current Account Management Department of the SAFE at the end of June.

2.

Scope of the inspection

The inspection shall cover the foreign exchange settlement accounts and foreign exchange special accounts of Chinese-funded entities, and the foreign exchange accounts of foreign establishments in China.

3.

Requirements on the inspection

3.1

All SAFE branches shall carry out the inspection seriously and ensure its quality in accordance with the requirements of the SAFE on the annual inspection.

3.2

In order to encourage law-abiding entities and establishments, properly simplify the inspection procedure on the law-abiding, and raise the efficiency of work, Chinese-funded entities and foreign establishments that were found to have no problem related to infraction of regulations in the previous annual inspection may be exempted from the 2001 annual inspection. Chinese-funded entities that were evaluated as "honorable enterprises for collection of export proceeds" by SAFE offices in accordance with the Proposed Methods for the Examination on Collection of Export Proceeds shall enjoy priority in going through relevant formalities after submitting their inspection reports to SAFE offices.

3.3

This annual inspection shall, on the basis of an overall inspection on the foreign exchange accounts under current account of Chinese-funded entities and foreign establishments in China, highlight:

3.3.1

cases of Chinese-funded entities exceeding the balance ceilings of their foreign exchange accounts;

3.3.2

cases of Chinese-funded entities opening accounts without approval of the SAFE offices;

3.3.3

cases of foreign exchange funds in foreign exchange special accounts of Chinese-funded entities being switched to time deposit account without approval;

3.3.4

sales of net foreign exchange income in foreign exchange special accounts of Chinese-funded entities.

4.

Requirement on the inspection report

4.1

The report shall be authentic and accurate.

4.2

The report shall cover: process of the annual inspection (including arrangement of the inspection, checkup and conclusion); inspection overview; main problems with account-opening entities and banks and analysis of their causes; classification of problems related to infraction of regulations that exist in accounts opened in violation of rules and case analysis thereto related; measures taken by the reporting SAFE office aiming at problems found and policy suggestions on improving the administration of foreign exchange accounts.