Laws of the People's Republic of China

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange (SAFE) on Issues Related to Foreign Exchange Administration in Small Frontier Trade with Russia and Other Countries of the Commonwealth of Independent States (CIS)

HuiFa [2002] No.88

September 16, 2002

SAFE branches in Heilongjiang Province, Inner Mongolia Autonomous Region, and Xinjiang Uygur Autonomous Region:

In order to guide and normalize frontier trade, improve foreign exchange administration, and further promote the development of foreign trade and economic cooperation, a circular on issues related to the foreign exchange administration in small frontier trade with Russia and other CIS countries is given hereunder:

1.

Small frontier trade in this Circular refers to trade between enterprises in our frontier regions who are authorized to run small frontier trade (hereinafter referred to as "small frontier trade enterprises" or SFTEs) with enterprises, individuals, or other trade entities in the frontier regions of Russia and other adjacent CIS countries at designated land border ports.

2.

Set up and improve bank settlement system in frontier regions, guide the settlement of small frontier trade into the banking system. Commercial banks in frontier regions shall actively set up relationship of correspondent bank with commercial banks in frontier regions of the adjacent countries, and open a direct settlement channel through the banking system. If a bilateral agreement on settlement in the domestic currency has been signed between China and the adjacent country, commercial banks in the frontier region shall open bilateral settlement accounts in the domestic currency as soon as possible with commercial banks in frontier regions of the adjacent country, and make settlement in the domestic currency.

3.

Abolish the floor limit on export verification in renminbi or foreign currency under small frontier export. For small frontier export, whatever the amount is, a SFTE shall apply for export proceeds verification paper in accordance with regulations on the administration of export proceeds verification, and go through the procedure of customs declaration and paper delivery. The export proceeds verification shall be conducted according to the rules stated below:

(1)

If the settlement is made in foreign exchange, the SFTE shall go through the procedure of export proceeds verification in accordance with the Rules on the Administration of Export Proceeds Verification, Detailed Implementing Rules on the Administration of Export Proceeds Verification, and other regulations on the administration of export proceeds verification.

(2)

If the settlement is made in foreign currency, the SFTE shall go through the procedure of export proceeds verification upon customs declaration form of export, export proceeds verification paper, memo of sale of foreign currency issued by the bank, and invoices.

(3)

If the settlement is made in renminbi, the SFTE shall go through the procedure of export proceeds verification upon customs declaration form of export, export proceeds verification paper, and reporting form for carrying renminbi in across the border verified by the customs or proof of inward remittance of renminbi.

(4)

If the settlement is made in currency of the adjacent country, and the country has signed a bilateral agreement on settlement in domestic currency with China, the SFTE shall go through the procedure of export proceeds verification upon customs declaration form of export, export proceeds verification paper, and reporting form for carrying the currency of the adjacent country in across the border verified by the customs or proof of inward remittance.

4.

If an SFTE collects the export proceeds by inward remittance to a resident individual, the SFTE shall have the name and account number of the proposed receiving resident individual recorded at the SAFE office in advance. The bank shall mark the account upon the proof issued by the SAFE office. After export, formalities of export proceeds verification shall be handled upon customs declaration form of export, export proceeds verification paper, memo of sale of foreign exchange from the recorded account of the resident individual.

5.

SAFE offices in frontier regions shall distribute the export proceeds verification paper to SFTEs and handle the procedure of export proceeds verification for them in accordance with the Rules on the Administration of Export Proceeds Verification and Detailed Implementing Rules on the Administration of Export Proceeds Verification, and this circular; and examine their performance in collecting export proceeds according to rules.

6.

SAFE branches shall inspect and urge commercial banks under their jurisdiction to implement the Circular of the People's Bank of China on Issues Related to the Administration of Foreign Currency (YinFa [2001] No.376) and the supplementary circular thereto related, and the Detailed Implementing Rules on the Administration of Purchase of Foreign Exchange by Domestic Resident Individuals, instruct commercial banks to open the business of purchasing foreign exchange from individuals in all their branches and sub-branches in frontier regions that have been authorized to conduct the business of deposits in foreign currency, open the business of selling foreign exchange to individuals and establish more networks in all their branches and sub-branches in frontier regions that have been authorized to conduct the business of purchase and sale of foreign exchange, or the business of the exchange of foreign currencies. The Circular of the People's Bank of China on Adjusting the Policy on the Administration of Foreign Currency (YinFa [2001] No.283) shall be implemented seriously. Bid and asked rates of foreign currency shall be further adjusted. Appropriate fluctuations within the prescribed range are permitted. Sale of foreign currency to banks is encouraged. SAFE offices in frontier regions shall actively assist commercial banks in frontier regions to conduct the business of foreign exchange sale and purchase by individuals in line with market conditions, and do a good job of controlling risks and matching the demand and supply of different currencies.

7.

SAFE offices in frontier regions shall strengthen the statistics and analysis on small frontier trade, collect and summarize relevant statistics in time, and report to the Current Account Department of the SAFE the Statistical Statement of Small Frontier Trade and Verification for the previous month within the first 10 working days of every month.

8.

SAFE offices in frontier regions shall further strengthen the administration of foreign currency, actively solicit the support of the local governments, cooperate with the local public security organs to crack down upon illegal foreign exchange transactions and normalize the order of foreign exchange market.

9.

Violators of this circular shall be punished by the SAFE office concerned in accordance with the Regulations on the Exchange System of People's Republic of China and other foreign exchange regulations.

10.

SAFE offices in the frontier regions shall report the development of frontier trade and policies on foreign exchange administration to local governments, actively cooperate with local governments in putting policies encouraging frontier trade into practice. Meanwhile, they shall strengthen communication and cooperation with agencies in charge of foreign trade and economic cooperation, finance, and taxation to make joint effort to normalize the administration of frontier trade, make use of various media such as newspapers, TV, radio, and so on, and employ various ways such as forums, training courses, to familiarize SFTEs and persons concerned with policies on foreign exchange administration.

11.

This Circular shall be experimentally implemented in Helongjiang Province, Inner Mongolia Autonomous Region, and Xiangjiang Uygur Autonomous Region for the time being. SAFE branches in these regions shall formulate detailed implementing rules in accordance with this Circular and report them to the Current Account Department of the SAFE for approval.

12.

This Circular shall enter into force as from October 1, 2002. In case of any contradiction with the provisions of previous regulations, this Circular shall prevail. Upon receiving it, SAFE branches in Heilongjiang province, Inner Mongolia Autonomous Region, and Xinjiang Uygur Autonomous Region shall transmit in time this Circular to the sub-branches under their jurisdiction and commercial banks in frontier regions.

Attachment:

Statistical Statement of Small Frontier Trade and Verification (Omitted)