Laws of the People's Republic of China

State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning the Foreign Exchange Administration of Overseas Investment in Border Areas

Hui Fa [2005] No.14

The branches and offices of the State Administration of Foreign Exchange (SAFE) in all provinces, autonomous regions, municipalities directly under the Central Government, as well as the SAFE branches of municipalities of Shenzhen, Dalian, Qingdao, Xiamen and Ningbo:

For the purpose of further implementing the development strategy of "going out" and promoting foreign trade and economic relations with neighboring countries, relevant issues concerning the foreign exchange administration of overseas investment in border areas are hereby notified as follows:

1.

Border areas as used herein shall refer to such areas as prefecture-level cities and nationality autonomous prefectures, which are situated within the Chinese inland boundary and border on neighboring countries.

Overseas investment in border areas as mentioned herein shall refer to the establishment of various enterprises or the purchase and the holding of shares in neighboring countries by enterprises, corporations or other economic organizations (including individual households) (hereinafter referred to as investment subjects in border areas) registered in border areas of our country to engage in production and operating activities.

2.

Relevant branches of the SAFE may, within limits of their own authority, extend the authority vested with central sub-branches of foreign exchange located inside border areas within the jurisdiction of such branches in examining the source of foreign exchange funds for overseas investment, and shall file a report on such authority with the SAFE for record.

For projects funded by investment subjects in border areas by means of utilizing subjects' own foreign exchange or domestic foreign exchange loans or purchasing foreign exchange, central sub-branches of foreign exchange located inside border areas may, within the scope of the aforesaid authority, directly provide opinions for the examination of the source of foreign exchange funds.

3.

Overseas investment in border areas shall go through the procedure of overseas investment registration in accordance with pertinent regulations for the administration of overseas investment.

Investment subjects in border areas, if contributing their investment in RMB, may go through the formalities of overseas investment registration with the SAFE branches where such subjects reside on presentation of materials laid down in Article 4 hereof.

4.

Where overseas investment (including the overseas investment failing to undergo both the examination of the source of foreign exchange funds for overseas investment and the registration of foreign exchange for overseas investment, and another kind of overseas investment having undergone the examination of the source of foreign exchange funds for overseas investment but failing to undergo the registration of foreign exchange for overseas investment) in border areas has taken place prior to the entry into force of this Circular, subjects of such overseas investment may present the following materials to SAFE branches where such subjects are located for making up the registration formality of foreign exchange for overseas investment with such branches.

(1)

application filed by investment subjects in border areas in terms of making up registration (including date and place when and where overseas investment enterprises were established, their operating status and types);

(2)

materials attesting the registration by enterprises having made investment abroad with administrative departments for investment (or for industry and commerce) in countries where such enterprises are located;

(3)

overseas enterprises' balance sheets of the past year which have been examined (it is not necessary for investment subjects in border areas that are individual households to provide the sheet.);

(4)

contracts of joint or cooperative ventures or articles of association thereof, all of which are necessary to be separately provided by overseas joint or cooperative ventures; and

(5)

other materials required by the SAFE.

5.

Should investment subjects in border areas make their investment in kinds, they shall, after the contribution has been made in investment abroad in the form of materials, handle the formalities of balance verification and writing-off of no export proceeds in foreign exchange with SAFE branches, upon the strength of presenting instruments for verification and writing-off of the export proceeds in foreign exchange, customs declaration bills for export goods and the original of the Certificate of the Registration of Foreign Exchange for Overseas Investment as well as the photocopy thereof. Such branches shall, upon processing the verification and writing-off formality for enterprises, clearly write down on the Certificate of the Registration of Foreign Exchange for Overseas Investment the actual amount, currency and date in respect of the verification and writing-off.

6.

SAFE branches located in border areas shall give more publicity to relevant regulations and policies for the administration of overseas investment, and actively encourage enterprises to contribute investment abroad subject to related provisions.

7.

The present Circular shall come into effect as of April 1, 2005.

State Administration of Foreign Exchange

March 3, 2005