Laws of the People's Republic of China

The State Development Planning Commission, the State Economic and Trade Commission, the People's Bank of China

Circular of the State Development Planning Commission, the State Economic and Trade Commission, the People's Bank of China on Relevant Issues Concerning Strengthening Control over Sale of Exchange Under Capital Account

JiWaiZi [1998] No.992

June 15,1998

Province, autonomous region, the Development Planning Commission of municipality directly under the Central Government, the Economic and Trade Commission, the branch of People's Bank of China :

Because of having adopted proper and effective policies and measures and the emergence of new means of investment and financing, in recent years there has been an increase of foreign investment in the infrastructure and the issue of H share listed abroad and B share listed within China also have progressed greatly, which have consequently made the sale amount of exchange under capital account grow in a relatively fast speed and at the same time exerted pressure on the supply of Renminbi to some extent. In order to strengthen supervision and control over sale of foreign exchange under capital account, following matters concerning the control over sale of exchange under capital account with approval from State Council are hereby pronounced:

1.

On the premise of continual adoption of moderately tight monetary policy, domestic financial institutions are encouraged to make use of new financing means to participate in financing of Renminbi in the projects of domestic and foreign funds. Efforts to restructure should be strengthened to reduce excessive dependence of infrastructure projects on foreign funds.

2.

Within the current limits of authority to examine and approve, no localities and departments are allowed to divide up projects surmounting the prescribed quota of foreign fund into projects under the quota or deliberately lower down the total investment amount so as to examine and approve by themselves. In event of foreign-funded projects of BOT, financing of projects outside China, portfolio financing (ABS) etc., they must be all examined and approved by State Development Planning Commission or by State Council through State Development Planning Commission without exception.

3.

In case of various kinds of projects utilizing foreign funds and having a need of sale of exchange, yearly plan of fund for sale based by year should be added in the feasibility report presented for examination. When examining and approving the feasibility report of the project, the government agencies in charge of the examination and approval should check and determine the prescribed quota for sale. Copy of the feasibility report approved by examining government agencies concerned should be sent to State Administration of foreign exchange having the same authority to provide basis for state administration of foreign exchange to learn into the trend of sale of exchange under capital account.

4.

Establishment of record and registration system of sale of exchange under capital accounts. For those foreign-funded projects needing sale of exchange (including the issuing of B share listed within China and the share listed abroad), institutions with a project over the prescribed quota should go through record and registration of sale of exchange in State Administration of Foreign Exchange within 30 days since the date of approval of the feasibility report of the project in question. Institutions with a project below the quota should finish record and registration of purchase of foreign exchange in local branch of State Administration of foreign exchange. Those projects not having been recorded and registered should not be granted the right to sale exchange.

5.

If it is needed to issue B share within China and issue share abroad, listed companies having a direct demand for foreign exchange should be given priority. For those listed companies having a direct demand for foreign exchange, the need for sale of exchange should be added into the prospectus of the company. Exchange incomes can be deposited in Chinese banks in Hong Kong after approval and can be taken back for sale of exchange by installments according to the progress of use of funds in domestic projects.

6.

If found having committed activities of interest arbitrage through sale of exchange, enterprises which have borrowed foreign commercial loans, should be dealt according to relevant provisions.