Laws of the People's Republic of China

    Article 1  These Rules are formulated for the implementation of Articles
31 and 33 of the Interim Regulations for Foreign Exchange Control of the
People's Republic of China.

    Article 2  The following acts shall be regarded as unlawful procurement of
foreign exchange:

    (1) paying in Renminbi for imports or other items that ought to be paid in
foreign exchange, unless otherwise approved by the State Administration of
Foreign Exchange Control or its branch offices (hereinafter referred to as
foreign exchange control agencies), or stipulated by the State;

    (2) paying in Renminbi by organizations within territory to defray the
expenses in China for organizations stationed abroad, foreign organizations
stationed in China, enterprises with overseas Chinese capital, foreign-capital
enterprises, Chinese-foreign equity joint ventures, and individuals coming to
China for a short stay, in return for reimbursement in foreign exchange which
is not sold to the State;

    (3) paying in Renminbi by organizations stationed abroad to defray
expenses with their own Renminbi in China for others in return for
reimbursement in foreign exchange;

    (4) paying in Renminbi by foreign organizations stationed in China,
enterprises with overseas Chinese capital, foreign-capital enterprises,
Chinese-foreign equity joint ventures and the personnel thereof to defray
expenses for others in return for reimbursement in foreign exchange or in
other forms of a similar nature;

    (5) making repayments without approval of foreign exchange control
agencies in Renminbi by delegations, working groups or members thereof sent
abroad or to Hong Kong, Macao and other regions, who put to other uses or
spend on purchase of goods the foreign exchange allocated for the mission or
that earned from their various kinds of business operations;

    (6) offsetting export proceeds or other foreign exchange earnings against
import costs or other expenditures by organizations within territory.

    Article 3  Unlawful procurement of foreign exchange shall be penalized
according to different circumstances in the following ways:

    (1) If the foreign exchange unlawfully procured remains unused, the party
procuring the foreign exchange from others shall be ordered to repatriate the
foreign exchange within a prescribed time limit for a compulsory sale to the
State. If it has been used up, the party concerned must repay it either by a
compulsory sale to the State of an equal amount of foreign exchange or by a
deduction of the amount from the foreign exchange quota allotted to the said
party. In case the said party has no foreign exchange to repay, the difference
between the domestic and international market prices of the goods purchased
with the unlawfully procured exchange shall be paid. In addition, a fine
equivalent to 10-30% of the amount of the foreign exchange unlawfully procured
may be imposed.

    (2) The party procuring foreign exchange for others shall be fined a sum
equivalent to 10-30% of the amount of the foreign exchange illegally procured
in light of the seriousness of the case.

    Article 4  The following acts shall be regarded as evasion of foreign
exchange control:

    (1) retaining, spending or depositing foreign exchange earnings abroad by
organizations within territory without prior approval of the exchange control
agencies; depositing foreign exchange earnings abroad in violation of the
Regulations for Foreign Exchange Control Relating to Enterprises with Overseas
Chinese Capital, Foreign-capital Enterprises and Chinese-foreign Equity Joint
Ventures;

    (2) retaining or depositing abroad without authorization the foreign
exchange which is concealed by organizations within territory, enterprises
with overseas Chinese capital, foreign-capital enterprises and Chinese-foreign
equity joint ventures and which is acquired through such means as reporting
less foreign exchange receipts by understating the export prices or
commissions, or reporting more foreign exchange expenditures by overstating
the import prices, expenses and commissions.

    (3) retaining for business operations abroad or putting to other uses the
profits that ought to be repatriated according to State provisions, by
organizations stationed abroad or by Chinese joint venturers in
Chinese-foreign equity joint ventures established abroad;

    (4) failing to use the foreign exchange allocated for the mission or
earned from various kinds of business operations according to plans and
depositing it abroad or putting it to other uses, without otherwise approval
of the foreign exchange control agencies, by delegations or working groups and
the members thereof sent abroad or to Hong Kong, Macao and other regions.

    Article 5  Evasion of foreign exchange control shall be penalized
according to different circumstances in the following ways:

    (1) if the foreign exchange acquired through evasion still remains unused,
the evader or the involved competent department shall be ordered to repatriate
it within a prescribed time limit for compulsory sale to the State; or the
full amount of foreign exchange or part thereof shall be confiscated. In
addition, a fine equivalent to 10-50% of the amount of the foreign exchange
evaded may be imposed;

    (2) if the foreign exchange acquired through evasion has been used up, the
evader shall be ordered to repay an equal amount of foreign exchange which
shall be sold to the State or confiscated. In addition, a fine equivalent to
10-50% of the amount of the foreign exchange evaded may be imposed;

    (3) if the evader has no foreign exchange to repay, a fine equivalent to
no less than 30% of but no more than the full amount of the foreign exchange
acquired through evasion shall be imposed, or the illegal gains therefrom
shall be confiscated, or the fine and confiscation shall be imposed
concurrently.

    Article 6  The following acts shall be regarded as disrupting financial
stability:

    (1) engaging in foreign exchange business without prior approval of the
State Administration of Foreign Exchange Control or on a scale beyond the
approved business scope;

    (2) issuing securities denominated in foreign currencies in China or
abroad, or accepting loans offered by banks or enterprises in foreign
countries or in Hong Kong, Macao and other regions by organizations within
territory without prior approval of the State Council or the departments
authorized by the State Council;

    (3) using foreign currency by organizations within territory, without
otherwise approval of the foreign exchange control agencies, as the monetary
unit in settling accounts, borrowing or lending, making transfers or obtaining
mortgages, or as a medium of exchange in business transactions;

    (4) buying and selling foreign exchange without authorization or in any
disguised form, or at rates above those set by the State Administration of
Foreign Exchange Control, or profiteering in buying and selling foreign
exchange.

    Article 7  The following panalties shall be imposed on the offenders
involved in the cases listed in the preceding Article according to different
circumstances:

    (1) For cases referred to in paragraph (1), the offenders shall be ordered
to cease their foreign exchange business or operations that exceed the
approved scope, or their unlawful earnings shall be confiscated or a fine up
to but no more than the full amount of the illegal operating fund shall be
imposed, or the fine and confiscation shall be imposed concurrently.

    (2) For cases referred to in paragraph (2), the offenders shall be ordered
not to issue new securities or not to accept new loans, and may also be fined
a sum up to but no more than 20% of the securities issued or loans accepted.

    (3) For cases referred to in paragraphs (3) and (4), the offenders shall
be ordered to sell their unlawfully transacted foreign exchange to the State
and their illegal gains shall be confiscated, or a fine up to but no more than
the full amount of the foreign exchange illegally transacted shall be imposed,
or the fine and confiscation shall be imposed concurrently.

    Article 8  For other acts in violation of foreign exchange control not
specifically listed in Articles 2, 4 and 6, penalties may be meted out
according to the seriousness of the case with reference to the most relevant
provisions provided in these Rules.

    Article 9  In cases of minor offences, the offenders who voluntarily
confess to their unlawful activities before the foreign exchange control
agencies, show sincere repentance and demonstrate meritorious conduct by
informing against other offenders shall be dealt with leniently or exempt from
punishment. Offenders who refuse to confess, try to cover up their offences or
refuse to mend their ways despite repeated admonition shall be punished
severely in accordance with Articles 3, 5 and 7 of these Rules.

    Article 10  Serious cases of unlawful procurement of foreign exchange,
evasion of foreign exchange control or disrupting financial stability shall be
transferred to judicial organs for handling according to law.

    Article 11  To prevent violators from transferring their unlawfully
acquired funds when violations of foreign exchange control are under
investigation, the foreign exchange control agencies may ask the banks to
freeze the funds in question for a period of no more than two months. Upon
expiry, the funds shall be unfrozen automatically. If an extension of the
period is necessary under special circumstances, the relevant foreign exchange
control agency shall renew the notification to the bank concerned. In case a
violator refuses to pay the fine or the sum to be confiscated, the relevant
foreign exchange control agency may enforce the penalty by deducting the sum
from the violator's bank account.

    Article 12  In cases where the foreign exchange control agencies impose
penalties, notices of penalty decision shall be served to the units or
individuals being penalized. If the party concerned does not agree with the
penalty decision, it(he) may appeal to the foreign exchange control agency at
the next higher level for reconsideration within 15 days as of the date of
receipt of the notice. If the party concerned still does not agree with the
decision of reconsideration, it(he) may bring a suit in the local people's
court.

    Article 13  Cases involving violation of foreign exchange control
regulations shall be handled by the foreign exchange control agencies; cases
involving unlawful procurement of foreign exchange and evasion of foreign
exchange control that are of the nature of smuggling by means of illegally
getting the goods into or out of the country as part of luggage and personal
effects, by post or other means of transport, shall be handled by the Customs;
and cases involving the use of foreign exchange or payment instruments in
foreign currency for speculation and profiteering shall be handled by the
administrative departments for industry and commerce.

    Article 14  Measures for penalizing violations of foreign exchange control
in the special economic zones shall be separately formulated by the
Governments of Guangdong and Fujian Provinces by taking reference to these
Rules.

    Article 15  The State Administration of Foreign Exchange Control shall be
responsible for interpreting these Rules.

    Article 16  These Rules shall come into force as of the date of
promulgation.