Laws of the People's Republic of China

Notice of the State Administration of Foreign Exchange on the Relevant Issues concerning the Transfer of the Examination and Approval Power of Foreign Exchange Businesses under Some Capital Accounts to the Lower Levels

Hui Fa [2005] No. 63 August 25, 2005

The branches and foreign exchange administration departments of the State Administration of Foreign Exchange of all provinces, autonomous regions and municipalities directly under the Central Government, and the branches of the State Administration of Foreign Exchange in Shenzhen, Dalian, Qingdao, Xiamen and Ningbo:

With a view to simplifying the formalities and procedures of administrative examination and approval, the State Administration of Foreign Exchange (hereinafter referred to as the SAFE) has, in accordance with the Administrative License Law of the People's Republic of China and the relevant provisions on the administration of foreign exchange, decided to further improve the administrating manner of foreign exchange under capital accounts and the administrative licensing procedures, and to transfer the examination and approval power of foreign exchange businesses under some capital accounts to every branch and every foreign exchange administration department (hereinafter referred to as the branches). The notice on the relevant issues is given as follows:

I.

The Examination and Approval on the Foreign Guarantee

Except the foreign guarantees provided for oversea institutions, the foreign guarantees in any other form (including the foreign guarantee for house mortgage under which an oversea institution or natural person is the guaranteed person), which are in line with the existing laws, shall be subject to the examination and approval of the branch where the guarantor lives.

II.

The Examination and Approval on the Repurchase of Oversea Listed Stocks by the H-share Companies Themselves

Where the repurchase of oversea listed stocks by the H-share companies themselves involves the examination and approval of the purchase or payment of foreign exchanges or oversea account opening, if the amount of foreign exchanges to be purchased or paid is lower than 25 million US Dollars, it shall be subject to the examination and approval of the local branch; if the amount of foreign exchanges to be purchased or paid is more than 25 million US Dollars (including 25 million US Dollars), it shall still be reported to the SAFE for examination and approval by the local branches where the H-share companies are located.

III.

The Examination and Approval on the Settlement, Purchase and Payment of Foreign Exchanges by the Securities, Trust, Finance and Financial Leasing Companies

The purchase of foreign exchanges by a securities company, trust investment company, finance company of enterprise groups or financial leasing company that undertakes the foreign exchange businesses to supplement the foreign exchange capital (or the foreign exchange operational capital) or to settle the foreign exchange capital (or the foreign exchange operational capital) beyond the requirements shall be subject to the examination and approval of the local branch. All branches shall regularly report the conditions on the purchase, payment and settlement of foreign exchanges of the foresaid institutions within their respective jurisdictions to the Capital Account Management Department of the SAFE.

The settlement of foreign exchange profits of the foresaid institutions shall be subject to the examination and approval of the local branch or an authorized sub-branch at the lower level. The foresaid institutions shall, within four months after the end of each accounting year or within ten working days after the board of directors has approved the distribution scheme of that year, file an application for foreign exchange settlement of net profits with the SAFE.

IV.

The Examination and Approval on the Payment of Social Security Funds in the Form of Foreign Exchange through the Reduction of State Shares held by Oversea Listed Companies

Where any domestic shareholder of an H-share company or a Red-chip company applies for appropriating the foreign exchange incomes of the reduction into the national social security funds, it shall be subject to the examination and approval of the local branch.

Every branch may, in light of the application of an enterprise, examine and approve the direct appropriation of foreign exchange incomes of the reduction into the foreign exchange account as opened by the Ministry of Finance.

V.

Improving the Administration on Special Foreign Exchange Accounts (for Expenses) of Foreign Investors

The quota for special foreign exchange accounts (for expenses) of foreign investors shall be regulated from the original 100 thousand US Dollars to 100 thousand US Dollars or 5% of the total investment amount as approved by the investment administrative department. And the valid term of the accounts shall be extended from the original three months to six months.

VI.

Simplifying the Examination and Approval manner of Foreign Transfer of Personal Assets

As for the application for foreign transfer of personal assets exceeding the equivalent value of RMB 500 thousand Yuan (transfer due to immigration and transfer due to inheritance), the capital account office or the relevant business office of every branch may, after obtaining the approval of the deputy director (director-general) in charge of the foreign exchange business, directly report them to the Capital Account Management Department of the SAFE for approval by way of official documents of the office.

After the transfer of the foresaid examination and approval power to the lower levels, all branches shall establish corresponding internal control systems, strengthen the training on functionaries, intensify the follow-up supervision and inspection on the examined and approved matters, and go through the formalities on reporting for archival filing in accordance with the relevant provisions. When carrying out specific examination and approval matters, all branches shall strictly accord with the relevant laws and the relevant provisions as formulated in the Operational Procedures for Foreign Exchange Businesses under Capital Accounts. In the case of any significant circumstance or any issue concerning policies, all branches shall timely report it to the SAFE for instructions. The SAFE shall regularly and irregularly inspect the work of examination and approval by each branch. In addition, every branch shall further strengthen the statistical monitoring, and timely and accurately submit the relevant data to the SAFE strictly according to the relevant provisions. SAFE strictly according to the relevant provisions. SAFE strictly according to the relevant provisions. SAFE strictly according to the relevant provisions. SAFE strictly according to the relevant provisions. SAFE strictly according to the relevant provisions. SAFE strictly according to the relevant provisions. SAFE strictly according to the relevant provisions.