Laws of the People's Republic of China

State Administration of Foreign Exchange

Relevant Issues Concerning the Amendment to the Operative Procedures of Foreign Exchange Administration in Overseas Commodity Futures Hedging Business of State-Owned Enterprises (For Trial Implementation)

Hui Fa [2005] No. 34

The branches and offices of the State Administration of Foreign Exchange of the People's Republic of China (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, as well as various head offices of designated foreign exchange banks with Chinese investment:

With a view to meeting the needs of the development of overseas commodity futures hedging business of state-owned enterprises, and further regulating the administration of foreign exchange under commodity futures hedge, in according with pertinent provisions of the Measures for the Administration of Overseas Futures Hedging Business of State-owned Enterprises (hereinafter referred to as the Measures), relevant issues concerning the amendment to the Operative Procedures of Foreign Exchange Administration in Overseas Commodity Futures Hedging Business of State-Owned Enterprises (For Trial Implementation) (hereinafter referred to as the Operative Procedures) are hereby supplemented as follows:

1.

In Respect of the Confirmation of Risk Exposure and Its Administration

For an enterprise (hereinafter referred to as the enterprise) which has been granted a license of overseas commodity futures hedging business as issued by the China Securities Regulatory Administration (hereinafter referred to as the CSRC) and has had its risk exposure verified by the CSRC in the current year, it shall, if intending to apply for confirmation formality of risk exposure in the current year, file an application to a local SAFE branch or office (hereinafter referred to as the local SAFE branch) for handling the formality of risk exposure confirmation in the current year on presentation of the following materials:

(1)

a notice indicating the SAFE will verify risk exposure for an enterprise holding a license of overseas commodity futures hedging business in the current year;

(2)

a written report showing the confirmation of the said enterprise for risk exposure in the current year, including the amount to be applied for, development of import & export businesses under futures hedging business of the said enterprise, its preparation for and present situation development of futures hedging business as well as the plan for the current year. Where it is not the first time for the enterprise to file an application, utilization of risk exposure in the last year shall also be submitted; and

(3)

a bank statement of balance in the domestic special futures foreign exchange account by the end of last year or the end of preceding month from the date of application.

The local SAFE branch shall report application materials to the SAFE within 7 working days from the receipt of all such materials for the confirmation of the said enterprise' risk exposure by the SAFE. The enterprise shall, within 1 month from receiving a confirmation letter, apply to the local SAFE branch for dealing with the formalities of recordation and registration (modification) as well as opening a foreign special futures account after being examined and approved.

Subject to the Measure, the aggregate of the enterprise's deposits under futures and futures compensation amount as remitted accumulatively in the current year, and the balance in its foreign futures special account by the end of last year shall not exceed the amount of risk exposure confirmed in the current year. The enterprise shall present to the domestic opening bank a bank sheet of the balance in its foreign special futures account by the end of last year, and such bank shall strictly control the amount of funds allowed to be remitted by the said enterprise and handle well the registration of customs duty.

The enterprise may, within the scope of risk exposure confirmed by the SAFE, purchase foreign exchanges according to its demands as the funds under overseas futures hedge.

2.

With Regard to the Administration of Domestic and Foreign Special Futures Accounts

In case the municipality where the enterprise is registered is different from that in which the local SAFE branch is located, a domestic special futures account may be opened with a designated foreign exchange bank in a place where the said enterprises is registered and the local SAFE branch in the same place shall also be responsible for the daily administration of foreign exchange. Except an approval document of remitted initial deposit as set forth in Paragraph 2 of Article 4 hereof, an application for all other opinions and official replies required to be made in written form shall, after initially examined by a SAFE central sub-branch in the place where the enterprise is registered, be transmitted to a SAFE branch according to provisions.

Whereas the CSFC has made adjustment to approaches for the administration of the enterprises' selection of overseas brokering institutions, the material for examining an enterprise to open a foreign special futures account with the approval from local SAFE branch shall be adjusted as: a written notice of the CSRC on the recordation filed by an enterprise with the CSRC concerning the foreign futures brokering company under the selection of such enterprise.

3.

Permission to Enterprises for Retaining the Petty Cash Funds in a Certain Sum

As required by the business, local SAFE branch may ratify petty cash funds in foreign exchange at a certain rate in domestic and foreign special futures accounts and retain such petty cash funds in the domestic special account for circulation and use, among which the petty cash funds retainable in an foreign account shall refer to the petty cash funds other than those which must be retained by any enterprise with a license for holding a position according to the requirements of any futures brokering institution. The aggregate of upper limits of petty cash funds in foreign exchange retainable in a foreign special account at the same point in time shall not exceed more than 30% of the amount of risk exposure in foreign exchange of the current year. Such aggregate shall be earmarked for specified purpose only and be forbidden from appropriation.

4.

With Respect to the Administration of Initial Deposit Remittance

Any enterprise, if required to remit overseas the initial deposit under commodity futures, may apply to the opening bank for completing the formality of initial deposit remittance on presentation of documents issued by the local SAFE for approving an application letter, written agreement of account opening which is signed by the said enterprise and a foreign futures brokering company (institution) that is approved by the local SAFE branch to open foreign special accounts. The accumulative amount of initial deposits remitted in one year shall not exceed 20% of the amount of risk exposure in foreign exchange of the same year. If a rate higher than 20% is required under special circumstances, such circumstances shall be firstly examined by the local SAFE branch and then reported to the SAFE for approval.

In case an enterprise open a domestic special futures account with a bank of a place where it is registered, the initial deposit shall be approved and remitted by the SAFE central sub-branch in the same place subject to the provisions mentioned above.

An enterprise must, within 1 month after the remittance of initial deposit, feed back to the local SAFE branch the receipt certificate (Any of its original, duplicate, fax and email is acceptable.) which is affixed by the official seal of a collection brokering company.

5.

In View of the Feedback of Information and Date Statistics Thereof

Any enterprise and bank shall, within the first 10 working days in a month, be obliged to respectively submit to the local SAFE branch the Monthly Report of Stock of Overseas Futures Hedging Foreign Exchange Funds (See Schedule 1 For Enterprises Use) of the preceding month as well as the cash position statement issued by a domestic futures brokering institution from the end of last statement, with an official seal of the said enterprise thereof (bank statement of balance); Monthly Report of Flow of Overseas Futures Hedging Foreign Exchange Funds (Schedule 2 For Banks Use).

Any enterprise and bank shall be ordered to make rectification within a time limit by the local SAFE branch if failing to feed back the date and information set out in Item 4 and 5 during a period without any justifiable reason; Where still failing to make rectification, such enterprise and bank shall be imposed a penalty ranging from RMB 10 to 30 thousand yuan by the local SAFE branch according to the seriousness of respective circumstances.

Subject to Article 5 of the Operative Procedures, the local SAFE branch shall, within 20 working dates from the end of each season, report a Quarterly Report of Overseas Futures Hedging Foreign Exchange Funds (Schedule 3) of the current season in the form of disk and written text to the SAFE.

6.

This Circular shall become effective as of the date of promulgation. For any business prior to such date, pertinent formalities such as the application for limit of petty cash funds in foreign exchange deposited in foreign special futures account, shall be made up within 1 month from the date of such promulgation. In case of any conflict between other provisions and provisions hereof, the latter shall prevail. Anything not covered herein shall be subject to the Operative Procedures and the Circular of the State Administration of Foreign Exchange on Several Issues Concerning the Opening Domestic Accounts in Foreign Exchange under Operative Procedures of Foreign Exchange Administration in Overseas Commodity Futures Hedging Business of State-Owned Enterprises (For Trial Implementation). Special circumstances shall be submitted to the SAFE for examination level by level.

Schedules:

1)

Monthly Report of Stock of Overseas Futures Hedging Foreign Exchange Funds (For Enterprises Use)

2)

Monthly Report of Flow of Overseas Futures Hedging Foreign Exchange Funds (For Banks Use)

3)

Quarterly Report of Overseas Futures Hedging Foreign Exchange Funds (For SAFE branches and offices)

State Administration of Foreign Exchange

May 17, 2005

htm/e04095.htm

Schedule 1:

Monthly Report of Stock of Overseas Futures Hedging Foreign Exchange Funds (For Enterprises Use)

(Date of Filling　　)

　　(Official Seal)　　　　　　　　　　　　　　　　　　　　　 　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　Unit: Ten Thousand USD

　　Responsible Person: 　　　　　　Contact Tel: 　　　　　　Handling Person: 　　　　　　Contact Tel:

　　Note: 

　　　　1. Details of the Balance in the Foreign Special Account by the End of Last Month: Any enterprise may, based on its own actual situations, fill and report the information about the balance which is deposited in the account having been opened by a foreign futures brokering company and has been approved by the SAFE branch.

　　　　2. Total Sum of the Balance in the Foreign Special Account by the End of Last Month= Item 1+Item2+Item3+Item4+Item5+Item´´. as Set Forth in the Details of the Balance in the Foreign Special Account by the End of Last Month

Schedule 2:

Monthly Report of Flow of Overseas Futures Hedging Foreign Exchange Funds (For Banks Use)

　　Filling and Reporting Entity:　(Official Seal)　　　　　　(Date of Filling:　　　　　　)　　　　　　Unit of Currency: Ten Thousand USD

　　Contact Person: 　　　　　　Contact Tel:　　　　　　Filling Person:　　　　　　Contact Tel:

　　Filling Instruction:

　　1. Balance of Risk Exposure by the End of This Month= Confirmed Amount of Risk Exposure in This Year - Balance in the Foreign Special Account by the End of Last Year - Accumulative Expenditures of This Year

　　2. Balance in the Domestic Special Account by the End of This Month= Balance by the End of Last Month + Amount Transferred In for This Month +Amount of the Purchased Foreign Exchange + Other Incomes of This Month- Expenditures of This Month

Schedule 3:

Quarterly Report of Overseas Futures Hedging Foreign Exchange Funds (For SAFE branches and offices)

　　Filling Entity: (Official Seal)　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　Unit of Currency: Ten Thousand USD

　　Responsible Person:　　　　　　Contact Tel: 　　　　　　Filling Person: 　　　　　　Contact Tel: 　　　　　　Date of Filing:

　　Filling Instruction:

　　1. Balance in the Domestic Special Account by the End of This Quarter = Balance by the End of Last Quarter + Amount Transferred in This Quarter + Amount of Purchased Foreign Exchange in This Quarter + Other　Incomes of This Quarter - Expenditures of This Month - Amount of Settled Foreign Exchange of This Month

　　2. Balance of Risk Exposure by the End of This Month = Confirmed Amount of Risk Exposure in This Year - Balance in the Foreign Special Account by the End of Last Year - Accumulative Expenditures of This Year