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REGULATIONS ON FOREIGN EXCHANGE CONTROL

Category  BANKING Organ of Promulgation  The State Council Status of Effect  With An Amendment Existing
Date of Promulgation  1996-01-29 Effective Date  1996-04-01  

Regulations of the People's Republic of China on Foreign Exchange Control



Chapter I  General Provisions
Chapter II  Foreign Exchange in Current Transactions
Chapter III  Foreign Exchange in Capital Transactions
Chapter IV  Foreign Exchange Business of Financial Institutions
Chapter V  Renminbi Exchange Rates and Exchange Market
Chapter VI  Legal Responsibilities
Chapter VII  Supplementary Provisions

(Adopted at the 41st Executive Meeting of the State Council on January 8,

1996, promulgated by Decree No.193 of the State Council of the People's
Republic of China on January 29, 1996) (Editor's Note: For the revised text,
see Decision of the State Council on Amending the Regulations of the People's
Republic of China on Foreign Exchange Control promulgated on January 14, 1997,
and effective as of the same date)
Chapter I  General Provisions

    Article 1  These Regulations are formulated for the purpose of
strengthening the foreign exchange control, keeping international payments
equilibrium and promoting the healthy development of the national economy.

    Article 2  The exchange control department of the State Council and its
branches (hereinafter referred to as the exchange control department) shall
exercise foreign exchange control according to law, and be responsible for
the implementation of these Regulations.

    Article 3  "Foreign exchange" mentioned in these Regulations means those
payment instruments and assets in foreign currency which may be used for
international payments, including the following:

    (1) foreign currencies, including banknote and coins;

    (2) foreign currency payment instruments, including negotiable
securities, bank deposit certificates and postal savings certificates, etc.;

    (3) foreign currency securities, including government bonds, corporate
bonds and stocks, etc.;

    (4) Special Drawing Rights and European Monetary Units; and

    (5) other assets in foreign currency.

    Article 4  These Regulations shall be applicable to foreign exchange
receipts and disbursements and foreign exchange business operations by either
domestic institutions and individuals or foreign institutions and individuals
in China.

    Article 5  The state shall adopt a system of statistics and reporting of
the international balance of payment. All organizations and individuals
involved in international payments shall take statistics and make reports on
their international balance of payment.

    Article 6  No circulation of, or valuation and settlement in, foreign
currencies shall be allowed in the territory of the People's Republic of
China.

    Article 7  Any organization or individual shall be entitled to accuse and
expose the acts and activities that violate the exchange control.

    Organizations and individuals having rendered great service in accusing,
exposing, or assisting in the investigation of, violations of exchange
control shall be awarded by the exchange control department, and the latter
shall keep things secret.
Chapter II  Foreign Exchange in Current Transactions

    Article 8  Foreign exchange receipts from current transactions by
domestic institutions must be transferred to China and may not be held abroad
in violation of relevant provisions of the state.

    Article 9  Foreign exchange receipts from current transactions by
domestic institutions shall be sold to the authorized bank for dealing in
foreign exchange in accordance with provisions of the State Council
concerning the administration on foreign exchange settlements, sales and
payments or, with an approval, a foreign exchange account may be opened for
that with the authorized bank for dealing in foreign exchange.

    Article 10  Foreign exchange needed for current transactions by domestic
institutions shall be paid through buying from the authorized bank for
dealing in foreign exchange by presentation of valid certificates and
business papers in accordance with provisions of the State Council concerning
the administration on foreign exchange settlements, sales and payments.

    Article 11  Domestic institutions shall go through verification and
cancellation formalities for their foreign exchange receipts from export and
foreign exchange payments for import in accordance with provisions of the
state concerning the administration on verification and cancellation of
foreign exchange receipts from export and foreign exchange payments for
import.

    Article 12  Personal foreign exchange may be held by the individuals
themselves, or they may also be deposited in the bank or sold to the
authorized bank for dealing in foreign exchange.

    The business in personal foreign exchange saving deposit shall abide by
the principle of voluntariness in depositing, freedom of withdrawal, interest
on every deposit and keeping in secret for the depositors.

    Article 13  Foreign exchange needed by individuals when leaving China on
private business shall be bought within the specified limits; those beyond
the specified limits may be applied for to the exchange control department.

    Individuals carrying foreign exchange when leaving China shall go through
the declaration formalities with the customs; those carrying foreign
exchange exceeding the specified limits shall, in addition, present valid
certificates to the customs.

    Article 14  Without the approval from the exchange control department, no
foreign exchange assets in forms of foreign currency payment instruments or
foreign currency securities, etc., which are held by Chinese citizens
residing in China, may be carried or sent by post out of China.

    Article 15  Certificate fees and authentication fees received in Renminbi
by foreign diplomatic missions and consular posts in China may be converted
at the authorized bank for dealing in foreign exchange by presentation of
relevant certifications, when there is a need to remit them out of China.

    For remittance of any receipts in Renminbi legally obtained by foreign
institutions in China other than those mentioned in the preceding paragraph,
an application with relevant certifications shall be submitted to the
exchange control department, and said receipts in Renminbi may be converted
at the authorized bank for dealing in foreign exchange against foreign
exchange sales notices issued by the exchange control department.

    Article 16  Subject to provisions of paragraph 2 of this article,
salaries and other legitimate incomes obtained in Renminbi by foreign
specialists engaged by domestic institutions may be converted at the
authorized bank for dealing in foreign exchange and remitted or carried out
of China after taxation.

    salaries and other legitimate incomes obtained in foreign currency by
foreigners engaged by Chinese foreign investment enterprises may be directly
remitted or carried out of China after taxation; those obtained in Renminbi
may, after taxation, be converted at the authorized bank for dealing in
foreign exchange by presentation of valid certificates prescribed by the
exchange control department, and be remitted or carried out of China.

    Article 17  Foreign exchange remitted or carried in from outside China
by foreign institutions or individuals in China may be held by themselves,
deposited in the bank or sold to the authorized bank for dealing in foreign
exchange. They may also be remitted or carried out of China by presentation
of valid certificates.
Chapter III  Foreign Exchange in Capital Transactions

    Article 18  Foreign exchange receipts from capital transactions by
domestic institutions shall be transferred to China, except the State Council
has provisions otherwise.

    Article 19  Domestic institutions shall, in accordance with relevant
provisions of the state, open foreign exchange accounts with the authorized
bank for dealing in foreign exchange for their foreign exchange receipts from
capital transactions; for selling said receipts to the authorized bank for
dealing in foreign exchange, an approval from the exchange control department
shall be obtained in advance.

    Article 20  Domestic institutions wishing to make investment outside
China shall, before applying to the competent department for examination and
approval, have their sources of foreign exchange funds examined by the
exchange control department; after obtaining the approval, they shall go
through the fund remittance formalities in accordance with provisions of the
State Council concerning the foreign exchange control relating to external
investment.

    Article 21  The raising of foreign loans shall be handled in accordance
with relevant provisions of the state by government departments designated by
the State Council or by financial institutions or enterprises approved by the
exchange control department of the State Council.

    Foreign loans raised by foreign investment enterprises shall be submitted
to the exchange control department for the record.

    Article 22  For issuing foreign currency bonds outside China, financial
institutions shall apply to the exchange control department of the State
Council for approval, and the issuance shall be handled in accordance with
relevant provisions of the state.

    Article 23  The provision of external guarantee may be handled only by
the financial institutions and enterprises which are qualified according to
relevant provisions of the state and, for the provision, an approval from the
exchange control department shall be obtained in advance.

    Article 24  The state shall adopt a registration system for external
debts.

    Domestic institutions shall go through external debt registration
procedures in accordance with provisions of the State Council concerning the
external debt statistics and monitoring.

    The exchange control department of the State Council shall be responsible
for the nationwide statistics and monitoring of external debts, and shall
publish the external debt situation regularly.

    Article 25  Where a foreign investment enterprise is legally terminated,
among the assets after liquidation and taxation in accordance with relevant
provisions of the state, the Renminbi owned by the foreign party may be
converted at the authorized bank for dealing in foreign exchange and remitted
or carried out of China; the foreign exchange owned by the Chinese party
shall all be sold to the authorized bank for dealing in foreign exchange.
Chapter IV  Foreign Exchange Business of Financial Institutions

    Article 26  For launching foreign exchange business, financial
institutions must apply for approval to the exchange control department and
obtain a foreign exchange business license.

    Without approval from the exchange control department, no organization or
individual may engage in foreign exchange business. Financial institutions
with the approval for foreign exchange business operations may not engage in
business which are beyond the approved scope.

    Article 27  Financial institutions engaging in foreign exchange business
shall open foreign exchange accounts for their customers and handle relevant
foreign exchange business in accordance with relevant provisions of the state.

    Article 28  In operations of foreign exchange business, financial
institutions shall deposit reserves for foreign exchange deposit in
accordance with relevant provisions of the state, abide by provisions
concerning the control of foreign exchange balance sheet ratio, and establish
reserves for bad debts.

    Article 29  The authorized bank for dealing in foreign exchange shall use
their owned capital for the payment of Renminbi needed in the business of
exchange settlement.

    Revolving foreign exchange fund for settlement of accounts of the
authorized bank for dealing in foreign exchange shall be managed within a
proportional range, which shall be appraised and fixed in the light of actual
situation by the People's Bank of China.

    Article 30  In operations of foreign exchange business, financial
institutions shall subject themselves to the inspection and supervision by
the exchange control department.

    Financial institutions engaging in foreign exchange business shall file
with the exchange control department their foreign exchange balance sheets,
foreign exchange profit and loss statements and other financial accounting
statements and data.

    Article 31  For terminating the operation of foreign exchange business,
financial institutions shall apply to the exchange control department for
approval. Financial institutions approved to terminate the operation of
foreign exchange business shall make liquidation of foreign exchange
creditor's rights and debts, and hand in the foreign exchange business
license for cancellation.
Chapter V  Renminbi Exchange Rates and Exchange Market

    Article 32  A single managed floating system on the basis of the supply
and demand in the market shall be adopted to the Renminbi exchange rates.

    The People's Bank of China shall, according to the prices shaped in the
exchange market among banks, publish the exchange rates between Renminbi and
major foreign currencies.

    Article 33  Foreign exchange market transactions shall follow the
principle of openness, fairness, impartiality and good faith.

    Article 34  The currency varieties and forms of foreign exchange market
transactions shall be specified and adjusted by the exchange control
department of the State Council.

    Article 35  The authorized bank for dealing in foreign exchange and other
financial institutions engaging in foreign exchange business are transactors
in the foreign exchange market among banks.

    The authorized bank for dealing in foreign exchange and other financial
institutions engaging in foreign exchange business shall determine the
foreign exchange buying and selling prices for their customers and handle
the foreign exchange business according to the rates and floating ranges
published and specified by the People's Bank of China.

    Article 36  The exchange control department of the State Council shall
exercise supervision and administration on the foreign exchange market
throughout the country according to law.

    Article 37  The People's Bank of China shall exercise adjustment and
control with regard to the foreign exchange market according to the needs of
the monetary policies and the fluctuations of the foreign exchange market.
Chapter VI  Legal Responsibilities

    Article 38  Whoever evades foreign exchange by committing any of the
following acts shall be ordered to transfer the foreign exchange back to
China within a specified time with a compulsory buying and exchanging of said
foreign exchange and a fine from 30 per cent to five times the evaded amount
imposed on by the exchange control department, or be investigated for the
criminal responsibility if a crime is constituted:

    (1) in violation of provisions of the state, holding the foreign
exchange abroad without authorization;

    (2) failing to sell the foreign exchange to the authorized bank for
dealing in foreign exchange in accordance with provisions of the state;

    (3) remitting or carrying foreign exchange out of China in violation of
provisions of the state;

    (4) carrying or sending by post foreign currency deposit certificates or
foreign currency securities out of China without an approval from the
exchange control department; or

    (5) other acts of evading foreign exchange.

    Article 39  Whoever engages in illegal procurement of foreign exchange
by committing any of the following acts shall be given a warning with a
compulsory buying and exchanging of the procured foreign exchange and a fine
from 30 per cent to three times the amount procured imposed on by the
exchange control department, or be investigated for the criminal
responsibility if a crime is constituted:

    (1) in violation of provisions of the state, paying in Renminbi or with
physical goods for import or for others of the like which should be paid for
in foreign exchange;

    (2) paying domestic expenses for other persons in Renminbi while being
repaid in foreign currency by those persons;

    (3) without the approval from the exchange control department, foreign
investors making investment in China with Renminbi or with goods and materials
purchased in China;

    (4) buying foreign exchange from the authorized bank for dealing in
foreign exchange by cheating with false or invalid certificates, contracts
or documents; or

    (5) other acts of illegally procuring foreign exchange;

    Article 40  Whoever engages in foreign exchange business without an
approval from the exchange control department shall be confiscated of their
illegal earnings with their illegal business forbidden by the exchange
control department, or be investigated for the criminal responsibility if a
crime is constituted.

    Financial institutions engaging in foreign exchange business beyond the
approved scope without authorization shall be ordered to make corrections by
the exchange control department with confiscation of their illegal earnings,
if any, and a fine from one to five times the illegal earnings, or a fine
from 100,000 to 500,000 yuan if there is no illegal earnings. Where the
circumstances are serious or no corrections have been made within the
specified time, they shall be ordered to make consolidation or be revoked of
their foreign exchange business licenses by the exchange control department.
Where a crime is constituted, they shall be investigated for the criminal
responsibility.

    Article 41  The authorized bank for dealing in foreign exchange who fails
to handle the foreign exchange settlements or sales in accordance with
provisions of the state shall be ordered to make corrections and criticized
by circulating a criticism notice by the exchange control department with
confiscation of their illegal earnings and a fine from 100,000 to 500,000
yuan. Where the circumstances are serious, they shall be suspended from the
business of foreign exchange settlements and sales.

    Article 42  Financial institutions engaging in foreign exchange business
who violate the control of Renminbi exchange rates, foreign exchange loan and
deposit interest rates or foreign exchange market, shall be ordered to make
corrections and criticized by circulating a criticism notice by the exchange
control department with confiscation of their illegal earnings, if any, and a
fine from one to five times the illegal earnings, or a fine from 100,000 to
500,000 yuan if there is no illegal earnings. Where the circumstances are
serious, they shall be ordered to make consolidation or be revoked of their
foreign exchange business licenses by the exchange control department.

    Article 43  Domestic institutions committing any of the following acts in
violation of the control of external debts shall be given a warning and
criticized by circulating a criticism notice with a fine from 100,000 to
500,000 yuan imposed on by the exchange control department, or be
investigated for the criminal responsibility if the a crime is constituted:

    (1) raising foreign loans without authorization;

    (2) in violation of relevant provisions of the state, issuing foreign
currency bonds outside China without authorization;

    (3) in violation of relevant provisions of the state, providing external
guarantee without authorization; or

    (4) other acts in violation of the control of external debts;

    Article 44  Domestic institutions illegally using foreign exchange under
any of the following circumstances shall be ordered to make corrections by
the exchange control department with a compulsory buying and exchanging,
confiscation of their illegal earnings and a fine not exceeding the value of
the foreign exchange amount involved in the illegal acts, or be investigated
for the criminal responsibility if a crime is constituted:

    (1) valuating and settling in foreign currency in China;

    (2) providing pledge with foreign currency without authorization;

    (3) changing the uses of foreign exchange without permission; or

    (4) other circumstances involved in illegal use of foreign exchange;

    Article 45  Whoever buys and sells foreign exchange without permission or
in a disguised form or scalps foreign exchange shall be given a warning by
the exchange control department with a compulsory buying and exchanging,
confiscation of their illegal earnings and a fine from 30 per cent to three
times the foreign exchange amount involved in the illegal acts. Where a crime
is constituted, they shall be investigated for the criminal responsibility.

    Article 46  Domestic institutions who, in violation of the administration
on foreign exchange accounts, open foreign exchange accounts inside or
outside China without permission, lend or transfer their foreign exchange
accounts, use each other's foreign exchange accounts in collusion, or use the
foreign exchange accounts for other purposes than those approved shall be
ordered to make corrections and criticized by circulating a criticism notice
by the exchange control department with cancellation of their foreign
exchange accounts and a fine from 50,000 to 300,000 yuan.

    Article 47  Domestic institutions who, in violation of the
administration of foreign exchange verification and cancellation, forge,
alter, lend, transfer or repeatedly use export verification and cancellation
certificates, or fail to go through the specified verification and
cancellation procedures shall be given a warning and criticized by
circulating a criticism notice by the exchange control department with
confiscation of their illegal earnings and a fine from 50,000 to 300,000
yuan. Where a crime is constituted, they shall be investigated for the
criminal responsibility.

    Article 48  Financial institutions engaging in foreign exchange business
who violate provisions of Article 28 or 38 of these Regulations shall be
ordered to make corrections and criticized by circulating a criticism notice
by the exchange control department with a fine from 50,000 to 300,000 yuan.

    Article 49  Where any party concerned refuses to accept the penalty
decision made by the exchange control department, he may, within 15 days from
receiving the notification of the penalty decision, apply for reconsideration
to the exchange control department at the immediately higher level, which
shall make a reconsideration decision within two months from receiving the
reconsideration application. The party concerned refusing to accept the
consideration decision may bring a suit with the people's court.

    Article 50  Where any domestic institution violates provisions concerning
the foreign exchange control, in addition to the penalty on the institutions
according to provisions of these Regulations, the person in charge directly
responsible and other person directly responsible shall be given a
disciplinary sanction, or be investigated for the criminal responsibility if
a crime is constituted.
Chapter VII  Supplementary Provisions

    Article 51  For the purpose of these Regulations,

    (1) "domestic institutions" mean enterprises, institutions, government
departments, public organizations and army units, including foreign
investment enterprises, within the territory of the People's Republic of
China;

    (2) "the authorized bank for dealing in foreign exchange" means a bank
that engages in the business of foreign exchange settlement and sales with
the approval of the exchange control department;

    (3) "individuals" mean either Chinese citizens or foreigners who reside
in the People's Republic of China up to one year;

    (4) "foreign institutions in China" mean foreign diplomatic missions and
consular posts in China, resident representative offices in China of
international organizations, foreign commercial representative offices in
China and resident business offices in China of foreign nongovernmental
organizations;

    (5) "foreign individuals in China" mean permanent personnel of foreign
institutions in China, foreigners staying short terms in China, foreigners
engaged by domestic institutions and foreign students studying in China;

    (6) "current transactions" mean transactions that occur frequently
resulting in international receipt and payment, including trade receipt and
payment, service receipt and payment and unilateral transfer, etc.; and

    (7) "capital transactions" mean capital exporting and importing resulting
in increasing or decreasing of assets and liabilities, including direct
investment, loans of all kinds and investment in securities, etc..

    Article 52  Foreign exchange control measures for bonded areas shall be
formulated separately by the exchange control department of the State
Council.

    Article 53  Foreign exchange control measures for frontier trade and
transactions between inhabitants on either side of the border shall be
separately formulated by the exchange control department of the State Council
according to the principles prescribed by these Regulations.

    Article 54  These Regulations shall enter into force on April 1, 1996.
The Interim Regulations of the People's Republic of China on Foreign Exchange
Control promulgated by the State Council on December 18, 1980 and the rules
thereunder shall cease to be in force thereupon.



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