Laws of the People's Republic of China

The State Council

Regulations of the People's Republic of China for the Administration of Foreign Banks and Chinese-foreign Equity Joint Banks in the Special Economic Zones

the State Council

April 2, 1985

Article 1

These Regulations are formulated with a view to expanding international economic and financial co-operation, facilitating the inflow of foreign capital and the introduction of technology and promoting growth of the special economic zones.

Article 2

The term "foreign-funded banks" referred to in these Regulations means the branch banks established in the special economic zones by banks with foreign capital whose head offices are based in foreign countries or in Hong Kong and Macao regions and are registered in accordance with the laws of these localities as well as banks with foreign capital whose head offices are based in the special economic zones and are registered in accordance with the laws of the People's Republic of China.

The term "Chinese-foreign equity joint banks" referred to in these Regulations means banks jointly funded and operated in the special economic zones by banks and financial institutions with foreign capital and banks and financial institutions with Chinese capital.

Article 3

foreign-funded banks and Chinese-foreign equity joint banks shall abide by the laws and regulations of the People's Republic of China and their legitimate business activities and lawful rights and interests shall be protected by the laws of the People's Republic of China.

Article 4

To establish in a special economic zone a foreign bank or a Chinese-foreign equity joint bank, an application shall be filed with the People's Bank of China, which shall examine and approve the application based on the needs of growth of the special economic zones and on the basis of the principle of equality and mutual benefit.

The branch banks of the People's Bank of China in the special economic zones shall exercise administration and supervision over the foreign-funded banks and Chinese-foreign equity joint banks.

The State Administration of Foreign Exchange Control shall be responsible for the issuance of the licence for business operations in foreign exchange.

Article 5

Application for the establishment of a foreign bank or a Chinese-foreign equity joint bank shall be handled in accordance with the following provisions respectively:

1.

If a bank with foreign capital intends to establish a branch bank in a special economic zone, the head office of the bank shall file the application and submit the following documents and data:

(1)

a written application duty signed by the chairman of the board of directors or the general manager with the authorization of the board of directors and certified by a notary office, containing such information as the name of the intended branch bank, the amount of operating funds allocated by the head office, the curriculum vitae of the principal persons in charge and letters of authorization, and the types of business operations applied for;

(2)

articles of association of the head office of the bank, the composition of the board of directors, the balance sheets, statements of profit and loss, and reports of business position for the three years prior to the application for the establishment of the branch bank;

(3)

a copy of the business licence verified and issued by the competent authorities in the country or region where the bank is located; and

(4)

letters of undertaking issued by the head office of the bank assuming the tax and debt repayment obligations for the intended branch bank.

2.

For the establishment of the head office of a foreign bank in a special economic zone, the foreign investors concerned shall file the application and submit the following documents and data:

(1)

a written application for the establishment of the foreign bank, containing such information as the name of the head office of the foreign bank, the registered capital and the paid-in capital, a list of the principal persons in charge and the types of business operations applied for;

(2)

articles of association;

(3)

a list of the candidates for the board of directors, including its chairman and vice-chairmen, and the directors nominated by the investors; and

(4)

data about the status of the assets and liabilities of the investors attached with documents certified by a notary office.

3.

For the establishment of a Chinese-foreign equity joint bank in a special economic zone, all investing parties thereto shall jointly file the application and submit the following documents and data:

(1)

a written application for the establishment of the equity joint bank, containing such information as the name of the equity joint bank, the name of each of the investing parties thereto, the registered capital and the paid-in capital, the percentage of capital contribution by each of the investing parties, a list of the candidates for the principal persons in charge and the types of business operations applied for;

(2)

a feasibility study report jointly prepared by all the investing parties thereto;

(3)

the draft agreement, contract and articles of association of the equity joint bank initialled by the authorized representatives of the respective investing parties thereto; and

(4)

a list of the candidates for the board of directors, including its chairman and vice-chairmen, jointly nominated by all the investing parties thereto.

4.

Where foreign-funded banks and Chinese-foreign equity joint banks established in the special economic zones intend to establish separate branch offices in the special economic zones, the application shall be filed with branch banks of the People's Bank of China in the special economic zones for approval.

If any of the documents and data referred to in paragraph 1 of this Article is written in a foreign language, they shall be attached with a Chinese version.

Article 6

The People's Bank of China shall, based on the application of a foreign bank or a Chinese-foreign equity joint bank, grant approval for the bank concerned to engage in part or all of the following business operations:

1.

loans in the domestic currency and in foreign currencies and discount of negotiable instruments;

2.

inward remittances from foreign countries or from Hong Kong and Macao regions and collection of foreign exchange;

3.

settlement for export transactions, and mortgage in foreign currency;

4.

exchange of foreign currencies and of negotiable instruments in foreign currencies;

5.

investment in the domestic currency or in foreign currencies;

6.

gurantees of the domestic currency and foreign currencies;

7.

deals in stocks and securities;

8.

trust and safe deposit box services, credit and financial standing investigations and consultancy services;

9.

outward remittances by enterprises with overseas Chinese capital, foreign-capital enterprises, Chinese-foreign equity joint ventures and Chinese-foreign contractual joint ventures and settlement for their import transactions, and mortgage in foreign currency;

10.

deposits in the domestic currency and in foreign currencies and overdrafts by enterprises with overseas Chinese capital, foreign-capital enterprises, Chinese-foreign equity joint ventures and Chinese-foreign contractual joint ventures and by foreigners, overseas Chinese and compatriots from Hong Kong and Macao;

11.

handling deposits or loans in foreign exchange in foreign countries or in Hong Kong and Macao regions; and

12.

other business operations.

Article 7

The registered capital of the head office of a foreign bank or a Chinese-foreign equity joint bank established in a special economic zone shall be no less than Renminbi 80 million yuan in equivalent foreign exchange and the paid-in capital thereof shall be no less than 50 percent of the registered capital; a branch bank of a foreign bank established in a special economic zone must possess an operating fund allocated by its head office amounting to no less than Renminbi 40 million yuan in equivalent foreign exchange.

The paid-in capital and the operating funds of a foreign bank or a Chinese-foreign equity joint bank shall be raised in full within 30 days following the day on which its establishment is approved and shall then be audited and verified by a registered accountant of the People's Republic of China.

Article 8

A foreign bank or a Chinese-foreign equity joint bank shall, within 30 days following the day on which its establishment is approved, go through the procedures of registration with the administrative department for industry and commerce and obtain a business licence and shall, within 30 days following the day of the commencement of its business operations, go through the procedures of tax registration with the local tax authorities.

Where a foreign bank or a Chinese-foreign equity joint bank fails to commence its business operations within 12 months following the day on which its establishment is approved, the original document of approval shall automatically become null and void.

Article 9

The total amount of loans granted by the head office of a foreign bank or by a Chinese-foreign equity joint bank in a special economic zone to any enterprise in the special economic zone shall not exceed 30 percent of the total sum of its paid-in capital plus its reserve funds and the total amount of investment in the special economic zones shall not exceed 30 percent of the total sum of its paid-in capital plus its reserve funds.

Article 10

The business operations in exchange and settlement between the domestic currency and foreign currencies of a foreign bank or of a Chinese-foreign equity joint bank shall be handled in accordance with the rates of exchange quoted by the State Administration of Foreign Exchange Control and with other relevant provisions.

The rates of interest with respect to the various kinds of deposits, loans, overdrafts and discount of negotiable instruments in the domestic currency or in foreign currencies handled in the special economic zones by a foreign bank or by a Chinese-foreign equity joint bank may be fixed with reference to the rates of interest prescribed by the branch banks of the People's Bank of China in the special economic zones.

Article 11

A foreign bank or a Chinese-foreign equity joint bank that handles various deposits in the domestic currency or in foreign currencies in the special economic zones shall place deposit reserve funds with the branch banks of the People's Bank of China in the special economic zones.

Article 12

foreign-funded banks and Chinese-foreign equity joint banks shall submit to the blanch banks of the People's Bank of China in the special economic zones the following reports and statements of business operations:

1.

prior to the 10th of each month, the balance sheet of the previous month shall be submitted;

2.

prior to the 15th of the first month of each quarter, a breakdown of deposits and loans, a breakdown of outward and inward remittances and settlement for import and export transactions, and a breakdown of investment projects of the previous quarter shall be submitted; and

3.

prior to the end of March of each year, the balance sheet, the statement of profit and loss and the statement of account balance of the previous year shall be submitted, attached with an audit report presented by a registered accountant of the People's Republic of China.

Article 13

The branch banks of the People's Bank of China in the special economic zones shall have the right to examine the position of business operations and financial status of the foreign-funded banks and Chinese-foreign equity joint banks, require them to submit or provide the related information and the relevant data, and send persons to examine their account books and files.

Article 14

A foreign bank may remit abroad the profit that remains after tax has been paid in accordance with the law.

The head office of a foreign bank or a Chinese-foreign equity joint bank established in a special economic zone shall, in accordance with the relevant provisions, draw the reserve fund, the staff bonus fund, the welfare fund and the enterprise development fund from its after-tax profit. The portion of the profit distributed to investors from abroad may be remitted abroad.

Foreign staff and staff from Hong Kong and Macao regions of a foreign bank or of a Chinese-foreign equity joint bank may remit abroad their salaries and other legitimate income that remain after tax has been paid in accordance with the law.

Article 15

A foreign bank or a Chinese-foreign equity joint bank that is to terminate its business operations shall, 30 days prior to the termination thereof, submit a written report to the People's Bank of China for approval.

A foreign bank or a Chinese-foreign equity joint bank that is to suspend its business operations shall, in accordance with the provisions of the People's Republic of China concerning the dissolution and liquidation of foreign-capital enterprises and Chinese-foreign equity joint ventures and under the supervision of the branch bank of the People's Bank of China in the special economic zone and other relevant departments, conduct its liquidation. After the taxes have been paid in full and liabilities have been settled, the funds of the foreign bank or the fund owned by or distributed to investors from abroad in a Chinese-foreign equity joint bank may be remitted abroad.

Upon the completion of liquidation as referred to in the preceding paragraph, the foreign bank or Chinese-foreign equity joint bank shall approach the registration and licence-issuing authorities for the cancellation of its registration and business licence.

Article 16

In the case where a foreign-funded bank or a Chinese-foreign equity joint bank violates these Regulations or any other financial regulations, the branch banks of the People's Bank of China in the special economic zones shall have the right to issue a warning or impose a fine on it in the light of the seriousness of the case. In case of disagreement with the penalty, an appeal may be brought before the People's Bank of China for its ruling.

If a foreign-funded bank or a Chinese-foreign equity joint bank violates the laws and regulations to an especially serious extent, the People's Bank of China may order it to suspend its business operations or shall, in an extreme case, order it to be disbanded.

Article 17

These Regulations shall also apply to banks and financial institutions with overseas Chinese capital or with capital from Hong Kong and Macao regions.

Article 18

The People's Bank of China shall be responsible for the interpretation of these Regulations.

Article 19

These Regulations shall enter into force as of the date of promulgation.