Laws of the People's Republic of China

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

Order No.211, 1997 of the State Council January 14, 1997

(Promulgated by Order No.193 of the State Council of the People's Republic of China on January 29, 1996£¬and amended in accordance with the Decision of the State Council on Revising the Regulation of the People's Republic of China on Foreign Exchange Control on January 14, 1997)

Chapter I General Provisions

Article 1

For purposes of strengthening foreign exchange control, maintaining the balance of international payments, and promoting the healthy development of the national economy, the present regulations are hereby formulated.

Article 2

The foreign exchange control authority of the State Council and their branches (hereinafter referred to as the foreign exchange control authorities) shall fulfill the duty of controlling foreign exchanges according to law and be responsible for implementation of the present Regulations.

Article 3

The foreign exchanges mentioned in the present Regulations refer to the following means of payments and assets expressed in foreign currencies and used for international liquidation:

(1)

Foreign currencies, such as paper money and coins.

(2)

Foreign currency pay orders, such as bills, bank deposits, and postal savings deposits.

(3)

Foreign currency negotiable securities, such as government bonds, company bonds, and stocks.

(4)

Special drawing rights and European Currency Units. And

(5)

Other foreign exchange assets.

Article 4

The present Regulations shall apply to the foreign exchange receipts and payments and business activities of domestic institutions and individuals, foreign institutions in China, and foreigners in China.

Article 5

The state has no restriction to the current international payment and transfer of foreign exchange.

Article 6

The State shall carry out the system of the statistics and reports on international receipts and payments. Any unit and individual concerning international payment activities shall do the statistics and reports on international receipts and payments.

Article 7

The circulation and use for quoting prices and settling accounts of foreign currencies shall be prohibited in the People's Republic of China.

Article 8

All units and individuals have the right to report and expose behaviors and activities violating regulations on foreign exchange control.

The units and individuals that have performed meritorious service through accusation and exposure of violation against regulations on foreign exchange control or assisting relevant departments in handling such cases shall be maintained confidential and granted rewards by the foreign exchange control authorities.

Chapter II Foreign Exchanges on Current Accounts

Article 9

The domestic institutions shall bring home the current account incomes of foreign exchanges instead of depositing them abroad without authorization violating the related regulations of the State.

Article 10

The domestic institutions shall sell the current account incomes of foreign exchanges to designated banks in light of the State Council regulations on the management of buying, selling and paying foreign exchanges, or open a foreign exchange account in designated banks upon approval.

Article 11

The current expenditures of foreign exchanges of domestic institutions shall be paid with foreign exchanges bought from designated banks with valid vouchers and commercial bills, in accordance with the State Council regulations on the management of buying, selling and paying foreign exchanges.

Article 12

The check-off formalities on collection of foreign exchange from exports and payment of foreign exchanges for imports shall be gone through by the domestic institutions according to the State regulations on the management of the check-off of foreign exchange earnings from exports and the management of the check-off of foreign exchange expenditures for imports.

Article 13

Individual owners of foreign exchanges can hold the present foreign exchanges by themselves, deposit them in banks, or sell them to designated banks of foreign exchanges.

The principle of voluntary to deposit, freedom to withdraw, payment of interests to deposits, and keeping secret for depositors shall be carried out for the deposition of foreign exchanges by individuals.

Article 14

The purchase of foreign exchange by individuals for private purposes shall be granted without exceeding the specific limit. Individuals may apply to the foreign exchange control authority for buying foreign exchange over the limit for private purposes, and the application for such purchase shall be approved by the foreign exchange control authority if it is proved to be true.

When they come into or go out of China, individuals, who carry foreign exchanges with them, shall go through declaration procedures with the Customs. Those, who go out of China carrying more than prescribed amounts of foreign exchanges, shall also produce valid documents to the Customs.

Article 15

After they have emigrated but income is derived from possession of assets in China, individuals shall remit or carry foreign exchange abroad upon the presentation of the specified certifying documents and valid vouchers at the designated banks of foreign exchange.

Article 16

Without approval from the foreign exchange control authority, the foreign exchange pay orders, foreign exchange negotiable securities, and other forms of foreign exchange assets held by citizens residing in China shall not be carried or sent abroad.

Article 17

The legitimate income in RMB of foreign institutions and personnel in China, if it needs to be remitted abroad, shall be granted upon the presentation of the related certificate documents and credence at the designated banks of foreign exchange.

Article 18

The foreign exchanges of foreign organizations and individuals entering into China received or taken from abroad can be kept by themselves, deposited in banks, and also sold to banks designated of foreign exchange. They can also be remitted or carried abroad on the basis of the valid vouchers.

Chapter III Foreign Exchanges on Capital Account

Article 19

The domestic enterprises' foreign exchange incomes of capital account shall be brought back to the homeland unless otherwise provisioned by the State Council.

Article 20

The domestic enterprises' foreign exchange incomes of capital account shall be deposited into bank accounts, which are opened with designated banks of foreign exchange according to the relevant State regulations. If they want to sell foreign exchange to the designated banks of foreign exchange, they shall be approved by the foreign exchange control authorities.

Article 21

If a domestic enterprise makes investment in a foreign country, before it applies to competent department for examination and approval, the source of its foreign exchange funds shall be examined by the foreign exchange control authorities. After being approved, the relevant remitting procedures shall be gone through according to the stipulations of the State Council on the management of foreign exchanges used for investment in foreign countries.

Article 22

The borrowing of foreign loans shall be handled by the government departments approved by the State Council or the financial institutions and enterprises approved by the foreign exchange control authority of the State Council according to relevant regulations of the State.

The borrowing of foreign loans by foreign-funded enterprises shall be reported to the foreign exchange control authority for records.

Article 23

If the financial institutions issue the foreign exchange bonds in foreign countries, they shall be approved by the foreign exchange control authority under the State Council and handled according to relevant State regulations.

Article 24

Foreign-oriented guarantees can be provided only by financial institutions and enterprises satisfying conditions stipulated by State regulations and shall be approved by the foreign exchange control authority.

Article 25

The State shall carry out a foreign debt registration system.

The registration of foreign debts shall be carried out by domestic institutions according to State Council rules on the statistics compiling and monitoring of foreign debts.

The statistics compiling and monitoring of the whole country's foreign debts shall be taken charge of by the foreign exchange control authority under the State Council, which shall publicize the country's situation in terms of foreign debts.

Article 26

Foreign-funded enterprises terminated according to law shall be liquidated in accordance with related State regulations. The Renminbi left to the foreign investor after payment of taxes can be remitted by buying foreign exchanges from designated banks of foreign exchange for being or carried abroad. The foreign exchanges belonging to the Chinese investor shall be sold entirely to designated banks of foreign exchange.

Chapter IV The Foreign Exchange Business of Financial Institutions

Article 27

Financial institutions, which can handle the foreign exchange businesses shall be approved by the foreign exchange control authority, and obtain licenses for handling foreign exchange businesses.

Any unit or individual may not handle the foreign exchange businesses without approval of the foreign exchange control authority. The financial institutions, which are approved to handle foreign exchange businesses, may not go beyond their approved scope of businesses.

Article 28

Financial institutions handling foreign exchange businesses shall open foreign exchange accounts for their clients and handle relevant foreign exchange businesses in accordance with the relevant State regulations.

Article 29

Financial institutions handling foreign exchange businesses shall pay reserve funds for foreign exchange savings deposits according to the relevant State regulations, abide by the stipulations on the management of foreign exchange asset-liability rations, and set up bad debts reserves.

Article 30

Designated Banks of foreign exchange shall use their own funds to handle the settlement of foreign exchange accounts, for Renminbi is needed.

Proportional management shall be exercised over the foreign exchanges used by designated banks of foreign exchange as working capital, the specific proportions shall be verified by the People's Bank of China in accordance with actual conditions.

Article 31

Financial institutions handling foreign exchange businesses shall be subject to the examination and supervision of the foreign exchange control authority.

Financial institutions handling foreign exchange businesses shall submit balance sheets, statements of losses and gains, and other financial accountant statements sheets and data to the foreign exchange control authority.

Article 32

Financial institutions, which terminate foreign exchange businesses, shall apply to the foreign exchange control authority. Those approved to stop their foreign exchange businesses shall implement liquidation of their foreign exchange claims and obligations according to law and hand in their licenses for handling foreign exchange businesses.

Chapter V Exchange Rates of Renminbi And Foreign Exchange Market

Article 33

A unitary and well-managed floating exchange rate system that is based on market supply and demand will be carried out to the exchange rates of Renminbi.

The People's Bank of China shall publish the exchange rates of Renminbi against major foreign currencies in accordance with the prices fixed at inter- bank foreign exchange market.

Article 34

Transactions at foreign exchange market shall be subject to the principle of openness, fairness, impartialness, and honesty.

Article 35

The currencies and forms of transaction at foreign exchange market shall be stipulated and adjusted by the foreign exchange control authority under the State Council.

Article 36

Designated banks of foreign exchange and other financial institutions designated to handle foreign exchange businesses shall be the dealers of inter-bank foreign exchange market.

Designated banks of exchange and other financial institutions designated to handle foreign exchange businesses shall fix the prices of the foreign exchanges traded between their clients and handle foreign exchange transactions in accordance with the exchange rates and the floating range respectively published and specified by the People's Bank of China.

Article 37

The foreign exchange control authority under the State Council shall exercise supervision and management of foreign exchange market across the whole country according to law.

Article 38

The People's Bank of China shall carry out regulation according to law, of foreign exchange market in light of the requirements of the country's monetary policies and changes at the foreign exchange market.

Chapter VI Liabilities

Article 39

Those who commit one of the following acts of foreign exchange evasion shall be ordered to recall their foreign exchanges within fixed periods of time, forced to exchange the money by the foreign exchange control authority, and shall be fined amounting to more than 30 per cent and below five times of the foreign exchange they have evaded. Where a crime is constituted, the criminal liabilities shall be assumed:

(1)

Without authorization, depositing the foreign exchanges in abroad in violating the State provisions.

(2)

Failing to sell foreign exchanges to designated banks of foreign exchange, as required by State provisions.

(3)

Remitting or carrying foreign exchanges out of the country in violating the State provisions.

(4)

Carrying or mailing foreign exchange deposit certificates and foreign exchange negotiable securities out of the country without permission of foreign exchange control authority. Or

(5)

other actions of foreign exchange evasion.

Article 40

Those who commit one of the following acts of illegal foreign exchange arbitrage shall be given a warning, forced to exchange the money by the foreign exchange control authority, and shall be fined more than 30 per cent and below three times the foreign exchanges arbitraged. If a crime is constituted, criminal liabilities shall be assumed:

(1)

Payment for imports that ought to be paid with foreign exchanges in Renminbi or in barter, or in other similar means in breaking the State provisions.

(2)

Payment for the expenditures of a third party in Renminbi, who spent in China, for repayment from this party in foreign exchanges.

(3)

Investment in China in Renminbi or with materials bought in China by overseas investors without approval of the foreign exchange control authority.

(4)

Purchase of foreign exchanges with faked, invalid certificates, contracts, bills or other deceptive means from designated banks of foreign exchange.

(5)

Other actions of illegal foreign exchange arbitrage.

Article 41

The illegal incomes, which are gained by handling foreign exchange businesses without approval of the foreign exchange control authority, shall be confiscated by the foreign exchange control authority and this business shall be outlawed, or be affixed with criminal liabilities if crimes are constituted.

If financial institutions handling foreign exchange business handle foreign exchange businesses beyond their approved scope of businesses, they shall be ordered by the foreign exchange control authority to make corrections, their illegal incomes if any shall be confiscated and be asked to pay fines amounting to one to five times of the illegal incomes, be imposed with fines between 100,000 and 500,000 Yuan if they do not have any illegal incomes. They shall be ordered by the foreign exchange control authority to make rectification and consolidation or their business licenses shall be revoked if they involve in serious cases or fail to make corrections within fixed periods of time. If crimes are constituted, they shall be affixed with criminal liabilities.

Article 42

If designated banks of foreign exchange fail to handle foreign exchange settlement and sales according to State regulations, they shall be ordered by the foreign exchange control authority to make corrections, criticized, and their illegal incomes shall be confiscated and fined at between 100,000 and 500,000 Yuan. If the cases are serious, they shall be banned from handling foreign exchange settlement and sale businesses.

Article 43

If they go against the management of the exchange rates of Renminbi, the management of interest rates of foreign exchange deposits, or the management of foreign exchange market, financial institutions handling foreign exchange businesses shall be ordered by the foreign exchange control authority to make corrections, criticized, and their illegal incomes shall be confiscated if any and fined at one to five times of their illegal incomes, fined at between 100,000 and 500,000 Yuan if they do not gain any illegal incomes, ordered by the foreign exchange control authority to make rectification and consolidation or their foreign exchange business licenses shall be revoked if the cases are serious.

Article 44

Domestic institutions with one of the following acts of violation against the management of foreign debts shall be warned, criticized and fined between 100,000 and 500,000 Yuan by the foreign exchange control authority. If crimes are constituted, the criminal liabilities shall be affixed with:

(1)

Unauthorized handling the loans from foreign counties.

(2)

Unauthorized issuing the foreign exchange bonds in foreign countries against the State regulations.

(3)

Unauthorized providing foreign-oriented guarantees against the relevant State regulations. Or

(4)

Other acts against the management of foreign debts.

Article 45

Domestic institutions committing one of the following acts of illegal use of foreign exchanges shall be ordered to make corrections, and forced to sell their foreign exchanges by the foreign exchange control authority. The illegal incomes shall be confiscated, fined at the amount equal to or less than the amount of foreign exchanges illegally used. If crimes are constituted, the criminal liabilities shall be affixed with:

(1)

Pricing and settlement of accounts in domestic in foreign currencies.

(2)

Using the foreign exchanges as mortgages without approval.

(3)

Altering the purpose of the use of foreign exchanges without approval. Or

(4)

Other acts of illegal use of foreign exchanges.

Article 46

Those who buy or sell foreign exchanges privately, under disguise, or for profiteering purpose shall be warned and forced to sell their foreign exchanges by the foreign exchange control authority, their illegal incomes shall be confiscated and fined at above 30 percent and below three times their illegally traded foreign exchanges. If crimes are constituted, the criminal liabilities shall be affixed with.

Article 47

Domestic institutions, which open foreign exchange bank accounts at home or abroad without authorization and against stipulations on the management of foreign exchange bank accounts; and lend, collusively use or transfer their foreign exchange bank accounts; or change the scope of use of their foreign exchange bank accounts without approval, shall be ordered to make corrections by the foreign exchange control authority, criticized, and fined between 50,000 and 300,000 Yuan and their foreign exchange bank accounts shall be revoked.

Article 48

Domestic institutions, which fabricate, alter, lend, transfer, or repeated use import and export check-off sheets against stipulations on the management of foreign exchange check-offs, or fail to go through check-off procedures, shall be warned and criticized by the foreign exchange control authority, fined between 50,000 and 300,000 Yuan and their illegal incomes shall be confiscated. If crimes are constituted, the criminal liabilities shall be affixed.

Article 49

If a financial institution handling foreign exchange businesses violates stipulations in articles 28 and 30 of the present Regulations, it shall be ordered to make corrections, criticized, and fined between 50,000 and 300,000 Yuan by the foreign exchange control authority.

Article 50

The party who has objections against the decision of punishment made by the foreign exchange control authority can apply for reconsideration within 15 days after receiving the notice of the decision of punishment to a foreign exchange control authority at a higher level. A decision of re-consideration shall be made by the foreign exchange control authority within two months after its receipt of an application for re-discussion. If it has also objections to the decision of re-consideration, the party can lodge a lawsuit in a people's court according to law.

Article 51

Domestic institutions that violate stipulations on the management of foreign exchanges, besides to be given the punishment according to the present Regulations, shall have their members in directly charge and persons directly responsible disciplined. If crimes are constituted, the criminal liabilities shall be affixed with

Chapter VII Supplementary Provisions

Article 52

For the purposes of the present Regulations:

(1)

"Domestic institutions " mean the enterprise and institutional units, State organs, social groups, and armed units within the territory of the People's Republic of China, including foreign-funded enterprises.

(2)

"Designate banks of foreign exchange" mean banks approved to handle businesses of foreign exchange settlement and sale by the foreign exchange control authority.

(3)

"Individuals" mean Chinese citizens and foreigners who have resided within the territory of the People's Republic of China for one full year.

(4)

"Foreign representative offices in China" mean foreign diplomatic and consulate organizations resided in China, China offices of international organizations, representative offices of foreign businesses in China, and business organs set up in China by foreign non- governmental organizations.

(5)

"Foreigners coming into China" mean the permanent residents of foreign representative offices in China, foreigners coming to China for short stays, foreigners employed in China, and foreign students studying in China.

(6)

"Current accounts" mean items of transactions taking place frequently in international payments, including trade incomes and expenditures, incomes from and expenditures on labor services, and unitary transfers.

(7)

"Capital account" means the increase and decrease of the assets and liabilities arising from the inflow and outflow of capital in international payments, including direct investment, various loans, and securities investment.

Article 53

Rules for the management of foreign exchanges in bonded zones shall be separately constituted by the foreign exchange control authority under the State Council.

Article 54

Rules for the management of foreign exchanges in border trade and border free markets shall be separately constituted by the foreign exchange control authority under the State Council according to the principles of the present Regulations.

Article 55

The present Regulations shall enter into force as of April 1, 1996. The Interim Regulations of the People's Republic of China concerning the Management of Foreign Exchanges promulgated by the State Council on December 18, 1980 and their rules shall be abolished simultaneously.