By Li Jinnan, Partner, King & Wood’s Banking & Finance Group

In order to support outbound investment projects of domestic PRC entities, to meet the policy demands of domestic credit support, and to further facilitate trading and investing, the State Administration of Foreign Exchange ("SAFE") on July 30th, 2010 promulgated the Notice on the Administration of Overseas Security by Domestic Entities (the "Notice"), which came into effect as of the date of promulgation. This Notice relaxes the restrictions on financing of outbound projects.Continue Reading New SAFE Regulations Support Financing of Outbound Deals

On June 9, 2009, the State Administration for Foreign Exchange (“SAFE”) issued the Notice on Certain Issues Relating to Foreign Exchange Administration on Offshore Lending by Domestic Enterprises (the “Notice”) effective as of August 1, 2009, in an effort to deal with the difficulties faced by offshore Chinese-funded enterprises that have “gone abroad” in obtaining financing offshore and increasing working capital, to encourage more domestic enterprises with strong capital strength to “go abroad”, and to enhance the use of funds by domestic enterprises.
 

King & Wood’s Finance Group

 Continue Reading SAFE Circular to Improve Forex Administration on Offshore Lending

Huang Caihua, Associate, Foreign Direct Investment

Recently, the Chinese government issued a couple of new laws and regulations to curb overseas “hot” money and strengthen the administration of foreign exchange. On August 5, 2008, the State Council amended and promulgated the Regulations on Foreign Exchange Administration of the People’s Republic of China which requires that foreign exchange and the fund for settlement in a capital account should be used as approved by relevant approval authorities. On August 29, 2008, the Circular of Relevant Implementation Questions Concerning the Improvement of Administration of Payment and Settlement of Foreign Exchange Capital of Foreign Invested Enterprises (the “Circular”) was then issued by the State Administration of Foreign Exchange (“SAFE”), according to which the RMB settled from the capital account of a foreign invested enterprise (“FIE”) should be used in accordance with the business scope approved by the governmental agencies and may not be used to make equity investments in China. This means foreign investors cannot directly make use of the foreign exchange in their capital account to invest in China, which is expected to have a major impact on domestic re-investment by FIEs.
Continue Reading Foreign Exchange Capital: Restrictions on Domestic Investment

By King & Wood’s Banking Regulation & Compliance Practice

A Brief Analysis on the New Administrative Rules on Foreign Exchanges

Background

On August 5, 2008, the Premier of the PRC State Council, Mr. Wen Jiabao, issued the State Council Order No. 532, which promulgates the newly revised “Administrative Rules of the People’s Republic of China on Foreign Exchanges” (hereinafter referred to as the “New Rules”). This document came into force upon its promulgation, and to a large extent changes the rules of the old foreign exchange supervision system. This tremendous change in the regulatory system is for the purpose of accommodating the rapid development of China’s economy and the material transformation in the international economic fields in recent years.Continue Reading Revolution in the Foreign Exchange Control System