On October 22, 2005, the State Administration of Foreign Exchange introduced in Pudong nine pilot measures for the reform of the mode of administration of transnational companies’ foreign exchange fund:
(1) The transnational company may exercise central management of the foreign exchange of its member companies in a way of consolidation of balance within a day under the framework of the existing laws on consignment loans.
(2) The transnational company which has established financial centers or fund centers may open offshore accounts for central management of the foreign exchange fund of its member companies abroad.
(3) The transnational company may buy foreign exchanges to provide loans abroad, and the foreign exchange loan must not exceed the sum of the profit distributed to the foreign investor in the previous year, but not yet remitted abroad and the profit which the foreign investor is entitled to in accordance with the percentage of its investment, but not yet distributed by the enterprise. When conducting external loan business, the transnational company may handle forward exchange settlement and sale, and RMB and foreign exchange swapping businesses in accordance with Circular of the People’s Bank of China on Relevant Issues Concerning Expanding Forward Foreign Exchange Settlement and Sale and Commencing RMB and Foreign Exchange Swap by Designated Foreign Exchange Banks (Document YF [2005] No. 201).
(4) On the basis of the breakthrough made in the individual case of COSCO Ltd., the restrictions on the qualifications and conditions for foreign exchange fund offshore lending by Chinese-funded transnational companies who are pilot enterprises and have practical requirements, are appropriately relaxed, and the scope of the pilot project of external operation of fund expanded in support of the implementation of the “Going Out” policy by enterprises.
(5) The regional head-offices of a transnational company may be entrusted by the subsidiaries and associated companies at home with the concentrated handling of the import and export foreign exchange receipt from and payment to the overseas fund settlement center of the parent company, but netting is forbidden in settlement.
(6) The foreign exchange sale and payment business procedures under non-trade items are simplified and efficient and reasonable modes of non-trade items supervision explored. Of the non-trade foreign exchange sale and payment items not defined in the current laws, any item to the amount not more than an equivalent of 100 thousand USD is examined and approved, and handled by the bank; and any item to the amount over 100 thousand USD is examined and approved by the State Administration of Foreign Exchange Shanghai Branch, and handled by the bank, without the approval by the State Administration of Foreign Exchange any more. Small-amount non-trade foreign exchange sales and payments do not require tax certificates any more, and a transnational company may directly handle foreign exchange sale and payment procedures by presenting its contract and invoice to the bank.
(7) When a transnational company applies for membership of China Foreign Exchange Transaction Center, the total volume of transnational foreign exchange receipts and payments in the current accounts, or the goods trade import and export of the previous year of its internal member companies may be consolidated in the calculation.
(8) The innovation of financial derivative products in the conversion of RMB into foreign exchanges by Chinese and foreign-invested banks is supported, and banks with derivative product transaction qualification approved by banking supervision departments may start handling RMB and foreign exchanges cross wealth management services which conform to the foreign exchange administration requirement in the examination and verification by the State Administration of Foreign Exchanges.
(9) The foreign exchange administration evaluation and monitoring system, for monitoring fund flow and stock of transnational companies and foreign exchange balance, and the monitoring and evaluation of the effects of pilot projects further improved.
These nine measures will promote the establishment of fund and financial centers for cross border operations, by the regional head-offices established in China by Chinese and Foreign-invested transnational companies, further give play to the functions of the hub of human resources, logistics, funds, technologies and information, and also promote the innovation in the foreign exchange administration system, and support the comprehensive supporting reform in Pudong which will achieve effects as the pioneer and as the leader.
The pilot projects have progressed smoothly on the whole. In addition to the four enterprises of GE, Merchants Bank, HP and COSCO and another 25 enterprises have participated in the pilot project. At present, 29 enterprises in total and banks have started 29 related pilot projects, and another 21 units are applying for conducting another 31 pilot projects. |
