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SAFE simplifies FX rules for investors in China

China's State Administration of Foreign Exchange (SAFE) has issued a circular, which will come into force on 1 June 2015, simplifying its regulations of FX administration for direct investment.

The move deepens reform of China's FX regulations, in a move that, according to SAFE, will “boost and facilitate the operations of cross-border investment funds by enterprises”.

The circular includes the follows reforms:

  1. Cancelling registration and verification of foreign exchange under direct investment. Domestic and overseas investment entities can go directly to banks for registration for foreign exchange under domestic or overseas direct investment.
  2. Simplifying registration management for confirmation of capital contribution by a foreign investor under domestic direct investment. The registration for confirmation of non-monetary capital contribution by a foreign investor under domestic direct investment and registration for confirmation of capital contribution by a foreign investor for acquisition of a Chinese shareholder's equity are cancelled. The registration for confirmation of monetary contribution by a foreign investor is replaced with registration for accounting entry of monetary contribution for domestic direct investment.
  3. Cancelling filing of foreign exchange for overseas reinvestment. Foreign exchange filing will no longer be required for overseas reinvestment for establishment of or control over another overseas enterprise by an overseas enterprise established or controlled by a domestic investment entity.
  4. Cancelling annual check of foreign exchange for direct investment and replacing it with registration for accumulated equity in domestic and overseas direct investment. The period for registration will be extended to allow enterprises to report relevant data via multiple channels.
  5. Enhancing ongoing and ex post regulation. The foreign exchange authorities increase training and instructions to banks, strengthen ex post verification and inspection, require banks to raise their awareness of compliance, and specify punitive measures on violating banks.

The circular, titled Further Simplifying and Improving Policies for Foreign Exchange Administration for Direct Investment, is available on SAFE's website.

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