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Print articleChina: Relaxation of Foreign Exchange Control Over Current Account Items
January, 2007 -
The State Administration of Foreign Exchange ("SAFE") issued the Notice on Adjusting the Policies on Foreign Exchange Control for Current Account Items on 14 April 2006. The Notice, which became effective on 1 May 2006, further relaxes foreign exchange control over current account items.
Abolition of prior approval
To date, the opening, modification and closing of foreign exchange accounts related to current account items (“Accounts”) of organisations in China required approval by SAFE or its local agencies (“foreign exchange bureaux”). The Notice eliminates this approval requirement. An organisation in China with an existing Account that needs to open a new Account may carry out Account opening procedures directly with a designated foreign exchange bank (“designated bank”). If an organisation has not previously opened an Account, it shall solely be required to register its basic particulars with the relevant foreign exchange bureau.
Higher limit
The Notice raises the limit on the amount of foreign exchange that an organisation in China may retain in the Account. The limit in a given year shall be equal to the sum of 80% of the receipts in the Account and 50% of the expenditures from the Account in the previous year. If an organisation in China did not have any current account related foreign exchange receipts and expenditures in the previous year and needs to open an Account, the initial limit shall be the equivalent of US$500,000.
Simplification of documentation
In order to pay a charge in relation to trade in services of not more than the equivalent of US$50,000 to an organisation abroad or the equivalent of US$5,000 to an individual abroad, a payor in China may carry out foreign exchange purchase and payment procedures on the strength of the contract or invoice (payment notice). For amounts exceeding the foregoing limits, procedures shall be carried out in accordance with existing provisions, which means a tax certificate is required.
If a payor in China makes a payment in relation to trade in services to a foreign party by electronic commerce means, such as the internet, it may carry out foreign exchange purchase and payment procedures on the strength of the relevant contract or payment notice downloaded from the network and affixed with the payor’s stamp or signed by the payor.
If the statutes are silent on the examination of the documents for the sale and payment of foreign exchange in relation to trade in services, the examination shall be carried out by the designated bank if the amount is not more than the equivalent of US$10,000 or by the local foreign exchange bureau if the amount is more than the equivalent of US$10,000.
Other provisions
The Notice further relaxes the policies on the purchase of foreign exchange by resident individuals of China
Abolition of prior approval
To date, the opening, modification and closing of foreign exchange accounts related to current account items (“Accounts”) of organisations in China required approval by SAFE or its local agencies (“foreign exchange bureaux”). The Notice eliminates this approval requirement. An organisation in China with an existing Account that needs to open a new Account may carry out Account opening procedures directly with a designated foreign exchange bank (“designated bank”). If an organisation has not previously opened an Account, it shall solely be required to register its basic particulars with the relevant foreign exchange bureau.
Higher limit
The Notice raises the limit on the amount of foreign exchange that an organisation in China may retain in the Account. The limit in a given year shall be equal to the sum of 80% of the receipts in the Account and 50% of the expenditures from the Account in the previous year. If an organisation in China did not have any current account related foreign exchange receipts and expenditures in the previous year and needs to open an Account, the initial limit shall be the equivalent of US$500,000.
Simplification of documentation
In order to pay a charge in relation to trade in services of not more than the equivalent of US$50,000 to an organisation abroad or the equivalent of US$5,000 to an individual abroad, a payor in China may carry out foreign exchange purchase and payment procedures on the strength of the contract or invoice (payment notice). For amounts exceeding the foregoing limits, procedures shall be carried out in accordance with existing provisions, which means a tax certificate is required.
If a payor in China makes a payment in relation to trade in services to a foreign party by electronic commerce means, such as the internet, it may carry out foreign exchange purchase and payment procedures on the strength of the relevant contract or payment notice downloaded from the network and affixed with the payor’s stamp or signed by the payor.
If the statutes are silent on the examination of the documents for the sale and payment of foreign exchange in relation to trade in services, the examination shall be carried out by the designated bank if the amount is not more than the equivalent of US$10,000 or by the local foreign exchange bureau if the amount is more than the equivalent of US$10,000.
Other provisions
The Notice further relaxes the policies on the purchase of foreign exchange by resident individuals of China
