Chapter I General Provisions

Article 1. These Regulations are formulated to standardize foreign exchange conversion, sale and payment and to promote RMB's convertibility under current account.

Article 2. Financial institutions dealing with foreign exchange business shall handle foreign exchange conversion, sale and payment and open foreign exchange accounts in accordance with these Regulations and in conformity with their respective business scope approved by the People's Bank of China and the State Administration of Exchange Control ("SAEC").

Article 3. Ally types of foreign exchange revenues by all domestic enterprises and government units, State agencies, social groups, army units and so on (hereinafter referred to as "domestic institutions") shall be transferred back to the country in a timely manner; and foreign exchange settlement, purchase, opening of foreign exchange account and external foreign exchange payment shall be handled in accordance with these Regulations.

Individual residents, foreign institutions in China and foreign individuals in China shall handle foreign exchange conversion, purchase, opening of foreign exchange account and external foreign exchange payment in accordance with these Regulations.

Article 4. When domestic institutions and individual residents handle external revenues and expenditures through domestic financial institutions, they shall report the balance of payments statistics in accordance with the stipulations of the "Measures Governing Balance of Payments Statistics Reporting".

Chapter II Foreign Exchange Conversion, Sales and Payment under Current Account

Article 5. Except for such scope and amounts set forth in Article 6, 7 and 9 in these Regulations, the following foreign exchange obtained by domestic institutions shall all be settled:

(1) foreign exchange revenues from export, transit goods on a payment-prior-to-revenue basis, and other transactions;
(2) exchange revenues from winning international bids with foreign loans;
(3) exchange revenues from duty-free commodities business operations domestically under the supervision of the Customs;
(4) exchange revenues of such trades as transportation (including all transportation means), ports (including sea ports and airports), postal telecommunications (excluding international remittance), tourism, advertising, consulting, exhibition, commission sales, reparation through the provision of commodities or services;
(5) exchange revenues of administrative or judicial departments from stipulated fees, fines or confiscations;
(6) exchange revenues from the transfer of such intangible assets as land use right, copy right, trademark license, patent right, non-patented technologies and goodwill;
(7) foreign currency profits remitted home by overseas investment enterprises, foreign exchange recovered from foreign economic aid projects, or exchange revenues from overseas assets;
(8) exchange revenues from overseas claims; foreign exchange guaranty money returned;
(9) exchange revenues from a lease of real estate or from other foreign exchange assets;
(10) exchange revenues of insurance companies from underwriting foreign exchange insurance;
(11) net revenues from foreign exchange business operations of financial institutions which have obtained the "License for Foreign Exchange Business Operations";
(12) exchange revenues from foreign donation, aid or assistance;
(13) Other foreign exchange revenues which are required to be settled by SAEC.

Article 6. With respect to foreign exchange revenues listed below, domestic institution (foreign investment enterprises excluded) may apply to SAEC or its branches (collectively, the "Exchange Bureaus") for opening foreign exchange accounts at the authorized foreign exchange banks and handle foreign exchange settlement in accordance with relevant regulations:

(1) foreign exchange received in the process of business by companies undertaking overseas contract projects, providing labor services, technological cooperation and other services to other countries;

(2) foreign exchange received or paid on behalf of their clients by institutions who act as agent for external or overseas business;

(3) foreign exchange from temporary receipts with obligation or unsettled temporary receipts, including bidding guaranty money or performance guaranty money remitted inward, foreign exchange receipts from transit trade on a payment-prior-to-revenue basis, foreign exchange remittance from handling international remittance by postal and telecommunications departments, foreign exchange advance payment made by foreign travel agencies to first-grade travel agencies of our country, foreign exchange revenues of railway departments from handling foreign insured transportation business, foreign exchange deposit and mortgage money collected by the Customs;

(4) premiums of an insurance company from underwriting foreign exchange insurance, which needs to be reinsured overseas, or which is unsettled yet.

Net foreign exchange revenues from the business operations described above shall be sold to the authorized foreign exchange banks within a specified time period in accordance with the relevant regulations.

Article 7. Foreign exchange which is used as donation and which requires offshore payment, as set out in the donation agreement, may only be retained after approval by the Exchange Bureaus.

Article 8. Foreign exchange within the scope described below may be sold to the authorized foreign exchange banks or may be retained:

(1) foreign exchange owned by foreign embassies in China and institutions in China set up by international organizations and other foreign legal persons;

(2) foreign exchange owned by individual residents for foreign individual residents in China.

Article 9. Foreign investment enterprises may retain foreign exchange revenues under its current account up to an amount verified and approved by the Exchange Bureaus. Any amount in excess must be sold to the authorized foreign exchange banks.

Article 10. Domestic institutions, individual residents, foreign institutions in China and foreign individuals in China, permitted in Articles 6, 7, 8, 9 of these Regulations to open foreign exchange accounts, shall go through procedures for opening an account at the authorized foreign exchange banks in accordance with relevant regulations on management for foreign exchange accounts.

Article 11. When a domestic institution makes external foreign exchange payment in trade and non-trade business operations described below, it shall produce valid commercial documents correspondent to the payment method and all necessary valid certificates before it can make payment from its foreign exchange account or convert foreign exchange at an authorized foreign exchange bank:

(1) With respect to import which is settled through documentary letter of credit/letter of guarantee, the import contract, the import exchange payment cancellation document and the application letter for the credit shall be produced.

(2) With respect to import which is settled through documentary collection, the import contract, the import exchange payment cancellation document and the import exchange payment notice shall be produced.

(3) With respect to import which is settled through remittance, the import contract, import exchange payment cancellation document, invoice, original bill of entry and original transportation documents shall be produced. If there is any discrepancy between the name of "operating unit" in the bill of entry and the name of the purchaser in the import contract, an additional agency agreement between the two needs to be furnished.

With respect to import described in sub-paragraphs (1) to (3) above, if the import goods are under quota administration or administered as specially designated products, an import license or import certificate issued by the relevant departments shall be produced. With respect to import goods for which automatic registration system has been adopted, relevant registration documents shall be produced. With respect to import of materials for production of export products, the contract for processing imported materials approved by MOFTEC shall be provided.

(4) With respect to advance payment under import (within the stipulated percentage), the import contract and the import exchange payment cancellation document shall be produced. With respect to transportation fees and insurance premiums for import goods, the import contract, the original transportation fee receipt and the original insurance premium receipt shall be produced.

(5) With respect to commissions under export (within the stipulated percentage), the export contract or the commissioning agreement, the foreign exchange settlement memo or advice of receipt shall be produced. With respect to transportation fees and insurance premiums related to export, the export contract, the original transportation fee receipt and the original insurance premium receipt shall be produced.

(6) With respect to arrear amounts under import, the import contract, the import exchange payment cancellation document and the qualification certificate for examination of goods shall be produced.

(7) With respect to such additional fees for materials, technologies and information under imports and exports, the import or export contract, the import or export exchange payment cancellation document, invoices, vouchers, and the letter of explanation signed by the person in charge of the import or export unit shall be produced.

(8) With respect to foreign exchange used to buy products from bonded zones or foreign exhibits in China, the relevant valid certificates stipulated in sub-paragraphs (1) to (7) shall be produced.

(9) With respect to import of such intangible assets as patent right, copy right, trademark, computer software, the import contract or agreement shall be produced.

(10) With respect to payment of foreign exchange compensations under import or export, the foreign exchange settlement memo or advice of receipt, agreement of claim, certificate for settlement of claims or certificate for returning foreign exchange shall be produced.

(11) The bidding document shall be produced for payment of bidding guaranty money and the contract shall be produced for payment of performance guaranty money and advanced project funds required in contracting overseas projects.

Article 12. When a domestic institution makes external foreign exchange payment in trade and non-trade business operations described below, a financial institution dealing in foreign exchange may pay from the foreign exchange account of the domestic institution or convert foreign exchange based on the detailed invoice provided by the clients before it conducts verification thereof:

(1) Payment for import of duty free commodities by companies dealing duty-free commodities as approved by the State Council within its approved business scope;

(2) Payment of offshore international joint transportation fees, equipment maintenance fees, fees for use of airports and harbors, fuel supply costs, insurance premiums, non-financing lease costs and other service charges by civil aviation, ocean-shipping or railway departments (institutions);

(3) Payment of accommodation and stipends for international operating personnel by civil aviation, ocean-shipping or railway departments (institutions);

(4) Payment of international postal and telecommunications charges by postal and telecommunications departments.

Article 13. When a domestic institution makes external foreign exchange payment in trade and non-trade business operations described below, it shall produce the approval document of the Exchange Bureaus to make payment from its foreign exchange account, or shall produce the foreign exchange sales notice issued by the Exchange Bureaus to convert foreign exchange at the authorized foreign exchange banks:

(1) The portion of advance payment or commissions which surpass the stipulated percentage;
(2) External payment incurred under transit trade on a payment-prior-to-revenue basis;
(3) Other external payments approved by SAEC.

Article 14. Where a domestic institution makes payment of foreign debt interest and interest for foreign exchange (on-lend) loans, it shall produce the debt service approval document issued by the Exchange Bureaus to make payment from its foreign exchange account, or to convert foreign exchange at the authorized foreign exchange banks.

Article 15. With respect to foreign exchange for non-trade and non-operational purposes required by government institutions, units and social groups which are included in the State budget, it shall be handled in accordance with the "Provisional Regulations on Foreign Exchange Financial Management of Non-Trade and Non-Operational Nature."

Article 16. Where a domestic institution excluded from the State budget requires foreign exchange for non-trade and non-operational purposes, it shall produce the approval document of the Exchange Bureaus to make payment from its foreign exchange account, or shall produce the foreign exchange sales notice issued by the Exchange Bureaus to convert foreign exchange from the authorized foreign exchange banks:

(1) foreign exchange for holding exhibits, business invitation, training or shooting TV plays abroad;
(2) external publicity expenses, aid to foreign countries, donation of foreign currency to other countries, membership charges of international organizations, registration and sign-up fee for international meetings;
(3) preliminary costs and operating costs for establishing offshore representative offices or branches;
(4) payment of offshore academic test fees by the Foreign Test Coordination Center of the State Education Commission;
(5) Other non-operational foreign exchange requirements.

Article 17. Foreign exchange requirements by individual for non-trade and non-operational purposes shall be converted in accordance with the relevant regulations at the foreign exchange banks authorized by the Exchange Bureaus:

(1) necessary conversion of foreign exchange by foreign specialists who are employed by domestic institutions and have their salary, living expenses and subsidy for leave from work paid in RMB;
(2) foreign exchange needed by individuals going abroad on personal causes (for instance, for visiting relatives, traveling or going on a pilgrimage);
(3) the need by individuals who have resided abroad to purchase foreign exchange with their retirement pensions, severance pay, dismissal pay, compensation for a bereaved family, and then remit out;
(4) domestic individual residents who need foreign exchange for such special purposes as to purchase a small amount of medicine or medical instruments.

Article 18. With respect to the remittance abroad of profits and dividends after the foreign investors to a foreign investment enterprise pays taxes in accordance with the law, the profit distribution resolution approved by the Board of Directors shall be produced before payment can be made from such enterprise's foreign exchange account or foreign exchange be converted by an authorized foreign exchange bank.

Foreigners, overseas Chinese and staff from Hong Kong, Macao or Taiwan who work in the foreign investment enterprise may, after paying taxes in accordance with the law, have their RMB salary and other lawful income converted into foreign currency at an authorized foreign exchange bank after producing relevant evidencing documents.

Article 19. Dividends which need to be paid in foreign exchange as stipulated shall be paid from the foreign exchange account or be converted at an authorized foreign exchange bank after taxes are paid in accordance with the law and the Board of Directors profit distribution resolution is produced.

Article 20. When foreign embassies in China want to remit abroad their lawful RMB revenues (such as visa charge and certification fee), they shall make conversion at the foreign exchange banks authorized by the Exchange Bureaus.

When institutions in China set up by foreign legal persons want to remit abroad their lawful RMB revenues (such as visa charge and certification fee), they must produce evidencing documents and apply to the Exchange Bureaus. Conversion can be made at the authorized foreign exchange banks after the Exchange Bureaus issues a foreign exchange sales notice.

Article 21. Unused RMB held by foreigners, overseas Chinese or compatriots from Hong Kong, Macao or Taiwan, who visit China on a temporary basis, may have their RMB converted into foreign currency and carried abroad after they produce their passport and the original exchange memo (with an effective period of six months).

Chapter III Settlement, Sales and Payment of the Foreign Exchange under Capital Items

Article 22. A specialized foreign exchange account shall be opened at the financial organ dealing with foreign exchange business for the foreign exchange under the capital item of a domestic institution.

Article 23 Settlement of foreign exchange within the scope of the following domestic institutions shall be approved by the SAEC:

(i) foreign exchange remitted inward by the offshore legal person or natural person and used as investment;
(ii) foreign exchange collected through offshore loans or the issuance of foreign currency stocks and bonds;
(iii) foreign exchange revenue under other capital items authorized by the SAEC.

Domestic foreign exchange loans, except outward documentary bills and international commercial loans borrowed by Chinese enterprises, shall not be settled.

Article 24. Foreign exchange earnings through the sale of real estate or other assets to offshore agents by domestic institutions, except the amount stipulated in Article 9 under these regulations, shall be sold to the appointed foreign exchange bank.

Article 25. In the event that capital items of domestic institutions are in need of foreign exchange as in the situations set forth below, they shall make application with the SAEC bringing the listed validated certificates, and foreign exchange may be withdrawn from their specialized foreign exchange accounts or be converted at the appointed fo reign exchange banks with the documents approved by the SAEC:

(i) In the event of repayment of external debts or foreign exchange loan principal, registration certificate of external debts, registration certificate of foreign exchange (transfer) loan and notices of repayment of the principle and interest issued by creditor institutions shall be prepared;

(ii) In the event of foreign exchange guarantee, contract of guarantee, registration certificate of foreign exchange guarantee issued by the SAEC and notice of payment issued by offshore institutions shall be prepared;

(iii) In the event of outward remittance of investment capital, approval documents and investment contracts issued by the state authority in charge shall be prepared;

(iv) In the event of contribution to a foreign investment enterprise with foreign exchange as required by the Chinese party and it is approved, documents and contracts approved by the state authority in charge shall be prepared.

Article 26. In the event that foreign investment enterprises are in need of foreign exchange as in the situations set forth below, foreign exchange may be withdrawn from their foreign exchange accounts as approved by the SAEC, or be converted at the appointed foreign exchange banks with the notice of sales of exchange issued by the SAEC:

(i) outward remittance of foreign exchange capital;
(ii) outward remittance of capital after liquidation in accordance with the law;
(iii) outward remittance of capital before due and full contribution in accordance with the Contract or the Articles of Association.

Allocation of capital of foreign investment enterprises domestically and re-investment of profits earned by the foreign party domestically shall be handled with the approval of the SAEC.

Chapter IV Supplemental Provisions

Article 27. If a payment is to be made from the foreign exchange account, the financial institution dealing with foreign exchange business shall make payment in accordance with the approved scope of foreign exchange receipt and expenditure as well as the stipulations of Chapter II and III hereunder.

Article 28. The appointed foreign exchange banks shall determine the exchange price and carry out settlement and sales of foreign exchange in accordance with the RMB's medium price and the floating range announced by the People's Bank of China.

Article 29. Payment or purchase of foreign exchange from foreign exchange accounts shall be performed on the day stipulated in the method of settling accounts or the account, early payment is not allowed; except for the foreign exchange for the payment of principal and interest and credit guarantee money, early purchase is not allowed, either.

Article 30. In order to avoid exchange rate risk, the appointed foreign exchange banks may deal in Renminbi and foreign exchange buying and selling and other value-guaranteed businesses for clients with forward payment contracts or agreements in accordance with relevant regulations.

Article 31. Financial institutions dealing with foreign exchange business shall submit statements of the settlement, sale and payment of foreign exchange to the SAEC on a quarterly basis.

Article 32. The domestic organ may choose a financial institution where it registers and opens a foreign exchange account, and carry out the settlement, purchase and payment of foreign exchange in accordance with the stipulations hereunder.

Without approval, only one basic foreign exchange account can be opened at an appointed foreign exchange bank for the foreign exchange receipt under the current items of a foreign investment enterprise.

Article 33. Financial institutions dealing with foreign exchange business and domestic organs that can perform settlement, purchase and payment of foreign exchange shall accept unconditional SAEC supervision and examination, and shall show and provide relevant materials. In the event of a breach of these regulations, the SAEC may impose penalties ranging from warnings, confiscation of illegal income, fines to the suspension of the business of settlement, sale (purchase) and payment of foreign exchange.

Article 34. These regulations shall be interpreted by the SAEC.

Article 35. These regulations shall come into effect as of the date of March 1, 1996. The Provisional Regulations on Administration of Settlement, Sales and Payment of Foreign Exchange promulgated on March 26, 1994, shall become invalid at trial areas. Where other regulations contradict these regulations, these regulations shall prevail.