Issuance of Foreign Exchange Registration Certificate of Foreign-funded Enterprises

Within 30 days from issuance of business license, the foreign-funded enterprise should apply for the Foreign Exchange Registration Certificate from the local foreign exchange control bureau. While making the application, a "Form of Registration of the Basic Profile of Foreign-funded Enterprise" is to be filled out and handed in together with the following papers(copies):

• Documents of approval and certificate of approval from the authorities in charge of the establishment of foreign-funded enterprises;
• Business license (in duplicate) issued by the State Administration of Industry and Commerce;
• Approved valid contract and article of association of the foreign-funded enterprise;
• Other papers required by the foreign exchange control bureau.
  
  

After examination of the papers submitted by the enterprise applying for registration, the foreign exchange control bureau issues the Foreign Exchange Registration Certificate of Foreign-funded Enterprises.

Foreign Exchange Control on Current Accounts

The foreign exchange settlement account may be used for current account receipts and payments and payments for capital items approved by the foreign exchange control bureau. Receipts of foreign-funded enterprises under current account may be retained within the maximum amount approval by the foreign exchange control bureau, the amount in excess may be sold to designated foreign exchange banks or sold through the foreign exchange swap center. Foreign-funded enterprises may purchase and sell foreign exchange at designated foreign exchange banks or through the foreign exchange swap center.

The state foreign exchange control administration adjusts the maximum amount of foreign exchange settlement accounts in line with the capital actually contributed by foreign-funded enterprise and the requirement of their turnover under current account.

Trade related or non-trade related operational payments of foreign-funded enterprises in foreign exchange may be made out of their foreign exchange banks on the strength of valid commercial documents or valid documents corresponding to the form of such payments.

Remittances of profits and dividends of the foreign investors in foreign-funded enterprises may be effected in foreign currency, after payment of taxes according to law, from their foreign exchange accounts or through designated foreign exchange banks on the strength of the resolution of their board of directors on the distribution of profits.

Salaries and other legitimate income of foreign employees, overseas Chinese and employees from Hongkong, Macao and Taiwan in foreign-funded enterprises may be exchange for foreign currency through designated foreign exchange banks after payment of taxes according to law on the strength of evidences.

The following external payments may be effected out of their foreign exchange accounts or effected in foreign currency through designated foreign exchange banks when authenticated by the foreign exchange control bureau:

Pre-payment for import in excess of 15% of the total contract amount and at the same time also in excess of the equivalent of US$100,000; rebates for export in excess of 2% of the total contract amount or commissions for exports in excess of 5% there of and at the same time also in excess of the equivalent of US$10,000; interest payment for external debts; cash drawing in excess of the equivalent of US$10,000.

Opening of Foreign Exchange Accounts

Foreign-funded enterprise may open foreign exchange accounts at the banks of their choice in the place of their registration on the strength of the Foreign Exchange Registration Certificate issued by the foreign exchange control bureau and other related papers.

Foreign-funded enterprises may open foreign exchange settlement accounts and foreign exchange capital accounts at the banks at which they have opened accounts on the strength of the Foreign Exchange Registration Certificate and the Notice for Opening Bank accounts issued by the foreign exchange control bureau. Foreign-funded enterprises may open Foreign Exchange (transfer) Loan Accounts and Special Foreign Exchange Loan Accounts of domestic Chinese financial institutions at the banks at which they have opened accounts on the strength of the Foreign Debt Registration Certificate issued by the foreign exchange control bureau.

Starting from December 1, 1996, China has undertaken liabilities under Article 8 of the IMB Agreement and effected convertibility of the RMB under current account.

Foreign Exchange Control On Capital Account

Capital contributed in cash by the investors of foreign-funded enterprises may be deposited in capital accounts. Payment from capital accounts are limited to payments for relevant uses under current account and payment under capital account as approval by the foreign exchange control bureau.

Foreign-funded enterprises may raise domestic and external loans in foreign exchange Formalities for registration of external loans must be completed at the foreign exchange control bureau within 15 days after signing the contract for external loans on presentation of the duplicate of the contract and External Debt Registration Certificates are thereby used registration item by item.

When channeling in external loans, the borrower should open special spot foreign exchange account for external debts at the bank of China or other banks as approved by the State Foreign Exchanges control Administration on the strength of the External Debt Registration Certificate.

At times of the payment of principals and interests of loans registered item by item, the borrowers shall approach the foreign exchange control bureau to complete formalities of approval on presentation of the External Debt Registration Certificate and the notice for payment of the principal and interest and effect payment of the special spot exchange account for external debts or special spot exchange account for payment of principal and interest of external debt.

In case guaranties are required in respect of the above mentioned external loans, the Regulations Governing External Guaranties by Domestic Institutions shall apply.

Foreign exchange holdings of foreign-funded enterprises under the following items may not be settled without the permission of the foreign exchange control bureau:

• Remittance of foreign exchange as investment by legal persons and natural persons from countries outside China.
• Foreign exchange receipts from legal persons or natural persons outside China remitted as investments;
• Loans and bonds in foreign currency obtained outside China, and foreign exchange obtained from stocks;
• Other foreign exchange income under capital account approval by the state foreign exchange control administration.
  
  

Payments in foreign currency under capital accounts of foreign-funded enterprises included in the following list shall be applied for on the strength of valid vouchers to the foreign exchange control bureau and paid out from their foreign exchange accounts or effected in foreign currency through the designated foreign exchange banks upon approval by the foreign exchange control bureau.

• Paying bank principal of external debt--with External Debt Registration Certificate, loan contract and notification from the creditor institution calling for paying back the principal.
• Foreign exchange used for execution of external guaranties -- with guaranty contract, registration certificate of external guaranties and payment notice from institutions outside China.
• Remittance of investment capital out of China –with documents of approval from state authorities and investment contract.
• Registered capital of foreign-funded enterprises to be contributed by Chinese investors in foreign exchange as approved -- with documents of approval from state authorities and relevant contract.
• Capital of foreign-funded enterprises in foreign currency to be remitted out of China -- with resolution of the board of directors and the document of approval of state authorities.
• Capital transfers of foreign-funded enterprises inside China and capital expansion or reinvestment of profits of the foreign partners -- with document of approval from the foreign exchange control bureau.

Preferential Policies for Encouragement of Foreign Investment

Foreign-funded enterprises may open foreign exchange settlement accounts and foreign exchange capital accounts in the local designated foreign exchange banks with the Foreign Exchange Registration Certificate of Foreign-funded Enterprises and the Notice for Account Opening from the foreign exchange control bureau. Foreign-funded enterprises may effect sales and purchases of foreign exchange at the designated banks and the foreign exchange swap market.

When authorized by competent departments, foreign-funded enterprises may export products bought with RMB from domestic producer in order to achieve comprehensive compensation in foreign exchange.

Foreign investors may reinvest heir RMB profits in other enterprises within China which can generate new and additional foreign exchange earnings, and apart from the preferential treatment for partial refund of income tax, they can also enjoy same treatment as that of investment in foreign exchange.