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Circular of the Ministry of Commerce on Issues Relating to Cross-border Direct Investments in RMB ([2011] No. 889)
 

In order to adapt to recent developments, facilitate investments and further make proper use of foreign investments, in accordance with the relevant provisions of laws and regulations on foreign investments, you are hereby notified of the matters relevant to cross-border direct investments in RMB as follows:

Article 1 the term "cross-border direct investments in RMB" as mentioned herein refers to foreign investors' direct investment activities in China conducted by using legally obtained offshore RMB, in accordance with Chinese law.

Article 2 the term "offshore RMB" as mentioned herein refers to:

1. RMB obtained by foreign investors through settlement of cross-border trade in RMB, RMB legally obtained by foreign investors from China as profits being remitted outside of China and RMB obtained through stock transfer, capital reduction, liquidation and investment return in advance; and

2. RMB obtained by foreign investors outside of China through legal channels, including but not limited to, RMB obtained by issuance of RMB bonds or RMB stock shares outside of China.

Article 3 Cross-border direct investments in RMB and re-investments into the invested foreign-funded enterprises shall comply with the requirements of laws and regulations and the relevant provisions on foreign investments and observe the relevant State provisions for the industrial policies on foreign investments, review over the security of mergers and acquisitions by foreign investors and anti-monopoly review.

Article 4 Cross-border direct investments in RMB within China shall not be directly or indirectly used to invest in securities or financial derivatives (unless otherwise provided for in Article 11 hereof) or used in entrusted loans.

Article 5 The competent commerce departments at all levels shall inspect and approve cross-border direct investments in RMB according to the existing provisions on the administration of inspection and approval of foreign investments and the limits of authority. Investors or foreign-funded enterprises shall, in addition to submitting the relevant documents in accordance with laws and regulations and the relevant provisions on foreign investments, submit the following documents to the competent commerce department:

1. The proving or explanatory documents in respect to the source of funds in RMB;

2. An explanation on the use of the funds; and

3. The "Form for the Details of Cross-border Direct Investments in RMB".

If investors or foreign-funded enterprises, in cross-border direct investments in RMB, convert the foreign currency used for its original capital contribution into RMB, they shall report the matter to the competent commerce department for approval, and in addition to the aforesaid materials, shall also provide the resolution of the highest authority of an enterprise such as the board of directors and the modified contract/articles of association (or the amended agreement).

Article 6 The local competent commerce departments shall record the "Form for the Details of Cross-border Direct Investments in RMB" into the system for the administration of the inspection and approval of foreign investments. Cross-border direct investments in RMB which fall under any of the following circumstances shall be reported by the competent commerce department in the provincial level upon it affixes its seal on the "Form for the Details of Cross-border Direct Investments in RMB" to the Ministry of Commerce for inspection and approval.

1. Where the amount of capital contribution in RMB reaches 300 million yuan or more;

2. Where they are invested into financing guarantee, financing lease, micro-credit, auction and other industries;

3. Where they are invested into investment companies established by foreign investors, venture capital or equity investment enterprises invested by foreign investors; or

4. Where they are invested into the industries macro-controlled by the State such as cement, iron and steel, electrolytic aluminum, and ship building.

Article 7 After receiving the "Form for the Details of Cross-border Direct Investments in RMB" submitted by the competent provincial level commerce department, the Ministry of Commerce shall, within five working days, complete its inspection and approval or provide its opinion. If it passes the inspection and approval, the local competent commerce department may provide an approving reply and issue an Approval Certificate for Foreign-Funded Enterprise.

Article 8 The competent commerce departments at all levels shall, in the approving reply for cross-border direct investments in RMB, specify the wording "capital contribution by offshore RMB", the amount of capital contribution and the requirements of Article 4 hereof and record the wording "capital contribution by offshore RMB" and the amount of capital contribution in RMB in the "notes" section of the Approval Certificate for Foreign-Funded Enterprise.

Article 9 The competent commerce departments at all levels shall, in a timely manner, send a copy of the approving rely documents for cross-border direct investments in RMB to the relevant same level departments in the People's Bank of China, the customs, the tax authorities, the departments for industry and commerce and the departments for foreign exchange.

Article 10 Cross-border direct investments in RMB into the real estate industry shall be made in accordance with the existing provisions on the administration of the inspection and approval and filing of investments made by foreign investors in the real estate industry. The cross-border direct investments in RMB having been filed shall be announced on the website of the Ministry of Commerce (www.mofcom.gov.cn, the section "publication of results" on the sub-website of the department of foreign investment) and the foreign-funded enterprises shall go through the relevant procedures in accordance with the relevant administrative provisions, with the information published on the website of the Ministry of Commerce (available after logging onto the website), the approving reply documents of the competent commerce departments and the Approval Certificate for Foreign-funded Enterprise.

Article 11 If foreign investors use offshore RMB legally obtained to participate in the directional share issuance of companies listed domestically and the transfer of shares thereof by agreement, they shall go through the relevant inspection and approval procedure with the Ministry of Commerce in accordance with the requirements of the "Administrative Measures on the Strategic Investments of Foreign Investors in Listed Companies".

Article 12 If foreign investors make direct investments with RMB profits, which are obtained from its foreign invested enterprises in China but have not been remitted outside of China or with RMB obtained from stock transfer, capital reduction, liquidation or return of investments in advance, the relevant provisions shall be followed.

Article 13 When conducting a joint annual inspection of foreign investments, the competent commerce departments at all levels shall inspect cross-border direct investments in RMB in accordance with Article 4 hereof.

Article 14 Investors from Taiwan, Hong Kong or Macao making cross-border direct investments in RMB shall also follow the rules hereof.

Article 15 Statistical requirements for cross-border direct investments in RMB will be issued in a separate circular.

Article 16 This Circular shall come into effect on the date of issuance. If there is any inconsistency between any previous provisions of the Ministry of Commerce on cross-border direct investments in RMB and this Circular, this Circular shall prevail.

In order to facilitate a standard and healthy development of cross-border direct investments in RMB, the competent provincial commerce departments should forward the requirements of this Circular to the competent commerce departments at all levels within their administrative regions and strengthen supervision over the inspection and approval work. If any issues are discovered in the course of the implementation of this Circular, please contact the Ministry of Commerce (the department of foreign investment) in a timely manner and report the relevant situation.