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PBOC on Clarifying the Operational Rules for the Settlement Business under RMB Foreign Direct Investment ([2012] No.165)
 

In order to implement the Administrative Measures for the Settlement Business under RMB Foreign Direct Investment (PBOC Announcement [2011] No. 23), facilitate the RMB investment in the PRC by foreign investors and standardize the practice of the banking financial institutions (hereinafter referred to as the "Banks") in connection with the RMB settlement business under foreign direct investment, the following relevant issues are notified hereby:

I. All foreign investors shall open RMB basic deposit account, special deposit account and general deposit account for overseas institutions in accordance with the Administrative Measures for the RMB Settlement Accounts (PBOC's Order [2003] No.5), Administrative Measures for the RMB Settlement Accounts of the Overseas Institutions (Yin Fa [2010] No.249) and other rules for the management of settlement accounts.

II. Each foreign investor may only open one special RMB deposit account for initial expenses and such account shall be named after the depositor's name preceded by "initial expenses".
Where the foreign investor is a foreign individual, he/she may apply to open an individual RMB bank settlement account for the deposit of the initial expenses pursuant to the Administrative Measures for RMB Settlement Accounts and other rules for the management of the settlement accounts. The use of such account shall be administrated in a similar manner with the special RMB deposit account of initial expenses for overseas institutions. When filing the individual settlement accounts for the initial expenses opened by foreign investors with the cross-border RMB collection and payment information management system, the Banks shall indicate "initial expenses" at the beginning of the "remarks" column.
When opening a RMB special account for the initial expenses for a foreign investor, the Banks shall log on to the cross-border RMB collection and payment information management system to check whether such foreign investor has already opened an account for the initial expenses. If yes, the bank shall refuse to open such account for the foreign investor.

III. Where a foreign investor opens a RMB special deposit account for re-investment, the account shall be named after the depositor's name preceded by "re-investment".
When the foreign investor is a foreign individual, he/she may apply to open an individual RMB settlement account specifically for the deposit of re-investment fund. He/she must comply with the Administrative Measures for RMB Settlement Accounts and other rules for the management of the settlement accounts. The use of such account shall be administrated in a similar manner to the overseas institutions' RMB special deposit account for re-investment.

IV. The scope of collection and payment of the RMB special deposit account for initial expenses and the RMB special deposit account for re-investment of foreign investors shall be subject to the application rules of the PBOC.
The funds in the RMB special deposit account for initial expenses of the foreign investors shall not be used to bid for land use right or for the purchase of real estate properties.

V. Any foreign-invested enterprise that carries out RMB direct investment shall choose a settlement bank as the main reporting bank, which shall be responsible for the registration of the enterprise's information and submission of information in relation to changes to the local branch of PBOC where the enterprise is registered via the cross-border RMB collection and payment information management system. The local branch of PBOC where the foreign-invested enterprise is registered shall check the information provided by the main reporting bank and, when it has any query on such information provided, it has the right to require the foreign-invested enterprise and main reporting bank to provide explanations and submit relevant materials.
When registering information and submitting information in connection with changes, a foreign-invested enterprise shall submit a photocopy of the Certificate of Approval for Foreign-Invested Enterprises, duplicate copy of its business license, Organization Code Certificate and other documents to its main reporting bank. For any foreign-invested partnership enterprise, it shall provide the duplicate copy of its business license, Organization Code Certificate, enterprise basic information sheet issued by the competent administration for industry and commerce which shall contain all registration items of such partnership enterprise and is affixed with the query chop of the registration authority or the printing sheet of the online query results when registering information of enterprise and submitting information in connection with changes. The main reporting bank shall retain the photocopy of the relevant documents provided by the foreign-invested enterprise for reference.
The investment in PRC by any foreign-invested partnership enterprise established with RMB funds shall also comply with applicable administrative rules of competent PRC authorities.

VI. The newly established foreign-invested enterprise may open a special deposit account for RMB capital funds at the Banks in its place of incorporation with the establishment approval documents issued by the competent administrative authority of commerce. Only one special deposit account for RMB capital funds could be opened with the same approval documents, and such account shall be named after the depositor's name preceded by "capital funds".
Upon increase of its registered capital, an established foreign-invested enterprise may open a special deposit account for RMB capital funds at the Banks in its place of incorporation with the approval documents issued by the competent administrative authority of commerce for the change in its registered capital. Only one special deposit account for RMB capital funds could be opened with the same approval documents, and such account shall be named after the depositor's name preceded by "capital funds".
The accumulative credit amount of the RMB special deposit account for capital funds of a foreign-invested enterprise shall not exceed the amount indicated in the approval or filing documents issued by the relevant authorities.

VII. The foreign invested partnership enterprise may open a RMB special deposit account for capital funds in accordance with the requirements set forth in Article VI and with the enterprise's basic information sheet issued by the competent administrative authority of industry and commerce or the printing sheet of the online query results, on which the query chop of the registration authority shall be affixed and the registration items such as the contribution amount subscribed or actually paid by the partners of the partnership enterprise shall be recorded.

VIII. Where the foreign investor establishes a foreign-invested enterprise via acquisition of a domestic enterprise with RMB, the Chinese shareholders of the acquired domestic enterprise may open RMB special deposit accounts for acquisition with the Banks by providing the approval documents in relation to the establishment of the foreign-invested enterprise issued by competent administrative authority of commerce. Each Chinese shareholder may only open one special RMB deposit account for acquisition with the same approval documents, and such account shall be named after the depositor's name preceded by "acquisition".
Where the foreign investor pays the consideration for share transfer to the Chinese shareholders of the foreign-invested enterprise with RMB, the Chinese shareholders may open special RMB deposit accounts for share transfer with the approval documents for the change of shares issued by competent administrative authority of commerce. Each Chinese shareholder may only open one RMB special deposit account for equity transfer with the same approval documents, and such account shall be named after the depositor's name preceded by "share transfer".
Upon the completion of acquisition and the equity transfer, the funds deposited in the RMB special deposit account for acquisition and the special RMB deposit account for equity transfer may be used in accordance with applicable laws, and the information in relation to the domestic use of the accounts is not required to report with the cross-border RMB collection and payment information management system.

IX. Where the foreign investor establishes a foreign-invested enterprise via acquisition of a domestic enterprise or the equities of a foreign-invested enterprise held by the Chinese shareholder with RMB funds and the Chinese shareholder is a domestic individual, the Chinese shareholder may, in accordance with the Administrative Measures for RMB Settlement Accounts and other rules for the management of the settlement accounts, apply to open an individual RMB settlement account for depositing the RMB acquisition funds or equity transfer funds remitted by the foreign investor. The use of such account shall be managed in a similar manner with the special RMB deposit account for acquisition or the special RMB deposit account for equity transfer.
When filing the information of the individual settlement account for acquisition or equity transfer opened by the Chinese shareholder with the cross-border RMB collection and payment information management system, the Banks shall indicate "acquisition" or "equity transfer" at the beginning of the "remarks" column.

X. Within three months after the issuance of this Circular, the foreign investors, foreign-invested enterprises and Chinese shareholders shall check and verify all RMB special deposit accounts opened prior to the issuance of this Circular in accordance with the Administrative Measures for the Settlement Business under RMB Foreign Direct Investment, provide the supplementary supporting documents for account opening and complete the formality for the change of the account name. Where two or more special deposit accounts for initial expenses are opened, or two or more special deposit accounts for capital funds, acquisition, or equity transfer are opened with the same supporting documents, the relevant foreign investors, foreign-invested enterprises and Chinese shareholders shall determine one account for use afterwards and provide the account bank with written confirmation and supplementary supporting document of account opening and complete the formality for the change of the account name, and conduct cancellation of other settlement accounts at the same time.

XI. The foreign-invested enterprise may borrow RMB funds abroad only after its registered capital has been paid up on schedule. The interest rate of the RMB Loan borrowed by the foreign-invested enterprise could be determined in accordance with the commercial principles at the discretion of the lender and borrower within a reasonable scope. A foreign-invested real estate enterprise may not borrow abroad RMB funds.
The foreign-invested enterprise may only open one RMB general deposit account for the collection and payment of funds under the same foreign RMB loan. The RMB general deposit account for foreign loans shall be opened with the Banks where the foreign-invested enterprise is incorporated. In case of necessity, the foreign-invested enterprise may choose to open the RMB general deposit account with the Banks in a place other than that of its incorporation and file with the local branch of PBOC in its place of incorporation. In principle, the principal and interest of the foreign RMB loan shall be repaid by the foreign-invested enterprise through the original settlement bank.

XII. The total scale of the RMB loans and foreign currency loans of a foreign-invested enterprise borrowed from its foreign shareholders, affiliates within the same group and foreign financial institutions shall be calculated on a consolidated basis. If the loans are denominated in foreign currencies under the approval or filing document of the relevant PRC authorities, the exchange rate between RMB and the foreign currency shall be the RMB central parity rate published with authorization of PBOC on the date when the loan agreement becomes effective.
The total scale of the foreign RMB loans of a foreign-invested enterprise shall be calculated in accordance with the amount actually borrowed. If the foreign RMB loan of a foreign-invested enterprise is extended, the amount under first extension shall not be calculated into the total scale of the foreign loans borrowed by such foreign-invested enterprise while the amounts under the subsequent extensions shall be included in the total scale of borrowed foreign loans. Where a foreign institution or individual provides a domestic bank with security in favor of a foreign-invested enterprise, the RMB amount that has been actually enforced under such security shall be included into the total scale of borrowed foreign loans. If a foreign RMB loan of a foreign-invested enterprise is transferred to the capital, that corresponding loan shall no longer be counted upon the calculation of the total scale of the foreign loans borrowed by the foreign-invested enterprise.

XIII. Except for the foreign-invested investment companies, foreign-invested financial lease companies and other special types of foreign-invested enterprises, the total scale of RMB and foreign currency loans borrowed by a foreign-invested enterprise shall not exceed the difference between its total investment amount approved by the relevant PRC authorities and its registered capital.
The total scale of the overseas RMB and foreign currency loans of a foreign-invested investment company is subject to applicable regulations issued by the competent administrative authority of commerce for the establishment of investment companies by foreign investors. All foreign RMB loans of a foreign-invested finance lease company shall be calculated as risk assets. The risk assets of a foreign-invested finance lease company shall be managed in accordance with applicable regulations published by competent administrative authority of commerce.

XIV. When applying for the settlement under the foreign RMB loan, a foreign-invested enterprise shall submit the following materials to its domestic settlement bank, and the domestic settlement bank shall verify the materials received with caution.

(1) Approval Certificate of the Foreign Invested Enterprise;

(2) Latest capital verification report

(3) RMB loan agreement;

(4) Description of the oversea RMB loans, foreign currency loans and RMB enforcement amount that has actually been paid under the foreign security agreement in favor of the foreign invested enterprise as of the date of application.

The domestic settlement bank shall, within five working days after conducting the foreign RMB loan settlement business for the foreign-invested enterprise, submit the basic information of the foreign-invested enterprise and the information of the RMB loan to the cross-border RMB collection and payment information management system, and retain the photocopy of the relevant documents provided by the foreign-invested enterprise for inspection. The local branch of PBOC where the foreign-invested enterprise is incorporated shall verify the information provided by the settlement bank, and is entitled to require the foreign-invested enterprise and settlement bank to explain and submit the relevant materials if it has any query about the information provided.

XV. According to the Administrative Measures for RMB Settlement Accounts and Administrative Measures for RMB Settlement Accounts of Overseas Institutions, the RMB special deposit account for initial expenses and RMB special deposit account for re-investment of an foreign investor, the RMB special deposit account for capital funds and RMB general deposit account for foreign loans of a foreign-invested enterprise, RMB special deposit account for acquisition of the Chinese shareholders of a foreign-invested enterprise and the RMB special deposit account for equity transfer of the Chinese shareholders of an acquired domestic enterprise are current deposit accounts, the interest rate of which are subject to the interest rate on current deposits published by the PBOC.

XVI. The RMB funds deposited in the RMB special deposit account for capital funds and the RMB general deposit account for foreign loans of the foreign-invested enterprise shall be used within the business scope approved by the relevant authorities of the PRC and shall not be used for investment in securities and financial derivatives, entrusted loans or purchasing wealth management products or non-self-use real estate properties. For a non-investment-oriented foreign-invested enterprise, such funds may not be used for reinvestment in PRC. The RMB funds deposited in the RMB special deposit account for capital funds of the foreign-invested enterprise may be transferred as deposits with a term not longer than one year (including one year). And the RMB funds deposited in the RMB general deposit account for foreign loans of a foreign-invested enterprise may not be transferred.

XVII. The RMB funds in the RMB special deposit account for capital funds and the RMB general deposit account for foreign loans of the foreign-invested enterprise may be used to repay domestic and foreign loans.

XVIII. Except for the funds used for the payment of salary and reserve funds for travel expenses, sporadic purchase and sporadic expenditure, the funds in the RMB special deposit account for capital funds and the RMB general deposit account for foreign loan of the foreign-invested enterprise may not be transferred to the domestic RMB deposit account under the same name.

XIX. Within five working days after conducting all RMB settlement businesses in relation to foreign direct investment, the Banks shall, in accordance with Article 21 of the Administrative Measures for the Settlement Business under RMB Foreign Direct Investment, file the relevant information of RMB fund collection and payment to the cross-border RMB collection and payment information management system in a timely, accurate and complete manner. The PBOC and the State Administration of Foreign Exchange shall establish a mechanism for sharing the business information under foreign direct investment.
For any foreign investor invested in PRC prior to the implementation of the Administrative Measures for the Settlement Business under RMB Foreign Direct Investment, the settlement bank shall file the relevant information with the cross-border RMB collection and payment information management system in accordance with the Administrative Measures for the Settlement Business under RMB Foreign Direct Investment and this Circular before 31 July 2012.

XX. Foreign enterprises may open RMB settlement account for foreign institutions in accordance with the Administrative Measures for RMB Settlement Accounts of Overseas Institutions and other rules for the management of settlement accounts and carry out production and business activities including cooperative exploitation, development, exploration of resources, and contracting of domestic construction in PRC with RMB. The corresponding RMB settlement business shall be managed in accordance with the Administrative Measures for the Settlement Business under RMB Foreign Direct Investment and this Circular.