The branches of the State Administration of Foreign Exchange (“SAFE”) in all provinces, autonomous regions, municipalities directly under the Central Government, and cities under separate state planning; and all national Chinese-funded banks:

In order to thoroughly implement the decisions and deployment made by the CPC Central Committee and the State Council, further facilitate cross-border trade and investment, and effectively enhance the role of foreign exchange administration in serving the real economy, the SAFE has decided to further deepen the reforms of foreign exchange administration, facilitate market entities to handle cross-border trade and investment businesses in compliance with regulations, and promote high-quality development through high-level opening-up. The relevant matters concerned are hereby notified as follows:

I. Facilitation of foreign exchange receipts and payments for trade

i. Optimizing foreign exchange administration on market procurement trade. When a market entity engaged in market procurement trade that commissions a third party for export declaration handles foreign exchange collection in its name, it shall meet the following conditions:
1. The market entity engaged in market procurement trade has registered on the online platform for market procurement trade established by the local government. The online platform for market procurement trade shall be able to collect information throughout the transaction and export processes and provide detailed export data corresponding to enterprises and individual industrial and commercial households.

2. The bank that handles the foreign exchange collection for the market entity shall connect its system with the online platform for market procurement trade or adopt other necessary technical means such as logging into the webpage of the online platform for market procurement trade to identify the customer’s identity, verify the authenticity of the transaction background, and prevent the reuse of transaction information.

ii. Relaxing requirements for the netting settlement of balances in processing trade. When a bank handles the settlement of funds for an enterprise’s counterparty foreign exchange collection and payment for imported materials processing trade, i.e., the netting settlement in export payment and payment for imported materials and parts, the bank shall ensure that the following conditions are met:

1. The enterprise shall purchase materials and parts from an overseas counterparty for processing, and then sell the finished products to the same overseas counterparty.

2. Before the enterprise carries out the foreign exchange collection and payment deduction for the imported materials processing trade, it shall present relevant materials to the bank for explanation, and the bank shall add the “enterprise for counterparty foreign exchange collection and payment deduction on imported materials processing trade” label in the entity identification function of the foreign exchange monitoring system for trade in goods.

3. The enterprises shall reasonably schedule the netting cycle and settle accounts receivable and payable in a timely manner. In principle, netting settlements shall be made no less than once per quarter.

The banks shall review the authenticity and reasonableness of businesses in accordance with the principles of business development, handle the foreign exchange collection and payment deduction in imported materials processing trade for enterprises identified as “enterprises for counterparty foreign exchange collection and payment deduction in imported materials processing trade”, and process the declaration of actual receipt and payment data and restored data as required (see Annex 1 for declaration requirements).

iii. Improving the collection and payment of cross-border trade funds under entrusted agents. If an agent is unable to handle the collection and payment of foreign exchange for trade in goods due to bankruptcy, frozen bank accounts or other situations, the bank can handle the collection and payment of foreign exchange for trade in goods prudently for the entrusting party after confirming the authenticity and reasonableness of the receipts and payments in accordance with the business development principle, and mark “non-customs declarant + foreign exchange receipt and payment for the entrusting party + XXX (name of the agent)” in the remarks of the foreign-related receipts and payments declaration transaction.

iv. Facilitating the settlement of foreign exchange funds for commercial leasing business of domestic institutions. When a domestic institution (hereinafter referred to as the “lessee”) uses its foreign exchange income to pay rent in foreign currency for domestically rented commercial items (including aircraft, ships, and large equipment) to a domestic leasing company (hereinafter referred to as the “lessor”), it shall meet the following conditions:

1. The lessee has a stable source of foreign exchange income in a certain scale; the lessee’s annual rent payment in foreign currency shall in principle be no less than the equivalent of US$100 million, and the expenditure needs shall be reasonable; the lessee has been included on the list of high-quality enterprises in the facilitation of foreign exchange receipts and payments for trade.

2. More than 50% of the lessor’s funds for purchasing the leased property come from its debt in foreign currency, or the lessor has rented the leased property from abroad and needs to pay rent in foreign currency for the leased property. In principle, the foreign currency rental income collected by the lessor shall not be used for foreign exchange settlement (except for the payment of domestic taxes, cancellation, or liquidation), but it can be used to pay oversea rent, pay foreign currency debts, make payments for items rented overseas, or pay other foreign exchange expenses in compliance with the regulations of the SAFE.

The banks shall follow the principles of business development and handle foreign currency rent transfer business for domestically rented commercial items after reviewing the authenticity and reasonableness of the business. The lessee shall fill in the commercial lease contract number in the Domestic Remittance Application or other transaction remarks columns and indicate “Payment of Rent in Foreign Currency”; the lessor shall fill in the commercial lease contract number in the transaction remarks column of the Domestic Income Declaration and indicate “Collection of Rent in Foreign Currency.”

II. Expansion of facilitation policies for capital accounts

v. Promoting the policy on pilots for the facilitation of cross-border financing across China. Technology-based small and medium-sized enterprises (SMEs) shall be included as business entities in the pilot for the facilitation of cross-border financing to further support the technological innovation of SMEs. Qualified high-tech, professional, refined, specific, novel, and technology-based SMEs within the jurisdictions of Tianjin, Shanghai, Jiangsu, Shandong (including Qingdao), Hubei, Guangdong (including Shenzhen), Sichuan, Shaanxi, Beijing, Chongqing, Zhejiang (including Ningbo), Anhui, Hunan and Hainan can independently borrow foreign debts within the equivalent limit of US$10 million. Qualified high-tech, professional, refined, specific, novel and technology-based SMEs in other regions can independently borrow foreign debts up to an equivalent amount of US$5 million (see Annex 2 for implementation details).

vi. Relaxing restrictions on the scale of upfront expenses for overseas direct investment (ODI). The restriction that the cumulative remittance of upfront expenses for the overseas direct investment by domestic enterprises shall not exceed the equivalent of US$3 million shall be lifted, while the cumulative remittance shall not exceed 15% of the total proposed investment by China.

vii. Facilitating the payment and use of equity transfer funds and funds raised from overseas listings under the category of domestic reinvestment made by foreign direct investment (FDI). The asset realization accounts under the capital account shall be changed into settlement accounts under the capital account (see Annex 3 for the relevant account consolidation plan). Domestic equity transferors (including institutions and individuals) can, when receiving equity transfer consideration funds paid in foreign currency by domestic entities and foreign exchange funds raised by domestic enterprises from overseas listings, directly remit the funds to the settlement accounts under the capital account. The funds in the settlement accounts under the capital account can be settled and used independently. Domestic equity transferors can, when receiving equity transfer consideration funds paid by foreign-invested enterprises with funds in RMB obtained from foreign exchange settlement (i.e. from direct foreign exchange settlement income or RMB funds in the account to be paid for foreign exchange settlement), directly transfer the funds to the RMB accounts of the domestic equity transferors.

III. Optimization of foreign exchange administration under the capital account

viii. Improving the management of negative lists on the use of capital account revenues. Non-financial enterprises shall follow the principles of authenticity and self-use in the use of their capital funds, foreign exchange income under foreign debts and RMB funds obtained from their foreign exchange settlements, and shall not directly or indirectly use such funds for expenditures prohibited by Chinese laws and regulations; unless otherwise expressly specified, such funds shall not be used directly or indirectly for portfolio investments or other investment and wealth management (except for wealth management products and structured deposits with a risk rating of not higher than Level 2); such funds shall not be used to issue loans to non-affiliated enterprises (except for the scenarios expressly permitted in the business scope and the following four areas -- the Lin-gang Special Area of Shanghai China  Pilot Free Trade Zone, Guangzhou, Nansha New Area of the China (Guangdong) Pilot Free Trade Zone, the Yangpu Economic Development Zone of the China (Hainan) Free Trade Port, and the Beilun District of Ningbo in Zhejiang Province).; and such funds shall not be used for purchase of residential properties that are not for self-use (except for enterprises engaged in real estate development or real estate leasing operations).

ix. Canceling the approval requirement for opening foreign debt accounts in other regions. Non-financial enterprises with reasonable needs are allowed to open foreign debt accounts at banks in regions outside the jurisdictions of the foreign exchange administration branches where those enterprises were registered.

Banks are encouraged to include more high-quality enterprises in the pilot initiatives for the facilitation of capital account income payments. Efforts shall be made to further diversify cross-border investment and financing products and exchange rate risk management products based on the actual needs of enterprises, and optimize business processes. Efforts shall be made to ensure that due diligence of clients is properly done in accordance with the principle of business development. Technological means shall be leveraged to enhance post-hoc monitoring, and more accessible and efficient cross-border fund settlement services for authentic and compliant cross-border investment and financing shall be provided. And any abnormal or suspicious cases shall be reported in a timely manner. All branches shall strengthen in-process and post-hoc supervision, verification, and inspection of the above-mentioned businesses, and guide banks and enterprises to conduct business in compliance with relevant regulations.

This Notice shall be implemented from the date of issuance (Item vii shall be implemented from June 3, 2024). If any previous regulations are inconsistent with this Notice, this Notice shall prevail. (i.e. See Annex 4 for specific revised provisions). After receiving this Notice, all provincial (municipal) branches of the SAFE shall promptly forward it to prefecture (city)-level branches, urban commercial banks, rural commercial banks, foreign-funded banks, and rural cooperative banks within their respective jurisdictions.

Annexes:
1. Declaration Requirements for the Netting Settlement of Balances in Processing Trade
2. Detailed Implementation Rules for the Facilitation of Cross-border Financing
3. Plan for the Settlement Account Consolidation of Capital Accounts
4. Selected Provisions in Four Normative Documents on Foreign Exchange Administration as Amended by the State Administration of Foreign Exchange (SAFE)
 

                                   The State Administration of Foreign Exchange
December 4, 2023