Foreign Investment Financing and Exchange Management

Currently in China,  financial organizations are mainly state-owned commercial banks with the coexistence of a variety of financial institutions. The government adopts separate management and supervision to those banking, securities, insurance and trust. The country’s financial regulatory, through the central bank’s monetary policy and management mechanism, regulates the financial markets. Implementation of China’s exchange rate is based on  market supply and demand with reference to the basket of currencies, a managed or a floating RMB exchange rate. Usually, RMB is freely transferrable under the capital account of foreign exchange but subject to strict management. Foreign exchange adopts the revenue and expenditure mechanism to implement with the banking exchange system, the import and export receipt and payment verification system.

Foreign Exchange Registration:             Foreign investment enterprise, shall within 30 days from the date of issuance business license, makes copies of the  foreign investment enterprise approval certificate and the business license to the foreign exchange management departments for applying "Foreign Investment Foreign Exchange Registration Certificate" and fill in the "Foreign-invested Enterprises Basic Fact Sheet", the certificate registration enable the enterprise to go to the designated foreign exchange bank for account opening. Offsite or offshore accounts should be referred to the respective local foreign exchange administration department for approval.

Banking Exchange Settlement system:           All types of foreign exchange inflows must be put into the designated bank in accordance with the regulation, which opened for foreign exchange account or sold to designated foreign exchange banks. All types of foreign exchange of enterprises to pay or use, it must hold a valid certificate or the approval by the Foreign Exchange Management Department from their foreign exchange accounts payable or to the designated foreign exchange bank for payment. Foreign exchange outside the scope of the rules and regulations is illegal.

RMB is freely transferrable under the current system:             Domestic institutions (including Foreign-invested enterprises) often use foreign currency. Valid credentials enable them to go to designated banks to purchase foreign currency or arrange foreign payments on its foreign exchange account.  Advance payment, commissions and the others, once more than a certain percentage or amount as authenticated by the foreign exchange management department can be settled in bank after auditing.

Government’ capital management on revenue and expenditure of foreign exchange:            Firstly, unless otherwise provided in the State Council, under the capital requirement, it has to repatriate foreign exchange earnings ; Secondly, the company's foreign exchange income under capital account should be banked in the foreign exchange special account , upon approval is obtained by the foreign exchange management departments to sell foreign exchange designated banks ; Thirdly, to purchase of foreign exchange under capital and foreign payments, it is required by the foreign exchange administration department for approval , the approval documents must be obtained before instructing the bank for exchange sale and payment .

External Debt Management:            The PRC government implements a foreign debt registration. Foreign-invested enterprises can apply directly to foreign banks or companies to borrow foreign funds, but long-term external debt of foreign borrowing shall not exceed the cumulative amount of the contract, or articles of association of the difference between the total investment and registered capital. The companies, upon signed a loan contract, need to go to the foreign exchange management departments on a regular basis for individual debt registration, approval must be obtained before use of foreign exchange funds.   For actual use of foreign funds, it should act in line with those reported to foreign exchange management department.  All debts arrangement, with interest or principal, is subject to the approval by the foreign exchange management departments (except banking).

Foreign Exchange - Income and Expenditure Report:          The said report is a half-year report to be submitted on or before 10 July annually to the authorities. And to submit a full year report on or before 10 March each year accompanying with text for explanation.

Year-end Financial Statements:           It is required that, in each year, before 31 March, to submit to the authorities the year-end financial statements for the previous year, along with the PRC registered accountants' audit report .