|
Welcome Guest
|
|
You are using Guest Account
|
|
||||||||||||||||||||||||||||||||||
|
For the purposes of optimizing the allocation of foreign exchange resources, facilitating and supporting the utilization of foreign exchange funds and business operations of the multinationals, and in accordance with the Regulation of the People's Republic of China on Foreign Exchange and other relevant laws and regulations, you are hereby notified of the following issues concerning the management of forex fund for internal operations of multinationals: I. BASIC DEFINITIONS AND MANAGEMENT PRINCIPLES (1) The term "transnational company" mentioned in this Notice refers to an enterprise group concurrently comprises of member companies both at home and abroad and whose global or regional (including China) investment management functions are exercised by one of its member companies within China. Such enterprise group may be a Chinese-invested controlling enterprise group (namely Chinese-invested transnational company) or foreign-invested controlling enterprise group (namely foreign-invested transnational company). The term "member companies" mentioned in this Notice refers to all companies with independent legal person status within an enterprise group and with the relationship of one's controlling the shares of another. This Notice shall not apply to transnational financial institutions. (2) The term "internal operation of forex fund" mentioned in this Notice refers to an investment financing approach of a transnational company for the purposes of decreasing financial costs and increasing the fund utilization efficiency in accordance with this Notice achieved by the lending of forex fund among the domestic member companies or between a domestic member company and an overseas member company. (3) The lending of forex funds between a member company and another member company may, according to the Measures for the Administration of Financial Companies of Enterprise Groups, be conducted by a finance company established upon approval of the financial administrative department. It may also, according to the General Principles on Loans, be conducted by authorizing a designated bank for foreign exchange business to grant loans. Where a domestic member company of a transnational company intends to lend forex fund to an overseas member company, and if the requirements as stipulated in this Notice are met, it may do so by way of direct lending. A domestic member company of a transnational company shall comply with the relevant provisions of China on the management of foreign debts if it borrows forex fund from an overseas member company and repays the principal and interests of the aforesaid fund. (4) Where a member company of a transnational company lends forex fund to another, both parties shall stipulate on the lending interest rate by reference to the rate of commercial loans of the same period in the international financial market. Such lending interest rate shall not be abnormally high or low. (5) The forex fund used for internal operation of a transnational company shall be confined to the self-owned forex fund. The "self-owned forex fund" refers to the fund coming from the capital account or current foreign exchange account of the domestic member companies of the transnational company and can be disposed of freely. (6) The fund of domestic entrustment lending of a transnational company shall not be used for the settlement of foreign exchange, nor shall it be used as a pledge of RMB loan. (7) Where a domestic member of Chinese-invested transnational company lends any forex fund to any overseas member company, the balance of forex lending shall not exceed 20 % of the owner's equity. Where a China-based member company of a foreign-invested transnational company lends money to any overseas member company, the balance of forex lending shall not exceed the aggregate amount of the part of profit in the previous year that has been distributed to but hasn't been remitted abroad by the foreign investor plus the undistributed enterprise profit in proportion to its investment. (8) A transnational company engaged in internal operation of forex fund shall stick to the principle of full loan and full repayment. Without permission, it shall not deduct or offset the domestic and overseas account receivable against the account payable, nor may it make any net settlement. (9) A transnational company engaged in internal operation of forex fund shall comply with this Notice and other provisions regarding the management of foreign exchange and shall be subject to the administration, supervision and inspection of the State Administration of Foreign Exchange (hereinafter referred to the SAFE) and its branches and FEADs. II. QUALIFICATIONS FOR INTERNAL OPERATION OF FOREX FUND OF MULTINATIONALS (1) The domestic member companies of a transnational company shall meet the following requirements if they are engaged in entrusted inter-member-company lending of forex fund within China: 1. Both the entrusting lender and the borrower shall have been lawfully setup upon registration, and their registered capital has been fully paid in due time; and 2. The principal and proceeds of the previous entrusted inter-member-company forex loan within China have been repaid. (2) Where any domestic member company of a transnational company lends any forex fund to its overseas counterparts, besides the requirements as mentioned in the first paragraph of Article 2, the following requirements shall be met: 1. A Chinese-invested transnational company shall have at least 3 member companies abroad; 2. A foreign-invested company shall have at least 3 member companies within China; 3. The China-based member company that exercises the global and regional investment management function of a transnational company shall have made at least US$5 million of investment in total into its overseas counterpart(s), and the overseas counterpart(s) were rated as Class II or higher in the latest joint annual inspection over overseas investments; 4. As for a China-based member company of a transnational company that provides the lending fund, the ratio of its forex receivable of the previous year to its total forex asset shall be lower than the normal or average level of the foreign-funded enterprises of the same industry of the previous year. The amount of bank forex settlement conducted by the company in the previous year shall be bigger than its forex purchase amount; or if the forex purchase amount is bigger than the bank forex settlement amount, the margin between them shall be lower than the normal or average level of the foreign-funded enterprises of the same industry of the previous year. The owner's equity shall not be less than US$30 million, and the ratio of net asset to the total asset shall not be less than 20 %; and 5. As for a member that has been allowed to lend forex fund to its overseas counterparts, it shall, within the stipulated time limit, have taken back the principal and proceeds of the previous fund lent abroad. III. THE APPLICATION FOR INTERNAL OPERATION OF FOREX FUND OF MULTINATIONALS (1) Where a transnational company plans to engage in entrusted forex lending within China, the China-based member company as the entrusting lender shall file an application to the bank where its capital account or current foreign exchange account is opened. After the opening bank examines the qualifications of the China-based member company of the transnational company in compliance with this Notice, if it accepts the application, it shall, as the entrusted bank, sign a contract on entrusted forex loan with the entrusting lender and the borrower. The entrusted bank shall, in accordance with the requirements for the "creditors" mentioned the Notice of the State Administration of Foreign Exchange on Reforming the Foreign Exchange Administration of Domestic Foreign Exchange Loans (No. 125 of the State Administration of Foreign Exchange [2002]), perform the corresponding duties for the operation, supervision and reporting for the record of the entrusted lending business. (2) Where a transnational company plans to engage in entrusted outbound forex lending, after a lending agreement is concluded, its China-based member company that offers the lending fund shall submit the following materials to the SAFE for examination and approval via the local branch or FEAD: 1. An application (See Attachment1); 2. The lending agreement concluded by the lender and overseas borrower, or by the lender, overseas lender and the entrusted financial institution within China. If the overseas borrower plans to use the forex fund it borrows to invest in the operation of stocks, bonds, futures etc., the lending agreement shall clearly stipulate that the lender entrusts the overseas borrower to make investments; 3. The lender's financial audit report about the forex incomes and expenses during the recent year; 4. The latest capital verification report of the lender; 5. The descriptions about the previous overseas lending and repayment; 6. In addition, a Chinese-invested transnational company shall offer the name list of its overseas member companies, a copy of the approval certificate issued by the commerce administrative department of each overseas member company, financial accounting statement of the recent year of the overseas borrower(s) and report about joint inspection over the overseas investments directly related to the overseas borrower(s); and 7. In addition, a foreign-invested transnational company shall offer the name list of its China-based member companies, a copy of foreign exchange register certificate of each China-based member company and a letter issued by the overseas controlling parent company for guaranteeing the safety of the lending fund (for ensuring full repayment of the principal of the loan to be offered by the China-based lender and further investment operation by using such lending fund). After the branch or FEAD receives the materials submitted by the lender, it shall complete the preliminary examination within 10 working days and shall report to the SAFE. After the SAFE receives the aforesaid complete set of application materials and confirms them inerrant upon examination, it shall, within 20 working days, issue an approval to the lender and shall send a copy to the branch or FEAD where the lender is located and the one where the enterprise participating in the lending is located. Upon the strength of the approval document, the branch or FEAD where the lender is located and the one where the enterprise participating in the lending is located shall respectively issue documents of approval of opening bank account, domestic transfer or overseas payment of forex under capital forex business to the lender and the enterprise participating in the lending. IV. PROCEDURES FOR THE INTERNAL OPERATION OF FOREX FUND OF TRANSNATIONAL COMPANY (1) After a entrusted lending agreement is concluded among the China-based member company which serves as the entrusting lender of a transnational company, the China-based member company which serves as a borrower and entrusted bank, and the entrusted bank, the entrusted bank may, by reference to the Notice of the State Administration of Foreign Exchange on Reforming the Foreign Exchange Administration of Domestic Foreign Exchange Loans (No. 125 [2002] of the State Administration of Foreign Exchange), open an forex loan exclusive account for the borrower, complete the formalities for transferring the lending fund, repayment of principal and payment of interest. No approval of the SAFE is required when the entrusted bank conducts transfer of lending fund or repayment fund between the entrusting lenders' capital account or current foreign exchange account and the borrower's forex loan exclusive account. The entrusted bank shall, by reference to the formats and contents of Attachments 1 through 4 (inserting a column titled "entrusting lender" after the final column of each statement as shown in Attachments 1 through 3; inserting a sub-item titled "domestic entrusting lending" for each item under "Credit" Item in Attachment 4) as listed in the Notice of the State Administration of Foreign Exchange on Reforming the Foreign Exchange Administration of Domestic Foreign Exchange Loans (No. 125 [2002] of the State Administration of Foreign Exchange), regularly report to the local branch or FEAD the changes of the domestic forex credits of the transnational company. (2) As to a transnational company's domestic entrusting forex fund lending, if the term of the loan expires or the borrower requests for making repayment by installments or ahead of schedule, the entrusted bank shall supervise and assist the entrusting lender and borrower to follow the following steps: First, transfer the repayments of forex fund to the original capital account till the amount of repayments is equal to the amount transferred out of the original capital account. Then, according to the principle of proportioning the interests to the principal, transfer the remaining part of the principal and interest of the loan into the current foreign exchange account, out of which the original fund is transferred. If the repayment is made at the expiration of the loan, the above-mentioned steps shall be completed within 20 working days after the lending period expires. As to the repayment by installments or ahead of schedule, the above-mentioned formalities shall, in light of the time limit and way as stipulated by three parties, be timely completed as well. (3) Where a transnational company applies for engaging in overseas lending of forex fund, the lender shall submit the following materials to the local branch FEAD for opening an overseas lending exclusive account: 1. An application for opening a bank account; and 2. The document issued by the SAFE for approving its overseas lending. After the local branch or FEAD confirms the above-mentioned materials as inerrant, it shall issue the lender an approval document of opening a bank account. The bank shall, complete the formalities for opening an account for the lender upon the strength of the aforesaid approval document. The incomes of the overseas lending exclusive account shall be limited to the forex funds transferred to this account from capital account or current foreign exchange account of the lender or other domestic member companies upon approval of the branch or FEAD, repayment of the principal and interest of the fund lent abroad and security offered by the overseas controlling parent company for the fulfillment of contract; the expenses shall be limited to the overseas lending upon approval of the SAFE and transferring the funds back from the corresponding capital account or current foreign exchange account. (4) A transnational company may, within 6 months from the day when the SAFE approves it to engage in overseas lending, remit the forex fund abroad in a lump sum or in several times according to the approved amount and upon approval of the local branch or FEAD. (5) The time period for each overseas forex loan of a transnational company shall not exceed two years. If the term of the loan expires or the overseas borrower requests for making repayment by installments or ahead of schedule, the overseas borrower shall remit the repayments of forex fund to the original overseas lending exclusive account, and upon approval of the branch or FEAD. First, it shall transfer the repayments of forex fund back to the original capital account till the amount of repayments is equal to the amount transferred out of the original capital account; then, according to the principle of proportioning the interests to the principal, transfer the remaining part of principal and interest of the loan into the current foreign exchange account, out of which the original fund is transferred. If it is necessary to extend the term of the loan, the lender shall file an application with the local branch or FEAD within 1 month prior to the expiry date. (6) Where a China-based member company of a transnational company grants loans to its overseas counterparts, or grants loans as well as entrusts them to make investments by using the said loans, the total amount of the rights and interests generated from the overseas loans as calculated on the last day of annual calculation shall not be less than the corresponding total amount of the principals of the overseas loans. (7) Where a transnational company grants overseas loans by using forex fund, the China-based member company lender shall establish a special ledger for the operation of overseas fund, manage the fund and conduct the accounting in a centralized way, and shall formulate a monthly Statement of Changes of Forex Fund Positions of Overseas Lending Special Account and Statement of Operation of Overseas Lending Funds (See Attachment 2). (8) Where the repayment funds for the domestic and overseas entrusting forex loans and overseas loans of a transnational company are remitted or transferred to the capital accounts of the China-based member enterprises, the quota ceiling of the capital account shall not be occupied. When the banks into which the repayments are remitted or transferred reply the letters of requests for bank confirmation, they shall give a clear indication of the words "Repayment Fund" in the column of "Remarks". No accounting firm may undertake capital verification business of foreign-funded enterprises upon such kind of replies to letters of requests for bank confirmation. V. SUPERVISION (1) Each branch or FEAD shall, according to the statements submitted by the banks within its jurisdiction, insert a sub-item "Domestic Entrusting Lending" under each item "Domestic and Overseas Loans" in the Monthly Statement of Flow and Exchange under Capital Projects and Subordinate Projects, and submit a statement to the SAFE every month. (2) A transnational company that engages in internal operation of overseas loans shall, in June each year, gather the information about the overseas loans of its China-based member companies and submit it to the SAFE via the local branch or FEAD for examination. The information gathered shall cover the following: 1. A report about the overseas forex loans of all China-based member companies of this multinationals during the previous 12 months by the end of May of the current year (See Attachment 3); 2. The previous 12-month Statement of Changes of Forex Fund Positions of Overseas Lending Special Account and Statement of Operation of Overseas Lending Funds of the China-based member company of the transnational company; 3. The previous 12-month audit report about the China-based forex lending member company of the transnational company; and 4. The previous 12-month capital verification report of the China-based forex lending member company of the transnational company (no capital verification report is required if no capital verification was conducted during the previous year). (3) If, within 30 working days after the SAFE receives the complete set of the above-mentioned materials, it finds upon examination that the overseas lending member company of a transnational company doesn't meet the qualification requirements as prescribed in the Article 2 of this Notice, or the rights and interests derived from overseas loans fail to satisfy the requirement as mentioned in Article 4 (6), it shall be entitled to disqualify the China-based member company of the transnational company from lending forex fund abroad. The China-based member company which is disqualified from lending forex fund abroad shall, within 20 working days, take back the principal and proceeds of overseas loan to the overseas lending special account. Moreover, if a foreign-invested transnational company fails to satisfy the requirement as mentioned in Article 4 (6) of this Notice in getting repayment of loans, the overseas controlling parent company who issued the letter for guaranteeing the safety of the lending fund shall, within 20 working days after the China-based member company was disqualified from lending forex fund abroad, bear the guaranty liability. Where a transnational company fails to timely submit the materials as required in Article 5 (2) to the SAFE, it shall be dealt with by reference to Article 5 (3). VI. OTHER MATTERS (1) Where a transnational company violates this Notice in its internal operation of forex fund, it shall be punished by the branch or FEAD pursuant to Regulation of the People's Republic of China on Foreign Exchange. (2) As to a Chinese-invested enterprise group without any member company abroad, the entrusting lending for forex funds between its domestic member companies shall be conducted by referring to this Notice. (3) The power to interpret this Notice shall remain with the SAFE. (4) This Notice shall be implemented as of November 1, 2004. Attachments: 1. Application of Transnational Company for Granting Overseas Forex Loans (omitted) 2. Statement of Changes of Forex Fund Positions of Overseas Lending Special Account and Statement of Operation of Overseas Lending Funds (omitted) 3. Report about Overseas Forex Loans and Operation (omitted) |
||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
|
Copyright 2002 NovexCn.com
|