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	OFFICIAL REPLY OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE CONCERNING FOREIGN EXCHANGE REGISTRATION FOR PURCHASE OF RIGHT OF USE OF LAND WITHIN CHINA BY FOREIGN INVESTORS

	(No.156 [2002] Reply of the State Administration of Foreign Exchange promulgated on July 4, 2002)


SUBJECT : FOREIGN INVESTORS; PURCHASE OF LAND RIGHT OF USE
ISSUING DEPARTMENT : STATE ADMINISTRATION OF FOREIGN EXCHANGE
ISSUE DATE : 07/04/2002
IMPLEMENT DATE : 07/04/2002
LENGTH : 713 words
TEXT :

The advance payment for assignment of land use right made by foreign investors before they legally establish a foreign-funded enterprise within China is land security deposit. In order to ensure the correct use of land security deposit and the successful implementation of the registration of foreign capital in foreign exchange, the following provisions are stipulated on the inward remittance, use, capital verification, transfer, outward remittance, etc. of the land security deposit of foreign investors:

I. If the foreign investors need to pay the land security deposit to the land administrations before legally establishing foreign-funded enterprises within China, they shall apply to the foreign exchange administrations to open temporary land security deposit accounts, which shall be used to keep the foreign exchange remitted in by the foreign investors to pay the land security deposit, and the foreign investors shall settle the exchange through those accounts to pay the land security deposit to the land administrations.

II. The term of temporary account of land security deposit is 6 months, if it is necessary to be extended upon expiration, an application shall be filed with the foreign exchange administration, which shall examine and decide whether to approve the extension on the basis of the use of the account and the examination and approval of the establishment of the foreign-funded enterprise. If the account has been used against the rules or the establishment of the foreign-funded enterprise hasn't been approved, the foreign exchange administration shall demand the enterprise to close that temporary security deposit account and to remit out the capital therein.

III. The maximum limit of a temporary land security deposit account shall be approved according to the actual needs of the purchase of land use right by the foreign investors, during the term of the account, the accumulated credit arising in that account shall not exceed the approved limit.

IV. Settlements of exchange under a temporary land security deposit account must be verified by the foreign exchange administration one by one, and the use shall be limited only to the purchase of land use right and real properties attached to the land, you should specify the materials of verification according to the actual situations. The prior-establishment expenditure incurred by the foreign investors for establishing the foreign-funded enterprise shall still be paid from the temporary capital account.

V. Foreign investors may not, before registering and establishing economic entities with the purchased land use right, engage in business activities such as leasing, reselling, mortgage loaning, etc. of that land use right within China.

VI. After paying the land security deposit, if the foreign investor fails to establish the foreign-funded enterprise, they shall apply to the foreign exchange administration for closing the temporary land security deposit account, and the remaining capital in the account and the returned land security deposit may be remitted out of China upon the approval of foreign exchange administration. You should specify the examination materials according to the actual situations.

VII. The capital in foreign exchange remitted into a temporary land security deposit account by foreign investors may be used as the capital contribution after the establishment of the foreign-funded enterprise.

If the capital remitted into that account has been approved to be settled, certified public accountants may handle the capital verification of the foreign party to the foreign-funded enterprise on the basis of the Document of Approving Foreign Exchange Transactions under Capital Account issued by the foreign exchange administration for approving the settlement of exchange. If there is still foreign exchange capital left in that account after the enterprise is established, the capital may be transferred to the capital account of the foreign-funded enterprise, and certified public accountants shall certify to the bank that opened the capital account of the foreign party's capital contribution, the specific procedures for the certification and the registration of foreign capital in foreign exchange shall conform to the requirements of Document No.1017 [2002] of the Ministry of Finance and Document No.42 [2002] of the State Administration of Foreign Exchange.

You should, in accordance with the foregoing principles, formulate operation rules to direct and regulate the operation of the banks and accounting firms under your jurisdiction. The operation rules shall, after being formulated, be reported to the Capital Department of the State Administration of Foreign Exchange Control for record.