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	CIRCULAR OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE ABOUT IMPROVING THE EXAMINATION OF FOREIGN EXCHANGE SETTLEMENT UNDER CAPITAL ACCOUNT AND THE REGISTER OF EXTERNAL DEBTS OF FOREIGN-FUNDED ENTERPRISES

	(No. 42 [2004] issued by the State Administration of Foreign Exchange on May 17, 2004)


SUBJECT : FOREIGN-FUNDED ENTERPRISES; CAPITAL ACCOUNT AND THE REGISTER OF EXTERNAL DEBTS
ISSUING DEPARTMENT : THE STATE ADMINISTRATION OF FOREIGN EXCHANGE OF THE PEOPLE'S REPUBLIC OF CHINA
ISSUE DATE : 05/17/2004
IMPLEMENT DATE : 07/01/2004
LENGTH : 752 words
TEXT :

In order to guide foreign investment funds to flow reasonably and orderly within China, to maintain and promote international balance of payments, you are hereby notified of the following matters about improving the examination of foreign exchange settlement under capital account and the register of external debts of foreign-funded enterprises:

1. When the branches of the State Administration of Foreign Exchange (hereinafter referred to as the branches of the SAFE) and the designated foreign exchange banks handle, upon authorization, settlement of foreign exchange under capital account of foreign investment enterprises, you shall not only conduct examination according to the Notice of the State Administration of Foreign Exchange on Relevant Issues Concerning the Improvement of Foreign Exchange Administration of Direct Investments by Foreign Investors (No. 30 [2003] of the SAFE) and the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement Form of Capital under Foreign Investment (No. 59 [2002] of the State Administration of Foreign Exchange, but also require the enterprises that apply for foreign exchange settlement to provide written payment instructions related to the uses of the foreign exchange settlement fund so as to make direct payments to the designated beneficiaries if the amount of each foreign exchange settlement attains to US $ 200,000 or more. If an enterprise's small payment for wages, retained reserve or foreign exchange settlement fund is US $ 200,000 or less, you may put the foreign exchange settlement fund into the RMB account of the applicant enterprise instead of requiring it to offer written payment instructions. However, when the enterprise handles a new foreign exchange settlement, it shall provide a checklist of the uses of the preceding foreign exchange settlement fund.

2. When a branch of the SAFE handles the examination and approval procedures for foreign exchange settlement of external debts of a foreign-funded enterprise, it shall perform the examination duties in strict compliance with the existing operating procedures and the provisions of Article 1 of this Notice. If the foreign exchange settlement fund of foreign debt of a foreign-funded investment enterprise is used for repaying a RMB debt, no approval may be granted to the enterprise by the SAFE.

3. The summation of the accumulative amount of the medium-and-long-term external debts and the balance of the short-term external debts of a foreign investment enterprise shall be put under rigid control within the margin between the total amount of project investments upon approval by the examination and approval department and the registered capital. If the total amount of investment is changed without approval of the original examination and approval organ, the branch of the SAFE shall not register the excessive amount of fund of foreign debt remitted inward, nor may it handle the examination and approval procedures for foreign exchange settlement. If the foreign debt fund of the foreign-funded investment enterprise has already been remitted in at an excessive amount, the foreign-funded investment enterprise shall consciously make up the examination and approval formalities for modifying the total amount of investment in the original examination and approval department. The branch of the SAFE shall allow the enterprise to keep the fund of foreign debt for a time period of 3 months. If overdue, the branch of the SAFE shall inform the deposit bank to remit back the excessive amount of fund according to the original inward remittance route.

4. All the designated foreign exchange banks shall revise the their respective internal operating procedures accordingly and shall comply with the above-mentioned operation requirements. The branches of the SAFE of all levels shall be responsible for guiding and supervising the designated foreign exchange banks within their respective jurisdiction in the aspects of improving the management of foreign exchange settlement under capital account and the inward and outward remittance of fund of external debts.

5. All the above-mentioned measures are formulated for the purposes of further perfecting and implementing the existing regulations on the management of foreign exchange under capital account. The branches of the SAFE of all levels shall properly publicize and explain them so as to ensure the smooth implementation of the above-mentioned measures.

6. This Notice shall be implemented as of the 45th day from the promulgation date. After the branches of the SAFE of all levels receive this Notice, you shall distribute it to all the designated foreign exchange banks within your respective jurisdiction as soon as possible. If there is any difficulty in implementing the Notice, please report to the Capital Account Department of the SAFE without delay.