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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II ADMINISTRATION OF CUSTODIANS CHAPTER III ADMINISTRATION OF INVESTMENT QUOTA CHAPTER IV ADMINISTRATION OF ACCOUNTS CHAPTER V ADMINISTRATION OF EXCHANGE CHAPTER VI SUPERVISION AND ADMINISTRATION CHAPTER VII SUPPLEMENTARY PROVISIONS CHAPTER I GENERAL PROVISIONS Article 1. For the purpose of governing Qualified Foreign Institutional Investors' investments in China's securities market, and maintaining the stabilization of China's foreign exchange market and the international balance, these Provisions have been formulated in accordance with the Regulations of the People's Republic of China on Foreign Exchange Administration, as well as the Interim Measures on the Administration of Domestic Securities Investments of Qualified Foreign Institutional Investors (hereinafter referred to the Interim Measures). Article 2. A Qualified Foreign Institutional Investor (hereinafter referred to QFII) shall entrust its custodian to go through the formalities required by these Provisions. Article 3. QFIIs and their custodians shall comply with the relevant regulations and rules of China on foreign exchange control. Article 4. The State Administration of Foreign Exchange (hereinafter referred to SAFE) shall, in accordance with the laws, exercise foreign exchange administration over the securities investing activities undertaken by QFIIs within China. CHAPTER II ADMINISTRATION OF CUSTODIANS Article 5. To apply for the qualification of a custodian, a domestic commercial bank shall provide SAFE with, apart from the documents provided for in Article 14 of the Interim Measures, a report on foreign exchange operations of the last 3 years and other documents required by SAFE. Article 6. A custodian shall perform the following duties with respect to foreign exchange administration: (1) Handling the settlement and sale of foreign exchange, collection and payment of foreign exchange and settlement of RMB capital of QFIIs; (2) Supervising the investment activities of QFIIs, and reporting to the SAFE without delay in case QFII investment orders are found to have violated the provisions on foreign exchange administration; (3) When opening RMB special accounts for QFIIs, as well as processing the formalities for remitting/repatriating the principal/proceeds of QFIIs, correctly filling in the Foreign Exchange Registration Certificate of QFII (hereinafter referred to Foreign Exchange Registration Certificate); (4) Reporting to SAFE in two working days after a QFII remits/repatriates its principal/proceeds; (5) Reporting to SAFE about the income and expense and the investment gains and losses status of QFIIs' RMB special accounts of the last month, in five working days after the end of each month; (6) Compiling an annual financial statement on QFIIs' domestic securities investment activities in the previous year and sending it to SAFE after auditing by Chinese certified public accountants, in three months after the end of each accounting year; (7) Keeping the records and other related materials on QFIIs' fund remittance, repatriation, conversion, RMB receipt and payment for no less than 15 years; (8) Making international balance statistics reports pursuant to the relevant provisions of the state on foreign exchange administration; and (9) Other duties defined by SAFE based on prudent supervision principles. CHAPTER III ADMINISTRATION OF INVESTMENT QUOTA Article 7. To apply for investment quota, QFII shall supply SAFE with, apart from the documents provided for in Article 8 of the Interim Measures, the copy of the Securities Investment License issued by China Securities Regulatory Commission (hereinafter referred to CSRC) and other documents required by SAFE. Article 8. The investment quota applied for by a single QFII may not be less than the equivalent of 50 million US dollars in RMB, and may not be more than the equivalent of 800 million US dollars in RMB. SAFE may adjust the maximum and minimum investment quota a single QFII is allowed to apply for according to situation of the capital market and international balance. Article 9. If a QFII fails to remit adequate principals within 3 months from receiving the Foreign Exchange Registration Certificate and needs to remit adequate principals within the originally approved quota, or to remit the principal after repatriating some of the principles, or to increase the investment quota, it shall file an application with SAFE by presenting the following documents: (1) Application Form (including investment quota applied for and investment plan); (2) Foreign Exchange Registration Certificate; (3) Statement on sources of the funds, and Letter of Commitment promising not to withdraw funds during the approved period; (4) Letter of authorization by the applicant; (5) Report on domestic securities investment activities of the applicant; and (6) Other documents required by SAFE. SAFE shall, within 7 working days from the day when the full set of application documents are received, determine whether to grant approval or not. An official reply will be transmitted to the applicant through the custodian if the application has been approved; whereas a written notice on rejection will be transmitted to the applicant through the custodian if the application has been rejected. Article 10. The period of stay of the investment principals in China of a QFII shall be counted starting from the date when the QFII remits the principals for the first time. Article 11. If the investment principals remitted by a QFII has stayed in China for less than 1 year but more than 3 months, the QFII may, upon approval of CSRC and SAFE, transfer its investment quota to other QFIIs or other applicants meeting Article 6 of the Interim Measures. Article 12. If a QFII applies for transferring all or part of its investment quota to any other QFII, the transferor and the transferee shall respectively file an application for transfer with SAFE by taking the following documents: (1) Transfer Application Form; (2) Transfer contract; (3) Foreign Exchange Registration Certificate; and (4) Other documents required by SAFE. SAFE shall, within 15 working days from the day when the full set of application documents from the transferor and transferee are received, determine whether to grant approval or not after consultation with CSRC. An official reply will be respectively transmitted to the transferor and transferee through their custodians if the applications have been approved; whereas a written notice on rejection will be respectively transmitted to the transferor and the transferee through their custodians if the applications have been rejected. Article 13. If SAFE approves a QFII to transfer all its investment quota to any other QFII, the investment quota of the transferee shall be adjusted accordingly. Within 5 workdays from the transfer formalities have been completed, the transferor shall close its RMB special account opened with its custodian, and surrender its Foreign Exchange Registration Certificate to SAFE. If SAFE approves a QFII to transfer part of its investment quota to any other QFII, the investment quota of the transferor and the transferee shall be adjusted accordingly. Article 14. In case a QFII applies for transferring all or part of its investment quota to any other applicant meeting Article 6 of the Interim Measures, the transferee shall first obtain the Securities Investment License issued by CSRC and the investment quota approved by SAFE, before filing the application for transfer pursuant to Articles 12 and 13 of these Provisions. CHAPTER IV ADMINISTRATION OF ACCOUNTS Article 15. Upon approval of SAFE, a QFII may and may only open one RMB special account with its custodian. To apply for opening a RMB special account, the QFII shall file an application with SAFE by taking the following documents: (1) Application form for opening RMB special account; (2) Foreign Exchange Registration Certificate; (3) Formal custody agreement signed with its custodian; (4) Written promise of the custodian to supervise the use of the RMB special account pursuant to the provisions; and (5) Other materials required by SAFE. SAFE shall issue the official reply within 5 workdays from the day when the full set of application documents are received, and the custodian may open a RMB special account for the QFII on the basis of the official reply of SAFE. The custody shall put on record with SAFE the relevant information within 5 workdays from opening the RMB special account for the QFII. Article 16. The range of receipt and payment through the RMB special account of a QFII shall meet Article 24 of the Interim Measures, and funds in that account may not be used for other purposes. Article 17. If a QFII is in any of the following cases, its RMB special account at the custodian shall be closed, and the Foreign Exchange Registration Certificate shall be surrendered to SAFE: (1) Having repatriated all its principals and proceeds; (2) Having transferred all its investment quota; (3) Dissolution or bankruptcy of legal person institution and the liquidation procedures being finished; (4) Assets being taken over by receivers; (5) Automatic invalidation of the Securities Investment License or the License being surrendered to CSRC; or (6) Other cases stipulated by SAFE. CHAPTER V ADMINISTRATION OF EXCHANGE Article 18. If a QFII is to remit principals exceeding 50 million US dollars (including 50 million) or its equivalent, it shall notify the SAFE 3 workdays in advance. SAFE may, according to the status of international balance, suggest the QFII to adjust the time of remitting the principals within the valid term of its investment quota. Article 19. If the principles remitted by a QFII are convertible currencies, the rates shall be calculated according to the basic rates promulgated by the People's Bank of China on the current day or the middle rates of the official rates of the custodian on the current day. Article 20. To repatriate principals, a QFII shall file an application with SAFE in 5 workdays earlier by taking the following documents: (1) Application form for repatriation of principles; (2) Foreign Exchange Registration Certificate; and (3) Other documents required by SAFE. SAFE shall, within 5 workdays from the day when the full set of application documents are received, issue the document of approval if it approves the repatriation after examination, and shall reduce the investment quota of the QFII accordingly. The custodian shall process the formalities for purchase of foreign exchange and remittance of principals on the basis of the document of approval of SAFE. Article 21. If a QFII needs to purchase foreign exchange for repatriation of the after-tax proceeds audited by Chinese certified public accountants, it shall provide SAFE, apart from the documents stipulated in Article 29 of the Interim Measures, the Foreign Exchange Registration Certificate and other documents required by SAFE. SAFE shall, within 15 workdays from the day when the full set of application documents are received, issue the document of approval if it approves the repatriation after examination. The custodian shall process the formalities for purchase of foreign exchange and repatriation of proceeds for the QFII on the basis of the document of approval of SAFE. The accounting year of profits generating of a QFII shall be calculated on the basis of a Chinese fiscal year. CHAPTER VI SUPERVISION AND ADMINISTRATION Article 22. SAFE applies a system of annual inspection of the Foreign Registration Certificate of QFIIs. The time of annual inspection is from April 1 to April 30 of each year, and the main contents of the annual inspection include: (1) Income and expense status of the RMB special account; (2) Remittance and repatriation of the QFII; (3) Foreign exchange settlement, sale and payment; and (4) Compliance with the relevant laws and regulations on foreign exchange administration of the QFII. Article 23. A QFII shall submit the following materials to SAFE in the annual inspection: (1) Statements on its investment activities of last year; (2) Annual financial statements of the domestic securities investment of last year of the QFII compiled by the custodian and audited by Chinese certified public accountants; (3) Foreign Exchange Registration Certificate; and (4) Other documents required by SAFE. SAFE shall circulate a notice on the annual inspection of Foreign Exchange Registration Certificate to the People's Bank of China and CSRC. Article 24. If a QFII has been found to be any of the following cases in the annual inspection, it shall be punished by SAFE pursuant to these Provisions. If the QFII fails to correct within the prescribed time limit or refuses to execute the order, its Foreign Exchange Registration Certificate will fail the annual inspection: (1) Remitting principals exceeding the investment quota approved by SAFE or remitting principals beyond the valid term of the investment quota; (2) Repatriating principals or proceeds without approval of SAFE; (3) Receipt and payment through the RMB special account exceeding the range stipulated in Article 24 of the Interim Measures; or (4) Violations of Chinese laws and regulations, or other relevant provisions. If the Foreign Exchange Registration Certificate of the QFII failed the annual inspection, SAFE shall, after consultation with the People's Bank of China and CSRC, decide the scheme on fund withdrawing of the QFII. Article 25. SAFE may make on-spot inspections over QFIIs, custodians, securities companies, securities exchanges and securities registration and settlement agencies. The agencies under inspection shall accept and assist in the inspection. SAFE shall circulate a notice on the inspection to the People's Bank of China and CSRC. Article 26. If a QFII remits principals exceeding the investment quota approved by SAFE or beyond the valid term of the investment quota, or if the custodian handles for the QFII the remittance of principals exceeding the investment quota approved by SAFE or beyond the valid term of the investment quota, SAFE shall give the QFII/custodian a warning, order it to correct and impose on it a fine of no more than 3 thousand RMB concurrently. Article 27. If a QFII repatriates principals and proceeds without approval of SAFE, or if the custodian handles for the QFII the formalities for repatriation of principals and proceeds without approval of SAFE, SAFE shall order the QFII/custodian to correct, and impose a fine ranging from 30% of to 5 times the amount of foreign exchange evaded. Article 28. If a QFII or custodian opens any RMB special account without approval of SAFE, or opens several RMB special accounts, or uses the RMB special account exceeding the range stipulated in the Interim Measures, SAFE shall order the QFII/custodian to correct, circulate a notice of criticism, and impose on it a fine ranging from 50 thousand to 300 thousand RMB. Article 29. If a custodian fails to submit the statements and relevant materials to SAFE pursuant to the provisions, SAFE shall order it to correct, circulate a notice of criticism, and impose on it a fine ranging from 50 thousand to 300 thousand RMB. Article 30. If a custodian refuses to correct its rule-breaking acts, or the circumstances of violation are serious, SAFE, the People's Bank of China and CSRC shall make a joint decision to cancel its qualification of custodian. Article 31. If a QFII or custodian violates any other provisions on foreign exchange administration, SAFE shall punish the QFII/custodian pursuant to the relevant provisions on foreign exchange administration. CHAPTER VII SUPPLEMENTARY PROVISIONS Article 32. The materials to be submitted to SAFE required by these Measures shall be in the Chinese language. If there are both foreign language versions and Chinese versions at the same time, the Chinese versions shall prevail. Article 33. The power to interpret these Provisions shall remain with SAFE. Article 34. These Provisions shall come into force as of December 1, 2002. |
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