Decree No. 532 of the State Council of the People’sRepublic of China
The Regulationson Foreign Exchange System of the People’s Republic of China, reviewed andpassed in the 20th executive meeting of the State Council on August 1, 2008, are hereby released and shall come into forcesimultaneously.
Wen Jiabao
Premier of the People’s Republic of China
August 5, 2008
Regulations on Foreign Exchange System of the People’sRepublic of China
(Issued in theDecree No. 193 of the State Council on January 29, 1996, amended in accordancewith the Decision of the State Council to Revise the Regulations on ForeignExchange System of the People’s Republic of China on January 14, 1997, andrevised and passed in the 20th executive meeting of the State Councilon August 1, 2008.)
Chapter I General Provisions
Article 1 These regulations are formulated with a view toimproving foreign exchange administration, maintaining an equilibrium in thebalance of payments and promoting sound economic development.
Article 2 The foreign exchange administration department of theState Council and its local offices (hereinafter referred to collectively as “theexchange administration agencies”) shall exercise foreign exchangeadministration in accordance with laws and regulations and assume theresponsibility for the implementation of these regulations.
Article 3 Foreign exchange, as referred to in these regulations,includes the following means of payments and assets denominated in foreigncurrency for international settlement:
(1) cash in foreign currency, including banknotesand coins;
(2) documents or instruments payable inforeign currency, including, among others, negotiable instruments, bank deposits,bank cards;
(3) securities denominated in foreigncurrency, including, among others, bonds and stocks;
(4) Special Drawing Rights,
(5) other assets denominated in foreigncurrency.
Article 4 These regulations shall govern all activities inrelation to receipts and payments in foreign exchange or foreign exchangeoperations of domestic entities and domestic individuals, and, receipts andpayments in foreign exchange or foreign exchange operations of foreign entitiesand foreign individuals in the People’s Republic of China.
Article 5 International payment and transfer in foreignexchange for current account transactions shall not be subject to governmentrestrictions.
Article 6 The government undertakes a reporting system forbalance of payments statistics.
The foreign exchange administrationdepartment of the State Council shall take the responsibility for compiling andmonitoring balance of payments statistics, and publish these statistics on aregular basis.
Article 7 Financial institutions conducting foreign exchangeoperations shall conduct business operations through foreign exchange accountsopened for their clients in accordance with the regulations enacted by theforeign exchange administration department of the State Council.
Financial institutions duly authorized forforeign exchange operations shall report their clients’ foreign exchangereceipts and payments, and changes in foreign exchange accounts opened fortheir clients to the exchange administration agencies in accordance with lawsand regulations.
Article 8 Foreign currency is prohibited from circulation andshall not be quoted for pricing or settlement in the territory of the People'sRepublic of China unless otherwise regulated by the government.
Article 9 Foreign exchange receipts of domestic entities anddomestic individuals may be repatriated into or placed outside of the People’sRepublic of China. The foreign exchange administrationdepartment of the State Council shall determine the conditions, time limits andother factors of repatriation or overseas placement on the basis of the balanceof payments situation and the need for foreign exchange administration.
Article 10 The foreign exchange administration department of theState Council shall hold, manage and operate foreign exchange reserves inaccordance with laws and regulations, and follow the principles of safety,liquidity and profitability.
Article 11 In case of occurrence, or possible occurrence, ofserious disequilibrium in the balance of payments or a severe crisis of thenational economy, the government may adopt safeguards, controls or othernecessary measures.
Chapter II Foreign Exchange Administration on Current Account Transactions
Article 12 Receipts and payments in foreign exchange for currentaccount transactions shall have bona fide and legitimate transactionbackgrounds. Financial institutions duly authorized for foreign exchange purchaseand sale operations shall exercise due diligence in checking the authenticityof transaction documents and their consistency with the receipts and paymentsin foreign exchange in accordance with the regulations issued by the foreignexchange administration department of the State Council.
The foreign exchange administrationagencies have the right to supervise and conduct inspections under the aforesaidregulation.
Article 13 Foreign exchange receipts for current accounttransactions may be retained or sold to financial institutions duly authorizedfor foreign exchange sale and purchase operations in accordance with therelevant regulations of the government.
Article 14 Foreign exchange payments for current accounttransactions may be made with foreign exchange owned by the payer, or with the foreignexchange purchased from financial institutions duly authorized for foreignexchange sale and purchase operations with the presence of such valid documentsas specified by the foreign exchange administration department of the StateCouncil.
Article 15 The foreign exchange administration department of theState Council shall determine the limits and reporting requirements of foreigncurrency allowed to be carried into or out of the People’sRepublic of China.
Chapter III Foreign Exchange Administration on Capital Account Transactions
Article 16 Direct investments within territory of the People’sRepublic of China by foreign entities and foreign individualsshall be registered with the foreign exchange administration agencies afterbeing approved by the relevant authorities.
Issuance and transactions of securities orderivatives in the People’s Republic of Chinaby foreign entities or foreign individuals shall be made in accordance with theregulations governing market entry, and be registered in accordance with theregulations made by the foreign exchange administration department of the StateCouncil.
Article 17 Overseas direct investment and overseas issuance ortransactions of securities or derivatives by domestic entities and domesticindividuals shall be registered in accordance with the regulations made by theforeign exchange administration department of the State Council. Where priorapproval of, or registration with, the relevant authorities is required inpursuance of the regulations of the government, the approval or registrationprocedures shall be completed prior to the foreign exchange registration.
Article 18 The government undertakes quota management onexternal debt. External borrowing shall be undertaken in accordance withrelevant regulations of the government and shall be registered with the foreignexchange administration agencies.
The foreign exchange administrationdepartment of the State Council shall take the responsibility for compiling andmonitoring external debt statistics and publish these statistics on a regularbasis.
Article 19 In the case of offering an external guarantee, anapplication shall be made to the foreign exchange administration agencies. The foreignexchange administration agencies may either approve or reject the applicationtaking into account the applicant’s assets and liabilities, and other relevantfactors. Where the scope of business operations of domestic entities requiresapproval from the relevant authorities in accordance with the regulations ofthe government, such approval shall be obtained before making the applicationto the foreign exchange administration agencies. After signing an externalguarantee contract, the applicant shall register the external guarantee withthe exchange administration agencies.
The external guarantee offered for onlendloans with the permission of the State Council, and with a view to utilizingloans provided by foreign governments or international financial organizations isnot subject to the aforesaid regulation.
Article 20 Banking institutions may issue overseas commerciallendings directly within the scope of their approved business operations. Otherdomestic entities shall make an application to the foreign exchangeadministration agencies in the case of issuing overseas commercial lendings.The foreign exchange administrations agencies may either approve or reject theapplication taking into account the applicant’s assets and liabilities, andother relevant factors. Where the scope of business operations of domesticentities requires approval of relevant authorities in accordance with theregulations of the government, such approval shall be obtained before makingthe application to the foreign exchange administration agencies.
Overseas commercial lendings shall beregistered in accordance with the regulations made by the foreign exchangeadministration department of the State Council.
Article 21 Receipts in foreign exchange for capital accounttransactions may be retained or sold to financial institutions duly authorizedfor foreign exchange sale and purchase operations with the approval of the foreignexchange administration agencies, unless no approval is required in accordancewith the regulations of the government.
Article 22 Payments in foreign exchange for capital accounttransactions shall be made with the foreign exchange owned by the payer, orwith the foreign exchange purchased from financial institutions duly authorizedfor foreign exchange sale and purchase operations upon presentation of validdocuments specified by theforeign exchange administration department of the State Council. Where approvalof the foreign exchange administration agencies is required in pursuance of theregulations of the government, the approval shall be obtained prior to thepayment in foreign exchange.
Foreign investor’s Renminbi income in alegally terminated foreign invested enterprise which has completed liquidationprocedures and fulfilled tax obligations in accordance with the relevant regulationsof the government may be converted into foreign currency through financialinstitutions duly authorized for foreign exchange sale and purchase operationsand remitted out of the People’s Republic of China.
Article 23 Foreign exchange or converted Renminbi receipts for capitalaccount transactions shall be used for the purpose approved by the foreign exchangeadministration agencies in accordance with the relevant regulations of thegovernment. The foreign exchange administration agencies have the right toconduct supervision and inspection of the use of foreign exchange or converted Renminbireceipts and changes of relevant accounts.
Chapter IV Foreign Exchange Administration on Operations of Financial Institutions
Article 24 Financial institutions shall have the approval of theforeign exchange administration agencies for the operation or termination offoreign exchange sale and purchase business. Financial institutions shall havethe approval of the foreign exchange administration agencies or the financialsupervisory authorities according to their division of supervisoryresponsibilities for the operation or termination of other foreign exchangebusiness.
Article 25 The foreign exchange administration agenciesundertake comprehensive position management in respect to the foreign exchangeoperations of financial institutions. Detailed measures shall be formulated bythe foreign exchange administration department of the State Council.
Article 26 Currency conversion of financial institution’scapital, profit and mismatched assets denominated in domestic and foreigncurrencies shall have the approval of the foreign exchange administrationagencies.
Chapter V Renminbi Exchange Rate and Administration on Foreign Exchange Market
Article 27 The Renminbi exchange rate is in a managed floatingregime based on market supply and demand.
Article 28 Financial institutions duly authorized for foreignexchange sale and purchase operations, and other entities which have compliedwith such conditions as specified by the foreign exchange administrationdepartment of the State Council, may participate in trading of foreign exchangein the inter-bank foreign exchange market in accordance with the regulationsissued by the foreign exchange administration department of the State Council.
Article 29 Trading of foreign exchange in the market shallcomply with the principles of transparency, equality, fairness, honesty andcredibility.
Article 30 The trading currencies and formats in theforeign exchange market shall be specified by the foreign exchangeadministration department of the State Council.
Article 31 The foreign exchange administration department of theState Council shall supervise and manage domestic foreign exchange markets inaccordance with laws and regulations.
Article 32 The foreign exchange administration department of theState Council may, on the basis of the changes in the foreign exchange marketand monetary policy, smooth excessive fluctuations in the foreign exchangemarket in accordance with laws and regulations.
ChapterVI Supervision and Management
Article 33 The foreign exchange administration agencies shallcarry out their responsibilities in accordance with laws and regulations andhave the power to take the following measures:
(1) Make on-the-spot inspection offinancial institutions conducting foreign exchange operations;
(2) Enter into suspected places of illegalforeign exchange activities, conduct investigation and obtain evidence;
(3) Question the entities or individualswho have receipts or payments in foreign exchange or conduct foreign exchangeoperations and ask for explanation of matters directly relevant to the illegalforeign exchange activities under investigation;
(4) Examine and copy materials such astransaction documents directly relevant to the illegal foreign exchange activitiesunder investigation;
(5) Examine and copy financial andaccounting records and other relevant documents of the party involved in orentities and individuals directly relevant to the illegal foreign exchange activitiesunder investigation; documents and records which could potentially betransferred, concealed or destroyed may be seized;
(6) Examine accounts, other than individualsavings accounts, of the party involved in, or entities and individualsdirectly relevant to, the illegal foreign exchange activities under investigation,subject to the permission of the foreign exchange administration department of theState Council or the foreign exchange administration agencies at the provinciallevel;
(7) In the case that there is evidence oftransfer or concealment of the money or other assets in question, orconcealment, forgery or damage of important evidence, or there is evidence thatit is possible for these to happen, make an application to a People’s Court tofreeze or seize the said money, assets or evidence.
Relevant entities and individuals shallco-operate with the foreign exchange administration agencies in the supervisionand inspection, give honest explanations to relevant matters and providerelevant documents and other information. They shall not refuse to co-operatewith, obstruct or conceal things from the supervision and inspection.
Article 34 The foreign exchange administration agencies shallconduct supervision, inspection or investigation in accordance with laws andregulations. The supervision, inspection or investigation shall be carried outby no less than two officers, and the officers shall present identificationdocuments before inspection or investigation. Otherwise, the entities orindividuals subject to supervision, inspection or investigation have the rightto refuse.
Article 35 Domestic entities conducting foreign exchangeoperations shall submit financial and accounting statements, statistics andother documents as specified by the foreign exchange administration departmentof the State Council.
Article 36 The financial institutions duly authorized forforeign exchange operations shall, upon detection, report illegal foreignexchange activities to the foreign exchange administration agencies in a timelymanner.
Article 37 The foreign exchange administration department of theState Council may obtain the information necessary for taking theresponsibility of foreign exchange administration from relevant governmentagencies and institutions of the State Council. Relevant government agencies andinstitutions shall provide the said information.
The foreign exchange administrationdepartment of the State Council shall keep relevant government agencies andinstitutions informed of the work on foreign exchange administration.
Article 38 Any entity or individual has the right to report anyactivity in violation of foreign exchange regulations.
The foreign exchange administrationagencies shall keep the reporter confidential, and reward the reporter andother entities or individuals who have helped in investigating and penalizingthe activity in violation of foreign exchange regulations.
ChapterVII Legal Responsibilities
Article 39 To penalize foreign exchange evasion schemes, such astransferring foreign exchange abroad in violation of the regulations ortransferring domestic capital abroad by fraudulent means, the foreign exchangeadministration agencies shall order the foreign exchange in question to berepatriated and impose a penalty not exceeding thirty percent of the amountinvolved in the evasion scheme; in the case of serious violations, the penaltyimposed will be in the range of more than thirty percent and less than onehundred percent of the amount involved in the evasion scheme; in the case of criminaloffence, a criminal prosecution shall proceed.
Article 40 To penalize illegal foreign exchange arbitrage inviolation of the regulations, such as paying or receiving in foreign exchangefor expenses which shall be paid or received in Renminbi or purchasing foreignexchange from financial institutions duly authorized for foreign exchange sale andpurchase operations with fake or invalid transaction documents, the exchangeadministration agencies shall order the funds involved in the illegal arbitrageto be converted back and impose a penalty not exceeding thirty percent of theamount involved in the illegal arbitrage; in the case of serious violations,the penalty imposed will be in the range of more than thirty percent and lessthan one hundred percent of the amount involved in the illegal arbitrage; inthe case of criminal offence, a criminal prosecution shall proceed.
Article 41 To penalize the foreign exchange inward remittance inviolation of the regulations, the foreign exchange administration agenciesshall order redress and impose a penalty not exceeding thirty percent of theamount in question; in the case of serious violations, the penalty imposed willbe in the range of more than thirty percent and less than one hundred percentof the amount in question.
To penalize theillegal foreign exchange sales, the exchange administration agencies shall orderthe foreign exchange illegally surrendered to be converted back and impose apenalty not exceeding thirty percent of the amount in question.
Article 42 To penalize the carrying of foreign currency into orout of the People’s Republic of China in violation of the regulations, theexchange administration agencies shall issue a warning, and may impose apenalty not exceeding twenty percent of the amount in question. If existinglaws and regulations stipulate that cases of similar nature are in thejurisdiction of the Customs authority, those laws and regulations shallprevail.
Article 43 To penalize any activity in violation of theregulations governing external debt such as undertaking external borrowing,overseas bond issuance or external guarantee without permission, the foreign exchangeadministration agencies shall issue a warning and impose a penalty notexceeding thirty percent of the amount in question.
Article 44 To penalize the change of designated use of foreignexchange or converted Renminbi receipts without permission in violation of theregulations, the exchange administration agencies shall order redress,confiscate the illegal gains and impose a penalty not exceeding thirty percentof the amount in question; in the case of serious violations, the penaltyimposed will be in the range of more than thirty percent and less than onehundred percent of the amount in question.
To penalize the illegal use of foreignexchange, such as the use of foreign exchange in the People’s Republic of Chinafor pricing or settlement and the transfer of foreign exchange in violation ofthe Regulations, the foreign exchange administration agencies shallorder redress, issue a warning, and may impose a penalty not exceeding thirtypercent of the amount in question.
Article 45 To penalize the unauthorized trading, disguisedtrading, illegal buying or selling, and the illegal brokerage trading of arelatively large amount of foreign exchange, the exchange administrationagencies shall issue a warning, confiscate the illegal gains and impose apenalty not exceeding thirty percent of the amount in question; in the case ofserious violations, the penalty imposed will be in the range of more thanthirty percent and less than one hundred percent of the amount in question; inthe case of criminal offence, a criminal prosecution shall proceed.
Article 46 To penalize the unauthorized operation of foreignexchange sale and purchase business, the foreign exchange administrationagencies shall order the redress of the case, confiscate the illegal gains, ifany, and where the illegal gains exceed RMB500,000, impose a penalty in therange of one to five times the amount in question; where there is no illegalgain or the illegal gains do not exceed RMB500,000, the penalty imposed will bein the range of RMB500,000 to RMB2,000,000; in the case of serious violations,the relevant authority shall order suspension of operations and rectificationor revoke the license; in the case of criminal offense, a criminal prosecutionshall proceed: To penalize unauthorized operation of foreign exchange businessother than foreign exchange sale and purchase, the foreign exchangeadministration agencies or the financial supervisory authority shall use theaforesaid regulation as a reference.
Article 47 To penalize a financial institution carrying out anyof the following listed activities, the exchange administration agencies shallorder redress within a specified period, confiscate the illegal gains andimpose a penalty in the range of RMB200,000 to RMB1,000,000; in the case ofserious violations or failure to redress the case within the specified period,the foreign exchange administration agencies shall order termination ofrelevant business operations.
(1) failure to check the authenticity oftrading documents and their consistency with the receipts and payments inforeign exchange when conducting receipts and payments for current accounttransactions;
(2) violation of the regulations onreceipts and payments for capital account transactions;
(3) violation of the regulations on foreignexchange sale and purchase business;
(4) violation of the regulations oncomprehensive position management of foreign exchange business;
(5) violation of the regulations on tradingin the foreign exchange market.
Article 48 To penalize any of the following listed activities, the foreign exchange administration agencies shall order redress, issue a warning, and may impose a penalty not exceeding RMB300,000 for entities or RMB50,000 for individuals:
(1) failure to comply with the regulations on balance of payments statistics compilation and reporting;
(2) failure to comply with the regulations on submitting documents such as financial and accounting statements and statistics.
(3) failure to comply with the regulations on presenting valid documents or presenting unauthentic documents;
(4) violation of the regulations on foreign exchange accounts management;
(5) violation of the regulations on foreign exchange registrations;
(6) refusal to co-operate with, or obstruction of the supervision, inspection or investigation conducted by the foreign exchange administration agencies in accordance with the regulations.
Article 49 In respect of domestic entities which violate the foreign exchange regulations, in addition to imposing penalties in accordance with these regulations, the directly responsible person in charge and other directly responsible persons shall be disciplined; directly responsible directors, supervisors, senior management and other directly responsible persons in financial institutions shall be given a warning and a penalty in the range of RMB50,000 to RMB500,000; in the case of criminal offense, a criminal prosecution shall proceed.
Article 50 Any officer of the foreign exchange administration agencies who shows preferential treatment, commits irregularities, abuses his authority or neglects his duties shall be prosecuted for criminal liability in the case of criminal offense or, disciplined in accordance with the regulations in a case not constituting a criminal offense.
Article 51 If one party contests a specific administrative behavior conducted by the foreign exchange administration agencies, the party may make an appeal for administrative review in accordance with laws and regulations; if the party still contests the decision of the administrative review, the party may appeal to a People's Court in accordance with laws and regulations.
Chapter VIII Supplementary Provisions
Article 52 The definitions of the terms in these Regulations are as follows:
(1) "domestic entities" refers to, among others, government agencies, enterprises, public institutions, social organizations and armed forces, excluding foreign diplomatic agencies and consulates in the People’s Republic of China and resident representative offices of international organizations in the People’s Republic of China.
(2) “domestic individuals” refers to Chinese citizens and foreign nationals residing in the People’s Republic of China for a continuous period in excess of one year, excluding foreign diplomats in the People’s Republic of China and resident representatives of international organizations in the People’s Republic of China.
(3) “current account transactions” refers to, among others, the transaction items in the balance of payments involving goods, services, income and current transfers.
(4) “capital account transactions” refers to the transaction items in the balance of payments leading to changes in external assets and liabilities, including, among others, capital transfer, direct investment, portfolio investment, financial derivatives, loans.
Article 53 Non-financial institutions shall have approval of the foreign exchange administration department of the State Council to operate foreign exchange sale and purchase business. Detailed regulations shall be formulated separately by the foreign exchange administration department of the State Council.
Article 54 The Regulations shall enter into force on its issuing date.
