SAFE has delegated to banks the authority to review foreign exchange registrations for inbound direct investments by foreign investors and outbound investments by Chinese investors. It has also cancelled certain foreign exchange registrations and filings, as well as annual inspections for inbound and outbound investments. The new measures will become effective on 1 June 2015.
The changes were introduced by the State Administration of Foreign Exchange (SAFE) in the Notice on Further Simplifying and Improving Policies regarding the Administration of Foreign Exchange Matters Related to Direct Investment (Notice), which will take effect on 1 June 2015.
Registrations to be reviewed by banks
SAFE has delegated to banks the authority to review certain foreign exchange registrations for both inbound direct investments by foreign investors and outbound investments by Chinese investors.
Going forward, foreign-invested enterprises (FIE) and Chinese outbound investors will need to process the relevant SAFE registrations at a bank located in the city where the FIE or Chinese outbound investor is registered (Bank).
Certain registrations and filings cancelled
Under the Notice, SAFE has cancelled:
- registrations (whether with SAFE or at a Bank) for capital contribution confirmations for in-kind contributions by foreign investors and for equity acquisitions by foreign investors from a Chinese party;
- registrations with SAFE for capital contribution confirmations if cash is contributed by a foreign investor; instead, an FIE will need to register with a Bank when the cash contribution is wired by its foreign investor(s) to the FIE’s account in China; and
- filing requirements for re-investment made by overseas enterprises which are set up or controlled by Chinese outbound investors.
Annual inspections cancelled
SAFE has cancelled annual inspections for both inbound and outbound investment. FIEs and Chinese outbound investors will, from 1 June 2015, instead be required to register their investment in the preceding year via SAFE’s capital account information system before October each year. If any such registration is not made in time, Banks will be prohibited from processing foreign exchange registrations related to capital accounts for the relevant FIEs or Chinese outbound investors.
- Foreign investors and Chinese outbound investors will benefit from quicker foreign exchange registrations for inbound/outbound investments. The exact time required will likely vary from bank to bank.
- FIEs and Chinese outbound investors should make sure that their inbound/outbound investments in the preceding year are registered via SAFE’s capital account information system before October each year.