The People’s Bank of China recently released a notice with new requirements for the cross-border cash pooling of RMB by multinationals. This new notice relaxes operating income requirements for Chinese domestic group companies and overseas group companies that wish to participate in the pooling. In addition, a significant increase in the cap on net cross-border RMB inflow gives multinationals more freedom in pooling foreign RMB funds.
In view of these recent developments, we recommend that companies interested in setting up or making amendments to an RMB cash pool closely consult with both the local People’s Bank of China and their local commercial bank.
On 5 September 2015, the People’s Bank of China released its Notice of the People’s Bank of China on Further Facilitating Two-way Cross-border Renminbi Cash Pooling by Multinational Corporations. This “Circular 279″ updates Circular 324, the original rules that were issued on 1 November 2014 (see previous In context article).
Compared to Circular 324, Circular 279 relaxes certain operating income requirements for Chinese domestic group companies and overseas group companies that wish to participate in an RMB cash pool. The operational period required for both domestic and overseas group companies has been reduced from three years to one year. The aggregate operating revenue of the domestic group companies in the previous year must now be at least RMB 1 billion instead of RMB 5 billion. For overseas group companies, this requirement has been reduced from RMB 1 billion to RMB 200 million.
Circular 279 sets a new cap on the net cross-border RMB inflow at 50% of total own funds in the cash pool. The 50% cap is an initial ceiling and may be adjusted in the future depending on the economic situation in China and the need for controlling RMB inflow. As for the RMB outflow, there is still no cap on it.
As a consequence of Circular 279’s less stringent requirements on operating income, Chinese domestic group companies and overseas group companies can now more easily participate in the cross-border RMB cash pool of a multinational. The increased cap on the net cross-border RMB inflow of Circular 279 also gives multinationals more freedom in pooling foreign RMB funds.