Effective from October 2017, the Shanghai Branch of the PRC State Administration of Foreign Exchange (SAFE) will require companies that maintain, or plan to maintain, their dedicated foreign exchange account with Bank of China, Citibank or HSBC to start submitting any registration applications under Circular 7 (including initial registrations, annual re-registrations, amendment registration and de-registrations) to their bank, rather than directly to Shanghai SAFE. Companies that do not maintain, or do not plan to maintain, their dedicated foreign exchange account with any of these three banks are expected to continue to make their submissions directly to Shanghai SAFE.
Even though affected companies will be required to submit their registration applications to the bank, Shanghai SAFE retains the authority to review and approve any applications, and does not delegate any regulatory power to the banks. After the banks have preliminarily processed the application materials, Shanghai SAFE will review and make final decisions regarding approval.
We understand the change in process does not impact SAFE quarterly reports – these should continue to be submitted directly to Shanghai SAFE.
Lastly, note that the changes are in their pilot phase. The new guidance has only recently been communicated to the compliance departments of Bank of China, Citibank or HSBC and may have not been disseminated yet to all of their branch offices in Shanghai. Therefore, we recommend that affected companies submit their annual re-registration applications as soon as possible, as it may take some time for the banks to familiarize themselves with the new process and complete the preliminary review of the application. If the new process works to Shanghai SAFE’s satisfaction, we expect that Shanghai SAFE will expand the pilot program and designate additional banks to receive registration applications.