On November 19, 2012, the State Administration of Foreign Exchange ("SAFE") issued the Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Policies Related to Direct Investment (the "Notice"), which became effective on December 17, 2012. The purpose of the Notice is to simplify the administrative procedures and approvals, strengthen the statistics and supervision work, and make foreign exchange policies related to direct investment registration-based.

The Notice mainly covers the following points: (1) abolishing the requirement to obtain SAFE's approval for the opening of and payment into foreign exchange accounts for direct investment; (2) abolishing the requirement to obtain SAFE's approval for reinvestment of foreign investors' legal income obtained in China, for example, conversion by foreign-invested enterprises of capital reserves, surplus reserves, undistributed profits or other legal income that belongs to foreign investors or their registered external loans (including interest) into registered capital; (3) simplifying the administration of foreign exchange for reinvestment in China by foreign invested holding companies; (4) simplifying the procedures for capital verification and confirmation that foreign invested enterprises are required to complete; (5) simplifying the foreign exchange registration procedures for acquisition, by foreign investors, of shares held by Chinese parties; (6) abolishing the requirement to obtain SAFE's approval for purchase and external payment of foreign exchange for direct investment; (7) abolishing the requirement to obtain SAFE's approval for domestic transfer of foreign exchange for direct investment; (8) further relaxing controls regarding the provision of loans abroad; (9) improving the administration of the conversion (into RMB) of foreign exchange capital of foreign invested enterprises; and (10) requiring banks to enhance their awareness of compliance in the process of conducting foreign exchange businesses for direct investment. The plan for the transition and transfer of historic business and direct investment system data is also attached to this Notice.

The full Chinese text of the Notice is available here.