On July 18 2011, the State Administration of Foreign Exchange (“SAFE”) issued the Supplementary Circular on Issues in connection with Improving Administration of Capital Payment and Settlement of Foreign-Invested Enterprises (the “Circular”). The Circular came into effect on August 1, 2011.
This Circular supplements the SAFE Circular on issues in connection with Improving Administration of Capital Payment and Settlement of Foreign-Invested Enterprises dated August 29, 2008 which is a key SAFE rule regarding the conversion of foreign currency, which is the registered capital of foreign-invested enterprises (“FIEs”) into Renminbi. The Circular strengthens further the restrictions on converting registered capital contributed in foreign currency into Renminbi by, among other requirements; (i) requiring additional application documents for the conversion; (ii) imposing stringent authentication examinations of instruments and post-conversion management (e.g. the reporting to SAFE of revocation of underlying transactions by the settlement bank); (iii) restricting conversion for the purpose of petty cash; and (iv) blacklisting those FIEs which violate SAFE rules and imposing higher standards of examination of such FIEs for their future conversion of registered capital.
For the full text of the Circular, please refer to the Chinese version of the Circular http://events.whitecase.com/china_newsletter/Supplementary_Circ ular_on_Issues_092011.pdf