The State Administration of Foreign Exchange circulated on January 5, 2007 the Detailed Rules for the Implementation of Administrative Measures on Individual Foreign Exchange (the “Implementing Rules”), which took effect on February 1, 2007. The Implementing Rules work together with the earlier promulgated Administrative Measures on Individual Foreign Exchange (the Administrative Measures, People’s Bank of China, Order No. 3) to provide a complete administrative mechanism over the individual foreign exchange. The new Administrative Measures also came into play as of February 1, 2007.
Under the Implementing Rules, US$50,000 is specified as the annual quota to be applied over the individual settlement of foreign exchange by an individual within or outside the PRC territory, as well as individual purchase of foreign exchange by individuals that are within the territory of PRC. According to the new Administrative Measures, the individual within the PRC territory refers to those who hold a valid PRC identity card or two other particular substitute identity certificates. The new Administrative Measures provides an annual quota will be imposed on the above two individual foreign exchange related business. Earlier, individuals within the territory of China were allowed to buy a total amount of foreign exchange valuing US$20,000 and individual settlement of foreign exchange was measured against a single quota. In addition, such number is subject to future adjustment by State Administration of Foreign Exchange according to the international balance of payments.
The Implementing Rules, in conjunction with the new Administrative Measures, present a lenient attitude towards the trading related individual foreign exchange. The individual that is engaged in foreign trade or domestic business is allowed to open a foreign exchange settlement account, which will be treated same way as such for an organization or institute. There will be no annual upper limit for the foreign exchange settlement or purchase under such account. With respect to the settlement of foreign exchange under an individual frequent non-operation account that goes beyond the annual maximum amount, the Implementing Rules requires certain documents to be submitted for authenticity and legality check by relevant banks. For example, for receiving a donation, a valid donation agreement is required; with respect to the family support, a legal document is required to verify the underlying lineal relative relationship or other relationship to qualify the person for the receipt of such support, etc.
The annual quota also applies to the settlement or purchasing of foreign exchange under the individual capital account. Regarding the transaction that goes beyond the annual limit, the approval from the relevant foreign exchange bureau is mandated for such settlement or purchasing. Notwithstanding the foregoing, the restriction on the capital account will be relaxed gradually in reference to the schedule of Renminbi’s being a freely convertible currency.
In addition, the individual foreign exchange account includes the following three types: the foreign exchange settlement account, the saving account, and the capital item account. The earlier classification of foreign currency account and foreign exchange account no longer exists under the new regulations. Nevertheless, in order to strengthen the supervision over the foreign currency transaction, the Implementing Rules prescribe a limit for the daily deposit or withdrawal of foreign exchange. If the deposit amount goes beyond US$5,000 or the withdrawal exceeding US$10,000 accumulatively for each day, an approval from the relevant foreign exchange authority or an extra certain type of certifying document will be needed for the consummation of the transaction.