On May 6, 2009, the State Administration of Foreign Exchange (SAFE) issued the Circular on Adjusting the Examination and Approval Authority over Certain Foreign Exchange Matters Under Capital Accounts, which went into effect on June 1, 2009. In the Circular, SAFE delegates authority over certain foreign exchange matters to specific local SAFE branches and foreign exchange administrative departments (individually, a Local SAFE Branch).

Under the Circular, the following matters are now under the purview of the following Local SAFE Branches:

  1. The authority to approve the establishment by a foreign-funded enterprise of a capital account in a location other than where the enterprise is located falls to the Local SAFE Branch where the enterprise is located;  
  2. The authority to approve the purchase and payment of foreign exchange with the funds of a foreign party as part of a fixed return project by a foreign-funded enterprise falls to the Local SAFE Branch where the project is located;  
  3. The authority to approve, on a case-by-case basis, external guarantees provided by a non-banking financial institution or enterprise to a foreign enterprise for both financing purposes (excluding the issuance of bonds) and non-financing purposes falls to the Local SAFE Branch where the guarantor is located;  
  4. The authority to approve external guarantees provided by a domestic institution for the issuance of bonds (including commercial bills) by a foreign institution falls to the Local SAFE Branch where the guarantor is located;  
  5. The authority to approve a change in a securities or fund management company’s License for Foreign Exchange Operations in the Securities Business (as long as the change does not involve the business scope of the company) falls to the Local SAFE Branch where the company is located;  
  6. The authority to approve the termination of foreign exchange operations by a securities or fund management company falls to the Local SAFE Branch where the company is located;  
  7. The authority to approve an open-ended China fund established by a qualified foreign institutional investor with a monthly net subscription or redemption amount exceeding US$50 million falls to the Local SAFE Branch where the fund’s custodian is located; and  
  8. The authority to approve the termination of spot foreign exchange settlement and sale business by an enterprise group’s finance company falls to the Local SAFE Branch where the finance company is located.  

The Circular also specifies the approving authority for the purchase and payment of foreign exchange related to immigration and inheritance matters.  

The delegation of authority laid out in the Circular should benefit enterprises, which now can sidestep the lengthy review and approval procedures followed by SAFE at the central government level.