Q&A on Facilitating Foreign Exchange Receipts and Payments under the Capital Account

01

Q: In what respects are foreign exchange receipts and payments under the capital account facilitated?

A: After the facilitation policy comes into effect, an eligible enterprise, when using foreign exchange receipts under the capital account and renminbi funds obtained from foreign exchange settlement for domestic payments, may directly process the payment at an eligible bank based on the Order of Payment for Facilitating Foreign Exchange Receipts and Payments under the Capital Account without having to submit materials certifying the veracity of each transaction in advance.

05

Q: What conditions must an enterprise meet in order to be eligible for carrying out the facilitation of foreign exchange receipts and payments under the capital account?

A: An enterprise that is eligible for facilitated foreign exchange receipts and payments under the capital account must be a nonfinancial enterprise (excluding real estate companies and government financing vehicles) and meet the following conditions:

(1) There can be no record of foreign exchange-related administrative penalties in the past year (for enterprises established less than one year ago, there must be no record of a foreign exchange-related administrative penalty since the date of establishment);

(2) If it is an enterprise in the directory of enterprises for foreign exchange receipts and payments for trade in goods, it must be a "Class A" company engaged in the trade in goods.

06

Q: What conditions does a bank have to meet in order to be eligible to process facilitated capital account foreign exchange receipts and payments?

A: A bank processing facilitated foreign exchange receipts and payments under the capital account must meet the following conditions:

(1) It has opened the capital account information system of the State Administration of Foreign Exchange;

(2) It was rated as Grade B (excluding B-) or above in the compliance and prudential management evaluation of foreign exchange transactions during the previous year;

(3) It has a complete system of internal controls and adequate risk prevention measures.

08

Q: Does SAFE impose macro-prudential management rules on the facilitation of foreign exchange receipts and payments under the capital account?

A: Yes. SAFE conducts quota management for the facilitation of foreign exchange receipts and payments under the capital account. The quota on such receipts and payments is equal to the amount of the foreign exchange receipt under the capital account of the enterprise multiplied by the so-called macro-prudential coefficient. The macro-prudential coefficient is tentatively set at 1 but is subject to adjustment by SAFE from time to time based on the overall situation of foreign exchange receipts and payments. When the macro-prudential coefficient is less than 1, the part beyond the enterprise's quota of facilitated foreign exchange receipts and payments under the capital account shall be subject to the foreign exchange receipt and payment management policy that is in effect in the same period.

09

Q: Does the facilitating policy apply to the transfer of funds between foreign exchange accounts in the original currency?

A: No. The facilitation of foreign exchange receipts and payments applies only to direct foreign exchange payments within China, direct domestic payments after settlement of foreign exchange and domestic payments from quasi-settlement accounts. A direct foreign exchange payment within China means a direct payment of foreign exchange from the foreign exchange account under the capital account to the actual domestic payee. It does not include the transfer of funds between foreign exchange accounts in the original currency. Such transfers of funds must comply with relevant foreign exchange regulations in effect.

11

Q: What requirements must the bank comply with when submitting information on the facilitation of foreign exchange receipts and payments under the capital account?

A: When the handling bank is processing facilitated foreign exchange receipts and payments under the capital account, it must submit such information as relevant accounts, domestic transfers and foreign exchange settlement and sales within the accounts in a timely manner in accordance with the Notice of the State Administration of Foreign Exchange on Issuing the Regulations for Collection of Foreign Exchange Transaction Data of Financial Institutions (Version 1.2) (SAFE Document [2019] No.1). When submitting the foreign exchange settlement information, it needs to write "CIPP" in the column headed "Specific Purpose of Foreign Exchange Settlement" (it does not need to write this if the foreign exchange is settled to the quasi-settlement account); when the fund is transferred from the quasi-settlement account to any other renminbi account, it shall submit the domestic transfer information by filling in the domestic receipt and payment voucher, and write "CIPP" in the "invoice number" column.

13

Q: If the handling bank discovers anything abnormal or suspicious in the enterprise, what should it do?

A: If the handling bank discovers anything abnormal or suspicious in the enterprise, it should stop processing the facilitated foreign exchange receipts and payments for the enterprise and report the discovery to the local administration of foreign exchange in a timely manner.