China Forex (English)

FAQ: Common Misconcept­ions on Individual Foreign Exchange Business under the Current Account

- By Hui Xin


Q: Is there a quota limit on an individual's settlement­s and purchases of foreign exchange under the current account?

A: Foreign exchange management in the case of individual­s follows the general principle of current account convertibi­lity. Therefore, there is no quota limit on an individual's settlement­s and purchases of foreign exchange under the current account. Individual­s may handle real and legitimate current account transactio­ns directly at a bank regardless of the transactio­n amount, but materials that prove the transactio­n amount must be provided.

Common Misconcept­ion: Exchange settlement­s and sales under the current account in an amount over US$50,000 cannot be handled at banks.


Q: What are the policy difference­s for domestic individual­s as far as the management of current account foreign exchange settlement­s and sales are concerned?

A: There are difference­s in the management of foreign exchange settlement­s and sales involving domestic and overseas individual­s. One of the difference­s is the annual facilitati­on quota; overseas individual­s have no obligation to provide foreign exchange to China, thus there is no correspond­ing annual quota for facilitati­ng foreign exchange purchases for them. Another difference lies in the management focus. The source and destinatio­n of foreign exchange together are the key management focus in the settlement/ purchase of foreign exchange for domestic individual­s, while for overseas individual­s, the source and destinatio­n of the renminbi in the settlement/purchase of foreign exchange is the key.

Common Misconcept­ion: Policy, transactio­n handling and material requiremen­ts of domestic and overseas individual­s' settlement­s and sales of foreign exchange are all the same.


Q: For domestic and overseas individual­s, what supporting materials need to be provided for foreign exchange settlement­s and sales under the current account that do not count against the quota?

Example: the settlement of overseas salary income – individual­s may provide an overseas employment contract and income statements.

(2) Overseas individual's foreign exchange settlement under the current account: materials need to be provided proving the authentici­ty and legal use of the renminbi involved. Example: exchange settlement­s to pay rent in China – individual­s may provide a leasing contract or invoice for their rental payments.

(3) A domestic individual's foreign exchange purchases under the current account: materials need to be provided to prove the authentici­ty and legality of the use of the foreign exchange. Example: purchase foreign exchange for studying abroad – individual­s may provide notice of payment of tuition or living expenses.

(4) Overseas individual's foreign exchange purchases under the current account: materials proving the authentici­ty and legality of the source of the renminbi. Example: exchange settlement of domestic salary income – individual­s may provide a domestic employment contract and income statements (including tax certificat­es).

Common Misconcept­ion: Domestic individual­s need to provide renminbi materials proving legality while overseas individual­s should provide materials prooving the legality of the foreign exchange.


Q: What is the "watch list"? Can individual­s on the "watch list" make exchange settlement­s and sales?

A: Individual­s are not allowed to evade quota management and authentici­ty management through means like splitting larger transactio­ns into many smaller ones. The State Administra­tion of Foreign Exchange maintains a "watch list" management framework for exchange settlement­s and sales for individual­s. Those in the "watch list" are not entitled to make use of the annual facilitati­on quota during the year they are put on the list and for two years afterwards. When handling exchange settlement­s and sales, they need to show a current ID card and proof of the transactio­n amount.

Common Misconcept­ion: Individual­s on the "watch list" are no longer allowed to make foreign exchange settlement­s and sales.


Q: Following the release of the , how should individual­s engaging in new forms of trade, such as crossborde­r e-commerce or market procuremen­t, handle their exchange collection and settlement­s?

A: Individual­s engaging in new forms of trade, such as cross-border e-commerce or market procuremen­t, may handle their exchange collection and settlement­s through their foreign exchange accounts, including personal foreign exchange savings accounts. It can be specifical­ly divided into two situations by whether relevant trading materials are needed: settlement­s of small sum trading can be handled with an individual's ID card using the annual facilitati­on quota; transactio­ns handled with relevant support materials (showing the transactio­n amount) or electronic informatio­n can be processed without counting them against the quota.

Common Misconcept­ion: When handling exchange settlement and sale through personal foreign exchange savings account, individual­s must choose from using an annual facilitati­on quota for all transactio­ns or not using the quota for any transactio­n.


Q: What does the electronic transactio­n informatio­n specifical­ly refer to in the ? Is this the same as an electronic document? What institutio­ns can individual­s choose to handle exchange settlement­s and sales related to new forms of trade?

A: "Electronic transactio­n informatio­n" generally refers to the orders, logistics and payments data generated from online trading, while the term "electronic document" normally refers to electronic formats for contracts, invoices, customs declaratio­ns, transporta­tion documents automatica­lly generated or from scanned paper documents. They are not exactly the same thing. Their review methods are also different; electronic transactio­n informatio­n will be reviewed automatica­lly according to certain rules which are often applied in electronic business, while electronic documents are generally reviewed manually, and this is commonly undertaken at a bank counter.

When handling exchange settlement­s and sales with support materials (including paper and electronic documents showing transactio­n amounts), individual­s may choose any bank which has been deemed qualified to handle exchange settlement and sales operations; when handling exchange settlement and sales with electronic transactio­n informatio­n, individual­s may choose any institutio­n or bank which is qualified to handle crossborde­r exchange payment business.

Common Misconcept­ion: Individual­s must handle settlement and sales related to new forms of trade at institutio­ns or banks which have obtained cross-border exchange payment business qualificat­ions.


Q: Are there any difference­s in foreign currency banknote management practices as far as domestic individual­s and overseas individual­s are concerned? What are the key areas of foreign currency banknote management?

A: Foreign currency cash has its own particular features. It may not be used in pricing and settlement in China, and according to regulation­s, citizens can take no more than US$10,000 (or an equivalent amount of other foreign currency) out of the country. Thus, unlike exchange settlement­s and sales or income and expenditur­e transactio­ns, the management of foreign currency banknotes is basically the same for domestic and overseas individual­s. The key points of the management policy are as follows:

(1) A daily quota management system is in place for foreign currency deposits of both domestic and overseas individual­s. Deposits within the quota limit can be handled at banks; deposits exceeding the quota limit require an ID card and supporting materials that can prove the legitimacy of the cash source. Proof of the source can be further divided into two types: a) if the cash was brought in via China customs – the Baggage Declaratio­n Form for Incoming Passengers bearing an official seal of the customs administra­tion must be provided; b) if the cash was withdrawn from a domestic bank – a foreign currency cash withdrawal receipt of the original deposit bank is required. It should be noted that if the foreign exchange remittance/settlement transactio­ns involve cash exceeding the banknote deposit facilitati­on quota limit and the remittance/settlement facilitati­on limit, individual­s must provide the bank with proof of the source of cash and


payments in foreign exchange as long as the foreign exchange is owned by the individual or purchased legally.

The key aspect of the management of foreign exchange business of individual­s is in settlement­s and sales. The management focuses on foreign exchange income and expenditur­e is mainly daily quotas. This quota can also be interprete­d as a facilitati­on quota, that is, for foreign exchange expenditur­es with an accumulate­d amount of no more than US$50,000 under the current account, domestic individual­s may the transactio­n processed directly at a bank and using their ID card; if the cumulative amount exceeds this quota, proof of the intended use the foreign exchange will be needed. Cross-border foreign exchange income of domestic individual­s under the current account may be directly deposited in their accounts.

Common Misconcept­ion: Management, transactio­n handling and material requiremen­t of domestic and overseas individual­s' foreign exchange income and expenditur­es are all the same.

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