Central Bank Shores Up Cross-border RMB Settlement for Foreign Investors

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The People’s Bank of China has expanded support for cross-border settlement in the renminbi as part of efforts to facilitate overseas investment and trade.

On 5 January the Chinese central bank issued its “People’s Bank of China Notice on Further Improving RMB Cross Border Settlement Policy and Expediting the Convenience of Investment and Trade” (中国人民银行关于进一步完善人民币跨境业务政策 促进贸易投资便利化的通知).

The Notice will enable foreign investors to freely and lawfully repatriate their profits, as well as domestic enterprises to remit funds raised abroad via the issuance of RMB bonds, by allowing banks to engage in “other current account RMB cross-settlement business and  cross-border RMB settlement for carbon-emissions trading.”

According to the notice Chinese banks “shall handle RMB cross-border settlement following inspection of relevant documentary materials” for the “profits, dividends and other investment returns of foreign investors that are lawfully obtained domestically,” as well as ensure that foreign investors may lawfully and freely remit their profits abroad.

The Notice also states that “domestic enterprises that issue RMB bonds overseas may remit funds raised to China for domestic usage on the basis of actual need, following the handling of relevant procedures in accordance with comprehensive cross-border financing macro-prudential regulatory provisions.”

Below is a full translation of the “People’s Bank of China Notice on Further Improving RMB Cross Border Settlement Policy and Expediting the Convenience of Investment and Trade” (中国人民银行关于进一步完善人民币跨境业务政策 促进贸易投资便利化的通知).

In order to fully achieve the “State Council’s Notice on Several Measures for Spurring Foreign Investment Growth” (Guofa [2017] No. 39), improve and optimise RMB cross-border operations policy, expedite the convenience of investment and trade, create an outstanding commercial operating environment, service the establishment of One Belt One Road, and forge a new environment of comprehensive opening, we hereby issue notification in relation to the following matters:

1.Support the usage of RMB by enterprises for cross-border settlement

For all cross-border transactions for which foreign exchange settlement may be lawfully employed, enterprises may use RMB settlement. Banks should make servicing the real economy and expediting the convenience of investment and trade as their guiding direction, and in accordance with cross-border RMB policy, engage in the innovation of RMB financial products, and raise the ability of financial services to fully satisfy the genuine, compliant RMB cross-border settlement needs of customers.

2,Undertake individual other current account RMB cross-border settlement operations

Banks may perform other current account RMB cross-border settlement operations and undertake carbon emissions trading RMB cross-border settlement operations on the foundation of the three principles of “understanding your customer,” “understanding your business” and “due diligence.”

3.Undertake carbon emissions trading RMB cross-border settlement operations

Foreign entities that undertake cross-border emissions-trading via domestic carbon-emissions trading entities in accordance with the relevant provisions of the State Council’s carbon emission trading authorities shall open foreign entity carbon emissions trading RMB special usage deposit accounts at banks and handle carbon-emissions trading capital receipts and payments in accordance with provisions including the “Foreign Entity RMB Bank Settlement Account Administrative Measures (Yin fa [2010] document no. 249 yinfa)” and the “People’s Bank of China Notice Concerning Several Issues in Relation to Foreign Entity RMB Bank Settlement Account Opening and Usage” (yinfa (2012) no. 183).

4.Facilitate direct investment by foreign investors in the RMB

Further improve and optimise the relevant provisions of the “Foreign Direct Investment RMB Settlement Operations Administrative Measures (PBOC public notice [2011] no. 23)” and the “People’s Bank of China Notice Concerning the Clarification of Detailed Regulations on Direct Investment RMB Settlement Operations Handling”:

(1) Foreign investors that plan to establish multiple foreign-invested enterprises or projects domestically may establish separate RMB pre-period expense special-use deposit accounts. 

(2) The information registration and re-inspection of foreign-invested enterprises is handled by banks in the enterprise registration location via the RMB cross-border payment administration system, and the PBOC branch for the place of registration shall perform subsequent regulation. 

(3) Foreign invested enterprises may open RMB fund special-use deposit accounts in other locations, as well as open multiple RMB fund special-use deposit accounts. Funds may be reciprocally transferred between RMB fund special-usage deposit accounts under the same name. 

(4) Where foreign invested enterprise RMB funds and overseas loan funds are used for salaries, business trips, miscellaneous purchases and other expenditures, banks shall perform direct handling in accordance with enterprise payment orders on the basis of the three principles of operations. 

(5) Where foreign investors use RMB to participate in domestic enterprise state-owned asset transfer transactions, where transactions are concluded, they shall remit RMB guarantee deposits to the designated entities the state-owned asset supervision and administration authorities, to serve as the payment for the subsequent asset transaction or a capital contribution for the subsequently established foreign invested enterprises, and will be transferred into the corresponding special-use deposit account. Where the transaction is unsuccessful, the RMB deposit remitted by the foreign investor shall be remitted back via the original path. 

Other RMB deposits for foreign direct investment or RMB deposits remitted by overseas investors, as well as RMB transaction payments that must be accepted by third party entities in accordance with the relevant provisions of the state, shall make reference to the above provisions for handling of fund transfers. 

(6) With respect to the profits, dividends and other investment returns of foreign investors that are lawfully obtained domestically, banks shall handle RMB cross-border settlement in accordance with provisions following inspection of relevant documentary materials, and ensure that foreign investors may lawfully and freely remit their profits abroad. 

5. Facilitate the remittance and domestic usage of RMB funds raised abroad by enterprises

Domestic enterprises that issue RMB bonds overseas may remit funds raised to China for domestic usage on the basis of actual need, following the handling of relevant procedures in accordance with comprehensive cross-border financing macro-prudential regulatory provisions.

Banks shall implement their information submission duties, and promptly, accurately and fully submit information to the RMB cross-border payment information administration system. When handling RMB cross-border operations, banks shall pragmatically perform their duties in relation to combating money-laundering, terrorist financing and tax evasion in accordance with the “People’s Republic of China Anti-Money Laundering Law” and other relevant provisions. 

This Notice shall come into effect on the date of its issue, and prevail where it conflicts with related preceding provisions. 

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