The Chinese central government has announced the loosening of key capital account restrictions, alongside new measures to facilitate cross-border renminbi transactions.
On 4 January the Chinese central bank in tandem with the Ministry of Commerce (MOFCOM), the China Banking and Insurance Regulatory Commission (CBIRC), the State Administration of Foreign Exchange (SAFE) and the National Development and Reform Commission (NDRC) jointly issued the “Notice on Further Optimising Cross-border Renminbi Policy and Supporting the Stabilisation of Foreign Trade and Foreign Investment” (关于进一步优化跨境人民币政策支持稳外贸稳外资的通知).
The Notice is scheduled to come into effect on 4 February 2021, and its release follows a three month feedback period following the issuance of a draft version on 18 September.
The Notice covers five key areas including:
- Raising the convenience of renminbi settlement for trade and investment.
- Further simplifying cross-border renminbi settlement procedures.
- Optimising cross-border renminbi investment and finance regulation.
- Raising the convenience of individual renminbi cross-border payments and receipts under the capital account.
- Raising the convenience of offshore institutions using renminbi bank settlement accounts.
In terms of specific measures, the Notice loosens restrictions on the usage of some renminbi revenue under the capital account.
The capital account renminbi revenue of domestic institutions – including funds from foreign direct investment and funds from cross-border financing and offshore listing, can be used within the business scope approved by authorities as long as the following conditions are satisfied:
- No direct or indirect use for expenditures outside the enterprise business scope or for purposes prohibited by state laws and regulations;
- No direct or indirect usage for securities investment;
- No lending to non-affiliate enterprises unless permitted by the business scope;
- No use for the construction or purchase of real estate that is not for own-usage, with the exception of real estate enterprises.
The Notice also cancels specialist account requirements for foreign direct investment. This means that offshore investors who wish to reinvest domestic renminbi profits can directly transfer renminbi funds from enterprise accounts to the accounts of enterprises receiving investment or parties transferring equity, without the need to open a special “renminbi re-investment deposit account.”