Description of the draft for comment

Description of the "Regulations on Foreign Exchange Administration of Overseas Inward Investment by Domestic Institutions"

In order to implement the "going out" development strategy, promote and facilitate overseas direct investment activities of domestic institutions, and standardize and improve foreign exchange management of overseas direct investment, the State Administration of Foreign Exchange recently drafted the "Regulations on Foreign Exchange Administration of Overseas Inward Investment by Domestic Institutions". The relevant situation is explained as follows:

First, the background of the "Regulations"

In recent years, the State Administration of Foreign Exchange has earnestly implemented the scientific development concept and the “going out” development strategy. Based on the national overseas investment industry guidelines and the international balance of payments, the State Administration of Foreign Exchange actively and actively carried out policy adjustments and institutional innovations and introduced a series of policy adjustment measures. Further simplifying the foreign exchange management review procedures for overseas investment, delegating auditing permission, canceling the restrictions on the purchase of foreign exchange, and promoting the development of domestic enterprises to “go global” and achieved good results. The main measures are:

The first is to simplify the procedures for overseas investment review. Cancel the foreign exchange risk review of overseas investment; simplify the procedures for reviewing the source of foreign exchange funds for overseas investment; and cancel the repatriation profit margin system.

The second is to carry out pilot reforms in foreign exchange management for overseas investment. The pilot began in XX and was fully promoted in May XX. The main contents are as follows: 1. To relax the source of foreign exchange funds for overseas investment of enterprises, in addition to their own foreign exchange funds, they can also use foreign exchange loans and RMB to purchase foreign exchange; 2. Expand the amount of foreign exchange purchases; 3. No longer require the profits of overseas investment. Repatriation to the territory, you can stay abroad for capital increase or reinvestment; 4, further decentralize the enterprise to invest foreign exchange funds source review permission, the provincial foreign exchange bureau review permission from the original equivalent of 3 million US dollars to 10 million US dollars.

The third is to further adjust the foreign exchange management policy for overseas investment. Starting from July 1, XX, the restrictions on the amount of foreign exchange purchases will be cancelled; the upfront expenses of overseas investment will be allowed to be remitted; further simplifying the preliminary fee review program. In August XX, the overseas investment review permission was further decentralized. The foreign exchange source review of overseas investment was carried out by the local foreign exchange bureau without approval from the State Administration of Foreign Exchange.

The fourth is to strengthen support for the up-front capital and follow-up capital of “going out” enterprises. In the practice of overseas investment management, we deeply understand that financing difficulties and insufficient funds are the main factors that restrict the development and growth of China's overseas investment enterprises. In this regard, we have also introduced relevant policies and measures to increase the financing of overseas investment and alleviate the difficulty of financing foreign investment enterprises. In addition to canceling the restrictions on foreign exchange purchases and allowing foreign investment companies to remit relevant upfront costs, eligible Chinese and foreign-funded enterprise groups can use their own foreign exchange funds or purchase foreign exchange to conduct cross-border capital operations within the group. The overseas member companies within the group provide foreign exchange lending; improve the management mode for banks to provide financing external guarantees for overseas investment enterprises, from the original one-by-one review to the balance management, the bank within the scope of the approved balance indicators, can be overseas Investment companies provide financing external guarantees without the need for approval by the foreign exchange bureau. In August XX, the State Administration of Foreign Exchange conducted a pilot reform of foreign exchange management for overseas investment in Ningbo City, Zhejiang Province, allowing private enterprises to use their own foreign exchange, domestic foreign exchange loans or RMB purchase funds to lend money to their overseas member companies. Good results.

In order to maximize support for qualified domestic enterprises to “go global” and make full use of “two markets and two kinds of resources”, strengthen the support for overseas Chinese-funded enterprises under the current international financial crisis, and summarize overseas investment in recent years. Based on the experience of foreign exchange management reform, we have integrated a series of foreign exchange management normative files for overseas investment and formulated the "Regulations". The "Regulations" are to further improve the supporting foreign exchange management policies that encourage overseas direct investment, and will facilitate domestic institutions to carry out foreign direct investment and engage in transnational operations, and promote the effective implementation of the national foreign direct investment industrial policies.

Second, the main content of the "Regulations"

The first is to expand the scope of sources of foreign exchange funds for overseas investment. It is clear that domestic institutions can use their own foreign exchange funds, domestic foreign exchange loans, RMB purchases of foreign exchange, in-kind or retained overseas profits and other sources of funds for overseas investment.

Second, the mode of reviewing the source of foreign exchange funds for overseas investment was changed from ex-post review to post-registration, and the specific foreign exchange management operations were clearly defined.

The third is to clarify that domestic institutions can provide commercial loans and financing guarantees to their overseas direct investment enterprises, and provide support for the follow-up financing of overseas investment enterprises.

Fourth, the management of the foreign exchange bureau's repatriation of overseas investment funds from domestic institutions was adjusted from the previous approval system to the registration system. Domestic institutions should submit the approval file of the foreign direct investment department

And the foreign exchange registration certificate for overseas investment shall be remitted by the designated bank of foreign exchange for the authenticity review.

Fifth, the domestic institutions are allowed to prepare for the establishment of their overseas projects before the formal establishment of their overseas projects. With the approval of the foreign exchange bureau, they can remit a certain proportion of the initial expenses of their total investment.

The sixth is to clarify the disposal methods and management principles of the profits of overseas investment enterprises and the income from capital changes such as capital reduction, stock conversion, and liquidation that are retained overseas or repatriated.

The seventh is to improve the whole process supervision of foreign exchange management of overseas investment. In addition to the registration management system for the whole process of overseas investment such as establishment, change and cancellation, the joint annual inspection system for overseas investment jointly implemented with the Ministry of Commerce is further established.

In addition, the new "Regulations" also aimed at the direct investment foreign exchange management information system operated by the foreign exchange bureau, and further clarified and standardized the statistical monitoring of cross-border capital outflows and imports under overseas direct investment.

Hereby explain.