2008英文解读新《中华人民共和国外汇管理条例》

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1、ForeignExchangeCapital:RestrictionsonDomesticInvestmentPostedonOctober20,2008byKing&Wood  Recently,theChinesegovernmentissuedacoupleofnewlawsandregulationstocurboverseas“hot”moneyandstrengthentheadministrationofforeignexchange.OnAugust5,2008,theStateCouncilamendedandpromulgatedtheRegulationso

2、nForeignExchangeAdministrationofthePeople'sRepublicofChinawhichrequiresthatforeignexchangeandthefundforsettlementinacapitalaccountshouldbeusedasapprovedbyrelevantapprovalauthorities.OnAugust29,2008,theCircularofRelevantImplementationQuestionsConcerningtheImprovementofAdministrationofPaymentan

3、dSettlementofForeignExchangeCapitalofForeignInvestedEnterprises(the“Circular”)wasthenissuedbytheStateAdministrationofForeignExchange(“SAFE”),accordingtowhichtheRMBsettledfromthecapitalaccountofaforeigninvestedenterprise(“FIE”)shouldbeusedinaccordancewiththebusinessscopeapprovedbythegovernment

4、alagenciesandmaynotbeusedtomakeequityinvestmentsinChina.ThismeansforeigninvestorscannotdirectlymakeuseoftheforeignexchangeintheircapitalaccounttoinvestinChina,whichisexpectedtohaveamajorimpactondomesticre-investmentbyFIEs.   Inthepast,anumberofforeigninvestorsusedtoinvestinChinabyfirstestabli

5、shingaFIEandthenusingtheFIEasaninvestmentarmtore-investinChina.PleasenotesuchanFIEreferredtohereisnottheso-called“foreignfundedinvestmentcompany”(“InvestmentCompany”)whichisaspecialentitysetupbyforeigninvestorstomainlyengageindirectinvestmentinChina.RatheritreferstosuchaFIEwhosebusinessscopem

6、ayincludeproduction,retail,wholesaleofproducts,consultingortechnologyservicesorotherbusinessesratherthan“investment”aspermittedunderPRClaw.  Interestingly,theitemof“investment”isnormallynotallowedtobeincludedinthebusinessscopeofaFIEbyapprovalauthoritiesliketheMinistryofCommerce(“MOFCOM”) andc

7、orporateregistrationbodiesliketheStateAdministrationforIndustryandCommerce(“SAIC”)alongwiththeirlocalcounterparts.However, theProvisionalRegulationsonInvestmentwithinChinabyForeignInvestedEnterpriseswhichwaspromulgateddatedJuly25,2000jointlyb