To further facilitate cross-border trade and investment and accelerate the construction of a new development paradigm, the State Administration of Foreign Exchange (SAFE) has announced an expansion of the pilot policy on high-level opening up for cross-border trade and investment.
The pilot policy is firstly implemented in Shanghai, Jiangsu, Guangdong (including Shenzhen), Beijing, Zhejiang (including Ningbo), and Hainan (hereinafter referred to as the “pilot areas”).
The initiative aims to enable more entities to conduct cross-border trade and investment activities in a compliant manner, promoting high-quality development through high-level opening up.
Eligible Entities
The pilot policy applies to prudent and compliant banks (hereinafter referred to as “Prudent Banks”) that meet certain conditions, as well as high-quality enterprises (hereinafter referred to as “Qualified Enterprises”) designated by these banks.
Qualified Enterprises must fulfill the following criteria:
- Have conducted foreign exchange transactions for current account items with the same prudent bank for at least two years.
- Demonstrate a strong record of integrity, good faith, and compliance in its operations. Its fund receipts and payments, trade credit, and trade financing activities should align with its actual production and business needs.
- Maintain a Class A classification in foreign exchange management for goods trade over the past two years (if listed in the Foreign Exchange List of Goods Trade) and have not been penalized by SAFE.
- Designate dedicated personnel to supervise and assess current account foreign exchange transactions, with the ability to demonstrate the authenticity, logic, and rationality of such transactions while maintaining transaction records.
Meet any additional conditions stipulated by the prudent bank for risk prevention purposes.
What Convenience Measures Does the Pilot Policy Include?
Current Account Measures
1. Facilitated Foreign Exchange Payments for Current Account Transactions
Prudent Banks in pilot areas may process foreign exchange payments for current account transactions for Qualified Enterprises. For service trade and other project-related foreign exchange payments exceeding USD 50,000 per transaction, banks may verify the Tax Filing Form for Overseas Payments under Service Trade and Other Items after the payment is made.
2. Support for Banks in Optimizing Settlement for New Types of International Trade
Prudent Banks in pilot areas are encouraged to innovate financial services and independently handle foreign exchange transactions for new types of international trade that are authentic and compliant.
3. Expanded Scope for Netting Settlement of Trade Receipts and Payments
Under controlled risk conditions, Prudent Banks in pilot areas may provide netting settlement services to Qualified Enterprises engaging in specific current account transactions with the same overseas counterparty.
Applicable scenarios include:
- Netting settlement for general trade between related domestic and overseas enterprises.
- Netting settlement for payments and receipts involving freight charges, dispatch money, and demurrage.
- Netting settlement between sales proceeds and related rebates.
- Netting settlement for freight receipts and payments.
- Other scenarios specified by SAFE.
Enterprises conducting netting settlements must arrange reasonable netting cycles and settle receivables and payables in a timely manner, with netting settlements conducted at least once per quarter.
4. Exemption from Registration for Special Goods Trade Refunds Exceeding Time Limits
Prudent Banks in pilot areas may directly process special goods trade refunds for Qualified Enterprises without prior registration with SAFE.
5. Optimized Management of Advance or Reimbursement Business under Service Trade
For advance or reimbursement transactions between Qualified Enterprises and their overseas affiliates exceeding 12 months, as well as transactions with non-affiliated overseas institutions, Prudent Banks in pilot areas may review the authenticity and rationality of such transactions before processing them.
Capital Account Measures
1. Exemption from Registration for Domestic Reinvestment by Foreign-Invested Enterprises
Foreign-invested enterprises conducting domestic reinvestment activities are exempt from registration procedures if the invested enterprise or equity transferor is registered within the pilot areas.
2. Direct Handling of Foreign Debt Registration (Changes) by Banks
Eligible non-financial enterprises in pilot areas may directly process foreign debt registration (including changes) with banks. This policy applies to non-financial enterprises borrowing foreign debt under the macro-prudential cross-border financing model, excluding those using other methods (e.g., the “investment-registered capital gap” model).
3. Shared Foreign Debt Quotas between Parent and Subsidiary Companies in Financial Leasing
Eligible financial leasing companies in pilot areas may share their foreign debt quotas with their special purpose vehicles (SPVs). This allows SPVs to utilize unused foreign debt quotas of their parent companies when their own quotas are insufficient.
4. Direct Handling of Overseas Listing-Related Registration by Banks
Eligible non-financial enterprises in pilot areas may directly process registration procedures for overseas listings with banks, including initial registration, changes, and deregistration. However, share repurchases must still be processed with the local SAFE branch in accordance with existing regulations.
Summary
This pilot policy represents a significant step towards simplifying cross-border trade and investment processes, reducing administrative burdens, and enhancing operational efficiency for businesses. It underscores China’s commitment to fostering a more open and business-friendly environment while maintaining robust risk management frameworks.
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Eloise Yao
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