Shanghai Exchange Publication [2014] No.26

To all designated foreign exchange banks in Shanghai:To support the development of China (Shanghai) Pilot Free Trade Zone (the "PFTZ"), Anchorpromote further opening-up, and implement the Framework Plan for the China (Shanghai) Pilot Free Trade Zone (State Publication [2013] No. 38) and the Opinions of the People's Bank of China on Financial Sector Support for the China (Shanghai) Pilot Free Trade Zone (Bank Publication [2013] No.244), as approved by the State Administration of Foreign Exchange, the Shanghai Branch of the State Administration of Foreign Exchange (referred to hereafter as “SAFE Shanghai”) shall, based on the principles of serving the real economy, deepening reforms of foreign exchange management, effectively preventing the risks, and "one item at a time", adopt the following measures for foreign exchange management.

I. Deepening Reforms of Foreign Exchange Management to Facilitate Trade-related Investment

1. The procedures for evaluating the documents of foreign-exchange-related transactions (including receipt, settlement, purchasing and payment) under current accounts have been simplified. Banks shall handle these transactions in accordance with the principles of “knowing your clients, knowing your business, and due diligence.

2. The procedures for foreign exchange registration under FDI have been simplified, through expanding registration channels and applying the voluntary foreign exchange settlement policy to foreign-funded corporations in handling their foreign exchange capital. Foreign-funded corporations are allowed to open a RMB deposit account which is directly linked with their foreign exchange account for RMB generated in the settlement. The corporations may use this account to handle various payments in accordance with the real transaction principle.

3. Foreign debt management has been relaxed. The approval for providing guarantee to offshore institutions and the payment of guarantee fees for offshore debt is no longer required. The upper limit for the offshore foreign exchange loans has been raised from 30% to 50% of the owner’s equity, and credit registration under FDI is now covered by the registration management system of the offshore foreign exchange loans. The approval for outbound/overseas financial leasing is no longer needed, and rental payments in foreign currencies are allowed for domestic leasing business.

4. The pilot management system has been improved for centralized foreign exchange management for the headquarters of multi-national companies, for foreign exchange capital pool and for foreign exchange in the international trade settlement center; the qualifications for corporations entitled to the pilot policies have been lowered; and the approval procedures and account management have been simplified.

5. The management of foreign exchange settlement and sales operations has been improved; and support has been given to banks in launching the over-the-counter commodity derivative trading service for clients in the PFTZ.