In our China Update of October 2011, we reported that China
officially allowed foreign investors holding RMB deposits outside
of China to use those offshore RMB funds for foreign direct
investments ("FDIs") in China. We also
reported that the People's Bank of China
("PBOC") issued an announcement
regarding the settlement of the offshore RMB funds transferred by
foreign investors into China for FDI purpose. On 14 June 2012 PBOC
issued a circular (the "Circular"),
providing banks with more detailed guidelines on dealing with the
settlement of offshore RMB funds. The most important clarifications
the Circular provides are highlighted below.
A foreign investor or a Chinese company invested in by a
foreign investor ("a foreign-invested
company") may only open one RMB account for one
specific special purpose. For example, a foreign investor may only
open one RMB account for paying up-front costs before the
establishment of a foreign-invested company.
A foreign-invested company may take an RMB loan from abroad
only if the full amount of its registered share capital has been
duly contributed. A real estate company is not allowed to take an
RMB loan from abroad at all.
The maximum amount of RMB loans that a foreign-invested company
may receive from abroad is the balance between the company's
registered share capital and the government-approved total amount
of investments to be made by the company.
A foreign-invested company should use the RMB funds contributed
by its foreign shareholders or borrowed from abroad within its
approved business scope. It may not use the RMB funds for
investments in negotiable securities and financial derivatives,
entrusted loans, purchase of financing products and non-self-used
real estate. A foreign-invested company is allowed to use such RMB
funds to repay domestic or foreign debts.
Foreign-invested companies, except for special holding
companies approved by the competent authorities, are not allowed to
use the RMB funds they obtained overseas for equity investment in
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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