Due to the recent strong desire to convert Renminbi
("RMB") funds into foreign currency and
remit foreign currency amounts outside of China
("China" or the
"PRC", which excludes Hong Kong, Macau
and Taiwan for purposes of this discussion), the State
Administration of Foreign Exchange of China
("SAFE") and the Chinese banks have
slowed down the process for foreign currency conversions. In
practice, after PRC investors obtain required regulatory approvals
from, or complete filings with, the National Development and Reform
Commission and the Ministry of Commerce or their respective
provincial counterparts ("Regulatory
Approvals"), their conversion and remittance of
outbound investment capital may be subject to a further scrutiny of
the competent branch of SAFE and Chinese banks which handle such
conversions and remittances. As a result, remittances of foreign
currency amounts overseas for purposes of outbound investments have
taken longer than before. Given the foregoing issue, some PRC
investors have begun to directly remit funds in RMB to an account
opened with an offshore bank and held by an entity that they
incorporated outside of China or the target company of a Chinese
outbound investment. Consequently, the foreign bank will convert
RMB amounts into foreign currency in order for Chinese investors to
close their outbound transactions.
While the applicable PRC rules have been in place since 2011,
Chinese investors began to utilize this approach only recently, as
it has been more difficult to convert RMB into foreign currency,
and an increasing number of foreign banks have become willing to
convert RMB into foreign currency. Pursuant to the Measures for
the Administration of a Pilot Program on Settlement of Outbound
Investment in Renminbi ("Measures")
issued by the People's Bank of China and effective on January
6, 2011, a non-financial enterprise registered in a pilot program
region may choose to remit RMB funds overseas for purposes of
completing their outbound investments after they obtain all
required Regulatory Approvals. In practice, it normally takes
approximately five working days for a Chinese Bank to review the
application documentation upon its acceptance and complete the fund
conversion and remittance process.
Key points to note are as follows:
In order to use RMB amounts for outbound investments, a Chinese
investor is required to be a non-financial enterprise.
If a Chinese investor determines to utilize RMB funds to invest
outside China, it is required to expressly include this approach
into the application documents when applying for the Regulatory
When a PRC investor applies with a China-based bank to remit an
RMB amount out of China for its outbound investment, it must have
obtained the Regulatory Approvals.
The offshore bank to which the RMB amount will be remitted must
be actually engaged in the RMB clearing/settlement business.
Outbound investment in RMB may increase Chinese investors'
costs due to a higher offshore RMB exchange rate compared with the
onshore RMB exchange rate.
With more Chinese companies pursuing outbound investment
activities, while there appears to be the continuing pressure of
depreciation of the RMB, it is worth monitoring how this approach
will be implemented and whether it will in fact make a Chinese
investor's outbound investment process easier and faster.
Because of the generality of this update, the information
provided herein may not be applicable in all situations and should
not be acted upon without specific legal advice based on particular
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