China State Administration of Foreign Exchange (SAFE) has announced measures to optimize the banking procedures for current-account foreign exchange (forex) purchase, settlement or remittance.

According to Hui-fa [2021] No. 13, SAFE instructs all banks in China to optimize the review procedures on forex-related requests raised by Chinese nationals and expatriates based in China, specifically targeting the following areas:

- Simplified form:

Banks are notified to adopt a SAFE-mandated one-page application form in all of their manual or online processes.

The form serves in effect as a commitment letter, which requires the applicant to guarantee that the application for forex usage is based on valid and legitimate reasons. It holds the applicants legally liable for any untrue disclosure, malpractice or non-compliant acts.

- Check on consistency:

Banks are reminded to check if the purposes mentioned by the applicants are consistent, especially in cases where the remittance of the funds takes place directly after purchasing the forex.

- Elimination of review on recurrent cases:
For the following recurrent matters, the bank may, according to the applicant's first application, exempt from review

l  Payment of overseas education fees by Chinese nationals, for the purpose of converting Chinese Yuan into forex and remittance of the fund to an overseas education institution;

l  Receiving overseas salary by Chinese nationals, for the purpose of converting forex into Chinese Yuan;

l  Receiving salary from employment in China by expatriates, for the purpose of converting Chinese Yuan into forex, supported by a valid China employment contract.

Green channel policy:

Banks are required to establish a green channel policy to accommodate any current-account forex handling requests from individuals for any specific reasons not explicitly covered by the prescribed scope, as long as their requests can be justified by a genuine and legitimate transaction.

Observations

The new practice is of great convenience to individuals with a recurring need to make or receive payments in forex within China.

In addition, the establishment of a green channel policy by each bank, pre-approved by SAFE, to deal with the special forex needs of individuals is an inspiring approach.

If you would like to know more about the most recent financial policy developments in China, please contact us at info@phcadvisory.com.