Exchange controls on advance payments for exports

    By Yu Feng, Dacheng Law Offices

    The phrase “export-related moneys received in advance in connection with trade in goods” refers to the receipt of foreign exchange before the export date specified in a contract, or before the actual export and customs clearance date. Such moneys may be paid in advance by a foreign purchaser to a PRC exporter.

    Cooling hot money

    遇峰Yu Feng, 大成律师事务所 Dacheng Law Offices, 高级合伙人 Senior Partner
    Yu Feng
    Senior Partner
    Dacheng Law Offices

    In recent years, “hot money” from abroad has entered the PRC through three main channels: the current account, the capital account and underground money changers. To stem this inflow, the government has strengthened exchange controls. In 2008, the Foreign Exchange Administrative Regulations were comprehensively revised, and new exchange control measures imposed. Control was increased over the receipt and conversion of foreign exchange received in advance in connection with goods exported on the current account.

    The Administrative Regulations require that receipts and payments of foreign exchange on the current account are linked to a true and lawful underlying transaction. Financial institutions engaging in foreign exchange business are required to verify the genuineness of the transaction documents and their consistency with the foreign exchange receipts or payments made. The exchange control authorities are authorized to monitor this.

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    Yu Feng is a senior partner at Dacheng Law Offices

    Dacheng Law Offices LLP, Shanghai

    14/F China Development Bank Tower

    500 Pudong South Road, Shanghai

    Postal code: 200120

    Tel: +86 21 3872 2401

    Fax: +86 21 3872 2400