PBOC allows RMB settlement by foreign investors

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On 31 October, the People’s Bank of China published the Foreign Direct Investment in Renminbi Settlement Business Administrative Measures which became effective on the same day. The Measures explicitly provide that enterprises, economic organizations or individuals from abroad (collectively referred to as foreign investors) which invest in China using renminbi are permitted to apply directly to banks for the handling of renminbi settlement in compliance with the legislation in connection with foreign direct investment. Banks are permitted to process the settlement of renminbi funds for them in accordance with relevant regulations.

Inward remittance of RMB funds

According to the Measures, renminbi remitted from overseas must be credited to a special deposit account under the following circumstances, but this account is not to be used to process cash payments and receipts.

  1. If a foreign investor handles renminbi settlement business relating to foreign direct investment, it is permitted to apply to open a renminbi settlement bank account for an overseas office. In particular, depending on the sources and uses of funds, it should separately open a special deposit account for renminbi upfront fees and a special deposit account for renminbi reinvestment.
  2. If a foreign investor remits registered capital in renminbi from overseas or pays capital contributions in renminbi, it must do so using special-purpose accounts by opening a special deposit account exclusively for keeping renminbi capital funds.
  3. If a foreign investor forms a foreign investment enterprise by acquiring or merging with a domestic enterprise using renminbi, the Chinese shareholder of the acquired or merged domestic enterprise must apply to open a deposit account dedicated to the M&A project and exclusively to hold the renminbi capital remitted by the foreign investor for the M&A project. If a foreign investor pays the Chinese shareholder of a foreign investment enterprise in China renminbi in payment for an equity transfer, the Chinese shareholder must apply to open a deposit account dedicated to the equity transfer in renminbi exclusively to hold the renminbi remitted by the foreign investor to pay the price of the transfer.
  4. If foreign companies with an investment nature, foreign-invested venture capital enterprises, foreign equity investment enterprises and foreign-invested partnerships with investment as their principal business carry out investment business using renminbi according to the law in China, the enterprises they invested in must apply to open a special deposit account for renminbi capital funds exclusively for keeping renminbi registered capital or capital contribution funds, and handle the settlement of the relevant funds.

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Business Law Digest is compiled with the assistance of Haiwen & Partners. The authors can be emailed at baochen@haiwen-law.com. Readers should not act on this information without seeking professional legal advice.