Foreign financial institutions may establish representative offices, branches, subsidiaries and joint ventures in approved areas upon the approval of PBOC. The activities of foreign banks are supervised by PBOC and restricted in foreign currency deposit-taking and lending. Foreign banks should obtain special approval to engage in RMB business.


Foreign Exchange Control

The RMB is not a freely convertible currency now, and the foreign exchange rate system is a controlled floating one on the basis of market demand by the State Administration for Exchange Control (SAEC). On December 1, 1996, China announced to accept Article 8 of the International Monetary Funds, that is, RMB can be freely converted under current account.

The major policies and regulations of foreign exchange control on FIEs are as follows:

1. Applying For FIE's Exchange Control Register
Within 30 days from the issuance of business license, FIEs should apply for an Exchange Control Register from the local administration on foreign exchange control. chinese culture learn from SW35.COM!

2. Opening a Foreign Currency Account
FIEs should choose a bank that has the right to undertake foreign currency operations to open their foreign currency account.

3. The government will mainly control the inflow and outflow of FIEs' foreign currency under current account, the use and settlement of foreign currencies under capital account, its deposit and loans denominated in foreign currencies.

4. Annual Foreign Exchange Audit
FIEs should entrust qualified accounting firms (approved by the Administration of Foreign Exchange Control) to conduct annual foreign exchange audit on their use of foreign exchange and to issue audit reports. FIEs should then present the audit reports to local Administrations on Exchange Control to renew their Exchange Control Registers.

5. Favorable Treatments To FIEs
Any foreign investor of an enterprise with foreign investment who reinvests his share of profit directly into the enterprise or uses the profit as capital investments to establish other FIEs can be refunded part of the income tax already paid on the reinvested amount. ALL Rights Reserved By SW35.COM!
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