China Bulletin - March 2013: China Eases Foreign Exchange Restrictions on FDI

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On November 21, 2012, China’s State Administration of Foreign Exchange (“SAFE”) released a new circular, “Circular on Further Improvement and Amendment of Foreign Exchange Control Policies on Direct Investment ([2012] No. 59),” which took effect on December 17, 2012 (“Circular 59”). Circular 59 implemented certain changes to the foreign exchange control policies on capital account transactions in foreign direct investment (“FDI”) transactions and mergers and acquisitions (“M&A”) activities involving foreign investors which should simplify the current SAFE approval procedures of many FDI and M&A transactions. Other than the procedural simplification, Circular 59 also contains certain important provisions that may be seen as a further step in the liberation of SAFE’s tight control over capital accounts as part of the financial reform to attract more foreign investment after the decline of FDI in 2012.

The key provisions of Circular 59 are summarized below:

¦¦ Foreign Currency Accounts. The current SAFE regulations require a foreign investor to obtain various SAFE approvals before opening bank accounts in China to receive foreign currency to be used in specific FDI or M&A activities. Circular 59 largely eliminated the SAFE approval requirements and consolidated various types of such bank accounts. The banks will now process foreign investment accounts based on electronic information maintained by banks and SAFE.

Please see full bulletin below for more information.

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