The State Administration of Foreign Exchange (“SAFE”) issued the Notice on Foreign Exchange Control in Relation to Encouraging and Guiding the Healthy Development of Private Investment (“Notice”) in an effort to make it easier for Chinese businesses to raise foreign capital and do business outside of China.

The Notice simplifies the approval and registration procedures for converting RMB into foreign exchange for remittance outside China and reduces restrictions on the sources of foreign exchange loans for offshore subsidiaries of Chinese companies. Chinese companies are now permitted to borrow foreign exchange from a domestic bank in China and lend the loan proceeds to an overseas subsidiary.

In addition, the Notice simplifies the procedures for repatriating outbound direct investment capital. The difference between the total outbound investment of a company and its registered capital may be sent back to China upon registration with SAFE. Significantly, the Notice permits private individuals to provide a foreign exchange guarantee together with corporate guarantor to a foreign creditor in the form of a financial guarantee, a real estate mortgage or a pledge of other property. Previously, only financial institutions or certain qualified domestic enterprises were allowed to provide foreign exchange guarantees.

 

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