To conscientiously serve the real economy, promote the facilitation of trade and investment, support the transformation and upgrading of the industrial structure, and explore investment and financing exchange facilities, the State Administration of Foreign Exchange (SAFE) released the Circular on the Issuance of Provisions on Centralized Operations and Management of Multinationals' Foreign Exchange (Interim) (Huifa No. 23 [2014], hereinafter referred to as the Provisions), based on the pilot program that has been carried out since the end of 2012.

The Provisions state that following the principle of using funds through overall planning, efficiently allocating resources, and effectively guarding against risks based on the domestic and international markets, efforts should be made to make further innovations and deepen the pilot reform on centralized operations and management of multinationals’ (MNCs') foreign exchange: First, making innovations in the MNCs' account system. MNCs should be allowed to open either domestic or international master accounts, or both, for foreign exchange to centralized foreign exchange management for domestic and global member companies, including centralized collections and payments of foreign exchange and netting settlements, with the limits on the external debt and outbound lending under the account to be shared either entirely or partially. Second, further streamlining the review of documents. Banks should process the collection, settlement, purchase, and payment of foreign exchange under the current account in line with the principle of "understanding the customers," "understanding their businesses," and carrying out "due diligence reviews." A form must be filed to record the taxes for outbound payments under trade in services. Third, facilitating the MNCs’ allocation of funds. No limits will be imposed on the master account and overseas transfers of international foreign exchange funds, which can be carried out freely; within the limits of the external debt and outbound lending, domestic and international accounts will be connected to facilitate companies’ internal balancing of the surpluses and deficits. Fourth, managing the settlement of foreign exchange capital funds and the external debt based on a "negative list" approach. Foreign exchange capital funds and the external debt will be settled at the discretion of the MNCs, and outbound payments will be made after a review of the authenticity of the transactions. Fifth, enhancing statistical monitoring to prevent and control risks. Efforts shall be made to collect the receipts and payments and to centralize collections, payments, and net settlements of the MNC's foreign exchange in an all-round way to report a net reduction in data, with the documents retained in cases of inspections to make sure the control and monitoring "valve" on the limits is preserved.

The deepening of the pilot reform on centralized operations and management of MNCs' foreign exchange reflects a transformation in  foreign exchange concepts and management modes and is an important part of the deepening of the reform of the foreign exchange management system. First, further streamlining administration and delegating more power to lower levels to serve the real economy in an all-round way. Minimizing approval interventions to the best extent and facilitating capital utilization by businesses are favorable for further reducing financial costs for companies and for providing a benign policy environment for MNCs to establish capital centers in China, which will be favorable for creating conditions for the transformation and upgrading of the industrial structure and for promoting a transformation of the economic development pattern. Second, exploring ways to facilitate exchanges for investments and financing and for accumulating experiences in RMB capital account convertibility. Using the same account to achieve centralized management of different types of capital will improve the companies' and banks' capabilities to make innovations in capital management, thus opening up new approaches and accumulating new experience for the deepening of the reforms and for expanding the opening up in an all-round way. Third, improving the macro-prudential supervisory framework to carry out comprehensive supervision and to guard against risks. Based on the demands of the real economy, the framework should be implemented step by step and in a steadfast manner. Statistics on cross-border capital flows should be collected, with off-site monitoring and on-site verifications and inspections enhanced, so as to make sure our bottom line, eliminating systemic and regional financial risks, is strictly maintained.

The Provisions will come into force as of June 1, 2014. (End.)