With the aim of deepening the reform of the foreign exchange management system, promoting the facilitation of trade and investment, advancing convertibility under the capital account in an orderly manner, and regulating receipt and payment activities under cross-border guarantees, the State Administration of Foreign Exchange (SAFE) has, based on extensive solicitation of opinions from the society, released the SAFE Circular Concerning the Issuance of  Provisions on Foreign Exchange Management of Cross-border Guarantees (HuiFa [2014] No. 29, hereafter referred to as the “Provisions”). 

The Provisions mainly cover the following areas: First, vigorous efforts are made to streamline administration and delegate power to lower levels by reforming the foreign exchange management modes for cross-border guarantees. Approval procedures related to cross-border guarantees are cancelled or substantially simplified, and only the part of “partial cross-border guarantees that create new claims or liabilities by residents to non-residents upon the compliance of the guarantees” shall be subject to registration on a case-by-case basis. Second, foreign exchange management of cross-border guarantees has been comprehensively standardized. The scope of foreign exchange management of cross-border guarantees has been rationally defined in line with the objectives and responsibilities of foreign exchange management, and all types of cross-border guarantees that conform to the legal requirements in terms of form, that adopt payments as the guarantee compliance mode, and that can have a significant impact on the balance of payments are included in the scope of the policy adjustment. Third, equal treatment for Chinese-invested and foreign-invested enterprises is realized. With regard to domestic loans with offshore guarantees, under the premise of meeting the relevant restrictive conditions, Chinese- and foreign-invested enterprises are permitted to sign contracts at their own discretion and to conduct guarantee compliances within the amount equivalent to one time their net assets in order to unify and significantly improve policy on domestic loans with offshore guarantees for domestic Chinese- and foreign-invested enterprises. Fourth, the management concept for risk prevention is strengthened. In parallel with streamlining administration and delegating power to lower levels, off-site verifications and foreign exchange inspections are stressed through a support system and a regulatory approach, and investigations of violations of responsibilities have been strengthened. Fifth, laws and regulations are cleared up and consolidated to enhance transparency. The Provisions also annulled twelve relevant normative documents related to cross-border guarantees.

The Provisions shall be implemented as of June 1, 2014.