To deepen the foreign exchange administration system, better serve and facilitate domestic players' demand on operations and capital operation, and boost cross-border investment and financing to serve the development of the real economy, the State Administration of Foreign Exchange (SAFE) recently published the Circular of the SAFE on the Policies for Reforming and Standardizing Management of Foreign Exchange Settlement under the Capital Account (Huifa No. 16 (2016), "Circular"). The highlights of the Circular are as follows:

First, managing discretionary settlement of foreign exchange under external debt in an all-round way, allowing companies to choose the time for foreign exchange settlement under external debt at their discretion. Second, unifying the policy for discretionary settlement of foreign exchange receipts under the capital account by domestic institutions. Third, clarifying that domestic institutions' use of foreign exchange receipts and settlements under the capital account should be in conformity with the regulations on foreign exchange administration, a "negative list" approach will be adopted to the use of receipts under the capital account, and relative negative lists will be deeply cut. Fourth, further standardizing the payment management with regard to receipts and settlements under the capital account, and clarifying banks should take responsibility for authenticity review under the three-point business principle. Fifth, the SAFE will strengthen ongoing and ex-post management, with focus on strengthening ex-post regulation and punishments arising from violations.

The Circular will come into force as of the date of issuance. (End)