Presently, the administrative approach of settlement of foreign exchange capital of Foreign Investment Enterprises (the ‘FIEs’) is subject to the rule of "convert-to-pay", which means that the conversion shall be approved only when there is an underlying transaction and RMB payment is required for settlement, after the investigation of truly and legality made by banks handling the conversion.
On 4th August, 2014, the State Administration of Foreign Exchange ("SAFE") has released the circular, stating that with a view to further deepening the reform of the foreign exchange administration system, and better satisfying and facilitating the needs of foreign-invested enterprises for business and fund operations, the SAFE has decided to launch the pilot reform of the administrative approach regarding the settlement of the foreign exchange capitals of foreign-invested enterprises in the following areas: Tianjin Binhai New Area, Economy Group of Shenyang, Suzhou Industrial Park, Donghu National Independent Innovation Demonstration Zone, Guangzhou Nansha New Area, Hengqin New Area, Chengdu High-tech Industrial Development Zone, Zhongguancun Science Park, Chongqing Liangjiang New Area, border development and opening-up regions in Heilongjiang Province in which pilot foreign exchange administration reform is carried out, Wenzhou Comprehensive Financial Reform Pilot Area, Pingtan Comprehensive Experimental Area, China-Malaysia Qinzhou Industrial Park, Guiyang Comprehensive Bonded Zone, Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone and Qingdao Comprehensive Wealth Management and Financial Reform Pilot Area. The main contents of this Pilot Program includes: 1, foreign-invested enterprises registered and established within the pilot areas are allowed to settle 100% of their foreign exchange capitals on a discretionary basis; 2, the RMB funds obtained by foreign-invested enterprises from the discretionary settlement of foreign exchange capitals shall be managed under the accounts pending for foreign exchange settlement payment; 3, a foreign-invested enterprise may use capital for its own operational purposes within its scope of business.
（This information is provided by Lawyer Kelly Xie from Guangdong KaiTong Law Firm in friendship. It is not any legal opinion or legal grounds addressed to any organization or individual. For inquiry, please contact Kelly via email at Kelly_xie@ktlf.com.cn or by phone on 13926185641.）