The State Administration of Foreign Exchange answered a reporter’s question on the Circular of the State Administration of Foreign Exchange on Further Deepening Reform and Promoting the Facilitation o

　　CCTV News:According to the website of the State Administration of Foreign Exchange on December 8, a few days ago, the State Administration of Foreign Exchange (hereinafter referred to as the State Administration of Foreign Exchange) issued the Notice of the State Administration of Foreign Exchange on Further Deepening Reform and Promoting the Facilitation of Cross-border Trade and Investment (Huifa [2023] No.28, hereinafter referred to as the Notice). Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, answered a reporter’s question on the relevant contents of the Notice.

　　Q: What is the background of the Notice?

　　A: Since the 18th National Congress of the Communist Party of China, the State Administration of Foreign Exchange has made overall plans for development and security, continued to promote reform and opening up in the foreign exchange field, and promoted the facilitation of cross-border trade and investment and financing. In practice, we are concerned that with the vigorous development of new foreign trade formats and new modes and the increasing diversification of cross-border investment and financing activities, market operators have new and more demands for foreign exchange facilitation. In order to thoroughly implement the deployment requirements of the Central Financial Work Conference that "finance should provide high-quality services for economic and social development", the State Administration of Foreign Exchange carefully investigated market demands, thoroughly summarized the previous pilot experience, and systematically sorted out relevant foreign exchange management policies such as trade foreign exchange receipts and payments, cross-border financing of technology-based enterprises, and foreign direct investment. On this basis, the Notice was formulated and issued, and nine policy measures were introduced to further deepen the reform of foreign exchange management and promote the facilitation of cross-border trade and investment.

　　Q: What are the policy ideas in the Notice?

　　A: The main policy ideas of the Notice are: at the macro level, strengthen and improve the policy supply in the foreign exchange field, strengthen the systematic integration of policies, deepen reform and opening up around the facilitation of current and capital accounts, and constantly improve the "macro-prudential+micro-supervision" management framework of the foreign exchange market to help build a modern financial system with China characteristics. At the micro level, actively promote the stability of foreign trade and foreign investment, further optimize management processes, simplify operational links, facilitate market operators to handle cross-border trade and investment and financing business in compliance, effectively stimulate market vitality, and better serve the high-quality development of the real economy.

　　Q: What specific measures does the Notice take to facilitate cross-border trade?

　　A: The Notice introduced four cross-border trade facilitation measures. First, optimize the foreign exchange management of market procurement trade. Banks can use the information of market procurement networking platform in various ways to handle the collection and settlement of foreign exchange online for market procurement merchants. The second is to relax the net settlement of processing trade balance, and banks can handle the balance of foreign exchange receipts and payments for enterprises. The third is to improve the collection and payment of cross-border trade funds under the entrustment agency. When the agent is really unable to handle the collection and payment of foreign exchange in goods trade due to special circumstances, the bank can handle the collection and payment of foreign exchange in goods trade for the client according to the principle of exhibition industry. The fourth is to facilitate the settlement of foreign exchange funds for domestic institutions’ operating leasing business. Domestic institutions that meet the conditions can use their own foreign exchange income to pay domestic operating leasing rents to domestic leasing companies.

　　Q: What are the main considerations for the Circular to optimize the foreign exchange management of market procurement trade?

　　A: Optimizing the foreign exchange management of market procurement trade, on the one hand, helps the innovation and development of new trade formats such as market procurement, and supports market procurement merchants who entrust third-party customs declaration to handle foreign exchange collection and settlement online in their own names. On the other hand, more banks are encouraged to carry out foreign exchange settlement business of market procurement trade, and banks are supported to flexibly use the information of market procurement trade networking platform according to their own realities such as customer business situation and bank informatization construction, so as to provide more convenient service for market procurement merchants to collect and settle foreign exchange, improve the settlement efficiency of merchants’ funds, and also help banks to save system development costs.

　　Q: The Central Financial Work Conference pointed out that it is necessary to strengthen financial support for new technologies, new tracks and new markets. What measures did the Notice take in this regard?

　　A: According to our research, some start-up technology-based enterprises are faced with difficulties such as being unable to obtain more cross-border financing due to their small net assets. Therefore, from 2018, the State Administration of Foreign Exchange has continuously strengthened and improved the supply of foreign exchange policies for technological innovation, and introduced cross-border financing facilitation policies for high-tech and "specialized and innovative" enterprises, allowing them to borrow foreign debts independently within a certain amount, greatly reducing the financing costs of enterprises.

　　The Notice upgraded the above-mentioned cross-border financing facilitation policies in terms of subject scope, pilot areas and pilot quotas. First, on the basis of high-tech and "specialized and innovative" enterprises in the past, small and medium-sized science and technology enterprises will be included in the pilot subject to support the innovative development of small and medium-sized science and technology enterprises; Second, the policy coverage has expanded from the previous 17 provinces (cities) to the whole country; The third is to increase the facilitation quota of the previous 17 provinces (cities) to the equivalent of US$ 10 million, and the facilitation quota of the remaining regions is tentatively set at the equivalent of US$ 5 million, so as to facilitate cross-border financing of high-tech, "specialized and innovative" and technology-based SMEs, while preventing corporate debt risks.

　　Q: What policies in the Notice are beneficial for foreign-invested enterprises to develop their businesses in China?

　　A: In recent years, the State Administration of Foreign Exchange has continuously simplified business procedures and processes to facilitate foreign-invested enterprises to handle business under capital. In 2020, the reform of facilitating the payment of capital account income will be promoted throughout the country. When eligible enterprises use capital account income such as capital and foreign debt funds for domestic payment, they do not need to provide authenticity proof materials to banks one by one in advance. Since 2022, it has been piloted in four places, including Lingang New Area in Shanghai Pilot Free Trade Zone, and the domestic reinvestment business of foreign-invested enterprises does not need to go through registration procedures.

　　In order to further facilitate the foreign exchange receipts and payments of foreign-invested enterprises, the Notice clearly stipulates that the original asset realization account will be adjusted into a capital account settlement account, and the funds in the account can be settled and used independently. These funds mainly include foreign direct investment and domestic reinvestment, domestic equity transferor receiving equity transfer consideration funds from overseas direct investment, and foreign exchange funds raised by domestic enterprises listed overseas. In the next step, the State Administration of Foreign Exchange will, in combination with the needs of enterprises, promote more capital receipts and payments into the account in an orderly manner to facilitate the use of funds by enterprises.

　　Q: What are the main considerations for canceling the approval of opening foreign debt accounts in different places in the Notice?

　　A: Actually, the more convenient it is to use an enterprise’s foreign debt account, the more beneficial it is for enterprises to improve the efficiency of cross-border capital use. In April 2022, the People’s Bank of China and the State Administration of Foreign Exchange issued the Notice on Doing a Good Job in Financial Services for Epidemic Prevention and Control and Economic and Social Development, allowing multiple foreign debts of non-financial enterprises to share one foreign debt account, and supporting enterprises to apply for foreign debt registration online and other policies to further simplify the management of foreign debt accounts. The implementation of these policies has improved the convenience of using foreign debt accounts and won widespread praise from market operators. On this basis, the Notice further cancels the approval requirements for opening foreign debt accounts in different places, and allows business entities to open foreign debt accounts in different banks according to actual needs, which is conducive to the better use of foreign debt accounts by enterprises and reduces the "sole" cost of enterprises.