Li Weibin Law Firm
On May 19, 2023, the People's Bank of China and the State Administration of Foreign Exchange jointly issued the "Continuously Optimize the Policy on the Centralized Operation and Management of Cross-border Funds in Local and Foreign Currencies of Multinational Corporations", and decided to launch pilot projects in Beijing, Guangdong and Shenzhen, and optimize and upgrade the centralized operation and management policies of cross-border funds in domestic and foreign currencies of multinational companies on the basis of the Regulations on the Centralized Operation and Management of Cross-border Funds of Multinational Companies (Huifa [2019] No. 7, hereinafter referred to as "Document No. 7") issued on March 15, 2019. Subsequently, on 28 June 2023, the Beijing Foreign Exchange Administration Department of the State Administration of Foreign Exchange (hereinafter referred to as the "Beijing Foreign Exchange Administration") promulgated the Administrative Provisions on the Centralized Operation of Cross-border Funds in Local and Foreign Currencies of Multinational Companies (Pilot) (hereinafter referred to as the "Beijing Pilot Regulations"), and on 30 June 2023, the Guangdong Branch of the State Administration of Foreign Exchange (hereinafter referred to as the "Guangdong Foreign Exchange Bureau") issued the Administrative Regulations on the Centralized Operation of Cross-border Funds in Domestic and Foreign Currencies of Multinational Companies (Pilot) of the Guangdong Branch of the State Administration of Foreign Exchange (hereinafter referred to as the "Regulations") On 4 July 2023, the Shenzhen Branch of the State Administration of Foreign Exchange (hereinafter referred to as the "Shenzhen Foreign Exchange Bureau") issued the Administrative Provisions on the Centralized Operation of Cross-border Funds in Domestic and Foreign Currencies of Multinational Companies (Pilot) (hereinafter referred to as the "Shenzhen Pilot Regulations"), which provides specific provisions on the centralized operation of cross-border funds by eligible enterprises in the corresponding jurisdictions of the Beijing Foreign Exchange Bureau, the Guangdong Foreign Exchange Bureau and the Shenzhen Foreign Exchange Bureau.
This article intends to briefly summarize and analyze the relevant changes based on the provisions of Circular No. 7, the Beijing Pilot Regulations, the Guangdong Pilot Regulations, and the Shenzhen Pilot Regulations.
1. Scope of application and related definitions
| Sentence No. 7 | Beijing Pilot Regulations | Guangdong Pilot Regulations | Shenzhen Pilot Regulations | Difference | |
| Overall scope of application | Nationwide | Within the jurisdiction of the Beijing State Administration of Foreign Exchange | Under the jurisdiction of Guangdong Foreign Exchange Bureau | Shenzhen | The definition is slightly different. |
| Financial institutions (except for finance companies as the sponsors), local government financing vehicles and real estate enterprises shall not participate in the centralized operation of cross-border funds of multinational corporations as sponsors or member enterprises. | Financial institutions (except where finance companies are the sponsors), local government financing platform companies and real estate enterprises shall not participate in the centralized operation of cross-border funds in local and foreign currencies of multinational corporations as sponsors or member enterprises. | Financial institutions (except for finance companies as the sponsors), local government financing platform companies and real estate enterprises shall not participate in the centralized operation and management of cross-border funds in domestic and foreign currencies of multinational companies (hereinafter referred to as the capital pooling business) as sponsors or member enterprises. | Financial institutions (except where finance companies are the sponsors), local government financing platform companies and real estate enterprises shall not participate in the centralized operation of cross-border funds in local and foreign currencies of multinational corporations as sponsors or member enterprises. | The provisions are basically the same. | |
| Definition of "multinational corporation". | A consortium formed by a parent company, subsidiaries and other member enterprises or institutions with capital linkage as a link. | A consortium formed by a parent company, subsidiaries and other member enterprises or institutions with capital linkage as a link. | A consortium formed by a parent company, subsidiaries and other member enterprises or institutions with capital linkage as a link. | A consortium formed by a parent company, subsidiaries and other member enterprises or institutions with capital linkage as a link. | The rules are the same. |
| Definition of "Sponsoring Enterprise". | A domestic company with independent legal personality that has been authorized by a multinational company to perform duties such as filing, implementation, data reporting, and feedback of the main business. If the sponsoring enterprise is a finance company, its engagement in cross-border capital transactions shall comply with the regulations of the industry management department. | A domestic company with independent legal personality that has been authorized by a multinational company to perform duties such as filing, implementation, data reporting, and feedback of the main business. If the sponsoring enterprise is a finance company, its engagement in cross-border capital transactions shall comply with the regulations of the industry management department. | A domestic company with independent legal personality that has been authorized by a multinational company to perform duties such as filing, implementation, data reporting, and feedback of the main business. If the sponsoring enterprise is a finance company, its engagement in cross-border capital transactions shall comply with the regulations of the industry management department. | A domestic company with independent legal personality that has been authorized by a multinational company to perform duties such as filing, implementation, data reporting, and feedback of the main business. If the sponsoring enterprise is a finance company, its engagement in cross-border capital transactions shall comply with the regulations of the industry management department. | The Guangdong Pilot Provisions have special requirements, and the rest of the provisions are the same. |
| Definition of "Member Company". | Companies with independent legal personality that directly or indirectly hold shares within multinational corporations are divided into domestic member enterprises and overseas member enterprises. A brother company that does not have a direct or indirect shareholding relationship with the sponsoring company, but is controlled by the same parent company, may be recognized as a member company. | Domestic and foreign companies that directly or indirectly hold shares in multinational corporations and have independent legal personality. Brother companies that do not have a direct or indirect shareholding relationship with the sponsor but are controlled by the same parent company may be regarded as member companies. | Domestic and foreign companies that directly or indirectly hold shares in multinational corporations and have independent legal personality. Brother companies that do not have a direct or indirect shareholding relationship with the sponsor but are controlled by the same parent company may be regarded as member companies. | Domestic and foreign companies that directly or indirectly hold shares in multinational corporations and have independent legal personality. Brother companies that do not have a direct or indirect shareholding relationship with the sponsor but are controlled by the same parent company may be regarded as member companies. | Circular No. 7 does not include "branches", and the provisions in Circular 3 include "branches". |
| Definition of "cross-border capital centralized operation business". | Centralized operation and management of domestic and foreign funds, centralized management of foreign debts and overseas lending quotas, centralized receipt and payment of current account funds, and netting of differences. | "Centralized operation of cross-border funds in domestic and foreign currencies of multinational corporations (hereinafter referred to as "capital pooling business") refers to the business of centralized operation and management of the funds of domestic and foreign member enterprises by multinational corporations through the host enterprise according to their own operation and management needs, including the centralized management of foreign debts or overseas lending quotas, the centralized receipt and payment of current account funds, and the netting of differences. | "Capital pool business" refers to the business of multinational corporations in the centralized operation and management of the funds of domestic and foreign subsidiaries through the host enterprise according to their own operation and management needs, including the centralized management of foreign debts or overseas loan quotas, the centralized receipt and payment of current account funds, and the netting of one or more businesses. | "Centralized operation of cross-border funds in domestic and foreign currencies of multinational corporations (hereinafter referred to as "capital pooling business") refers to the business of centralized operation and management of the funds of domestic and foreign member enterprises by multinational corporations through the host enterprise according to their own operation and management needs, including the centralized management of foreign debts or overseas lending quotas, the centralized receipt and payment of current account funds, and the netting of differences. | Compared with Circular 7, the provisions of the three places are more detailed. |
2. The conditions that need to be met for multinational companies to carry out cross-border capital centralized operation business/capital pool business
Specifically, Circular 7, the Beijing Pilot Provisions, the Guangdong Pilot Provisions and the Shenzhen Pilot Provisions require the following:
| Sentence No. 7 | Beijing Pilot Regulations | Guangdong Pilot Regulations | Shenzhen Pilot Regulations | Difference | |
| Overall requirements | A multinational corporation that meets the following conditions may, according to its business needs, select a domestic enterprise as the host enterprise to centralize the operation and management of the funds of its domestic and foreign member enterprises, and carry out one or more of the businesses of centralized foreign debt quota, centralized overseas lending quota, centralized receipt and payment of current account funds, and netting net settlement: (1) Have real business needs; (2) Have a sound cross-border fund management structure and internal control system; (3) Establish a corresponding internal management electronic system; (4) The scale of the balance of payments in domestic and foreign currencies in the previous year (calculated on a consolidated basis for domestic member enterprises participating in the centralized operation of cross-border funds); (5) There have been no major foreign exchange violations in the near past (the established enterprise has no major foreign exchange violations since the date of establishment); (6) If the sponsoring enterprise and the domestic member enterprise are enterprises in the list of foreign exchange receipts and payments for trade, the classification result of trade in goods shall be Category A; (7) Other prudential regulatory conditions stipulated by the State Administration of Foreign Exchange. | Multinational companies that meet the following conditions may, according to their business needs, select a domestic enterprise as the host enterprise to centrally operate and manage the funds of domestic and foreign member enterprises and carry out capital pooling business: (1) Have real business needs; (2) Have a sound cross-border fund management structure and internal control system; (3) Establish a corresponding internal management electronic system; (4) The total amount of the balance of payments in domestic and foreign currencies of all domestic member enterprises in the previous year (5) There have been no major violations of laws and regulations in cross-border collection and payment business in the near past (the established enterprise has not committed major violations in cross-border receipt and payment business since the date of establishment). (6) For enterprises in the list of foreign exchange receipts and payments for trade, the classification result of trade in goods shall be Category A. If the result is downgraded to Category B or C, the local foreign exchange bureau will notify the multinational corporation to change the sponsoring enterprise and resubmit the application materials, while the other member enterprises shall be downgraded to Category B and C for the classification of trade in goods, and the sponsoring enterprise shall terminate its business and change the member enterprise with reference to Articles 9 and 10. (8) Other prudential regulatory conditions stipulated by the State Administration of Foreign Exchange. | Multinational companies that meet the following conditions may, according to their business needs, select a domestic enterprise as the host enterprise to centrally operate and manage the funds of domestic and foreign member enterprises and carry out capital pooling business: (1) Have real business needs; (2) Have a sound cross-border fund management structure and internal control system; (3) Establish a corresponding internal management electronic system; (4) The total amount of the balance of payments in domestic and foreign currencies of all domestic member enterprises in the previous year (5) There have been no major violations of laws and regulations in cross-border collection and payment business in the near past (the established enterprise has not committed major violations in cross-border receipt and payment business since the date of establishment). (6) For enterprises in the list of foreign exchange receipts and payments for trade, the classification result of trade in goods shall be Category A. If the result is downgraded to Category B or C, the local foreign exchange bureau will notify the multinational corporation to change the sponsoring enterprise and resubmit the application materials; if the classification result of the trade in goods of other member enterprises is downgraded to Category B or C, the sponsoring enterprise shall terminate its business and change its member enterprises with reference to Articles 10 and 11 of these Regulations. (8) Other prudential regulatory conditions stipulated by the State Administration of Foreign Exchange. | Multinational companies that meet the following conditions may, according to their business needs, select a domestic enterprise as the host enterprise to centrally operate and manage the funds of domestic and foreign member enterprises and carry out capital pooling business: (1) Have real business needs; (2) Have a sound cross-border fund management structure and internal control system; (3) Establish a corresponding internal management electronic system; (4) The total amount of the balance of payments in domestic and foreign currencies of all domestic member enterprises in the previous year (5) There have been no major violations of laws and regulations in cross-border collection and payment business in the near past (the established enterprise has not committed major violations in cross-border receipt and payment business since the date of establishment). (6) For enterprises in the list of foreign exchange receipts and payments of trade, the classification result of trade in goods shall be Category A. If the result is downgraded to Category B or C, the local foreign exchange bureau will notify the multinational corporation to change the sponsoring enterprise and resubmit the application materials, while the other member enterprises shall be downgraded to Category B and C for the classification of trade in goods, and the sponsoring enterprise shall terminate its business and change the member enterprise with reference to Articles 9 and 10. (8) Other prudential regulatory conditions stipulated by the State Administration of Foreign Exchange. | Compared with Circular 7, the differences between the three provisions are: (1) The "scale of the balance of payments in domestic and foreign currencies in the previous year" has been refined, and (2) the time requirement for "major violations of laws and regulations in cross-border receipt and payment business" has been relaxed (3 years has been changed to 2 years); (3) the "classification of trade in goods of the host enterprise" has been refined; (4) the requirements for "overseas member enterprises" have been clarified; (5) the requirement of "People's Bank of China" has been added to the "other prudential regulatory conditions". |
3. Requirements of the cooperative bank
Multinational companies that handle cross-border centralized capital operation business/capital pool business need to choose the corresponding cooperative bank. Circular No. 7, the Beijing Pilot Regulations, the Guangdong Pilot Regulations, and the Shenzhen Pilot Regulations all have corresponding requirements for cooperative banks, which are summarized as follows:
| Sentence No. 7 | Beijing Pilot Regulations | Guangdong Pilot Regulations | Shenzhen Pilot Regulations | Difference | |
| Overall requirements | Eligible domestic banks (within the provincial-level region where the host enterprise is located, the same below) | One or more eligible banks in the provincial/separately planned city where the host enterprise is located | One or more eligible banks in Guangdong Province | One or more eligible banks in the provincial/separately planned city where the host enterprise is located | The provisions are basically the same |
| Specific conditions | Should meet: (1) Possess the ability of international settlement and the qualification of foreign exchange settlement and sales; (2) In the past three years, the annual assessment of the foreign exchange management regulations has been carried out in category B (inclusive) or above, and the assessment level of the cooperative bank has declined, and the cooperative bank cannot only handle the original corresponding business, and cannot handle the new business; (3) Other prudential regulatory conditions stipulated by the State Administration of Foreign Exchange. | Have the ability of international settlement and have the qualifications for foreign exchange settlement and sales business, and should meet the following requirements: (1) Implementing the annual assessment of the foreign exchange administration regulations in the past two years (inclusive) or above; (4) Other prudential regulatory conditions stipulated by the People's Bank of China and the State Administration of Foreign Exchange. If the cooperative bank does not meet the above conditions in the course of continuing operations, it can only handle the original type of business for the original customer. | Have the ability of international settlement and have the qualifications for foreign exchange settlement and sales business, and should meet the following requirements: (1) Implementing the annual assessment of the foreign exchange management regulations in the past two years (inclusive) or above; (4) Other prudential regulatory conditions stipulated by the People's Bank of China and the State Administration of Foreign Exchange. If the cooperative bank does not meet the above conditions in the course of continuing operations, it can only handle the original type of business for the original customer. | Have the ability of international settlement and have the qualifications for foreign exchange settlement and sales business, and should meet the following requirements: (1) Implementing the annual assessment of the foreign exchange management regulations in the past two years (inclusive) or above; (4) Other prudential regulatory conditions stipulated by the People's Bank of China and the State Administration of Foreign Exchange. If the cooperative bank does not meet the above conditions in the course of continuing operations, it can only handle the original type of business for the original customer. | Compared with Circular 7, the provisions of the three places are more detailed. |
Fourth, the filing requirements for handling business
Multinational companies carrying out cross-border centralized capital operation business/capital pooling business shall apply to the competent foreign exchange bureau for filing. Specifically, Circular 7, the Beijing Pilot Provisions, the Guangdong Pilot Provisions and the Shenzhen Pilot Provisions require the following:
| Sentence No. 7 | Beijing Pilot Regulations | Guangdong Pilot Regulations | Shenzhen Pilot Regulations | Difference | |
| Record | To carry out the business of centralized operation of cross-border funds, a multinational company shall file with its foreign exchange branch and management department (hereinafter referred to as the branch) through the branch office of the State Administration of Foreign Exchange where the host enterprise is located (hereinafter referred to as the local foreign exchange bureau) and submit the following materials: (1) Basic materials 1. Application for filing (including the basic information of the multinational company and the sponsoring enterprise, the type of business to be carried out, the list of member enterprises, the shareholding structure of the sponsoring enterprise and the member enterprises, the cooperative bank to be selected, etc.); 2. Letter of authorization from the multinational corporation to the host enterprise to carry out the centralized operation of cross-border funds; 3. Confirmation of Handling of Cross-border Capital Centralized Operation Business of Multinational Corporations jointly signed by the sponsoring enterprise and the cooperative bank; 4. A copy of the business license of the sponsoring enterprise and its domestic member enterprises; 5. Registration documents of overseas member enterprises (non-Chinese translations are provided at the same time as Chinese); 6. Financial business license and business scope approval document (only if the sponsoring enterprise is a financial company, it must be provided). The above 2 materials should be stamped with the official seal of the multinational company, and the rest of the materials should be stamped with the official seal of the host enterprise. (2) Special materials 1. Centralized management of foreign debt quotas. When applying for the filing of the foreign debt quota of the centralized domestic member enterprises, the sponsoring enterprise shall list in the filing application the name of the domestic member enterprise participating in the concentration of foreign debt quota, the unified social credit code, the place of registration, the audited owner's equity status of each domestic member enterprise at the end of the previous year, the external debt quota to be concentrated, and provide a copy of the balance sheet of the member enterprise contributing to the foreign debt quota for the previous year (with the official seal of the sponsoring enterprise). 2. Centralized management of overseas loan quotas. ...... 3. Centralized receipt and payment of current account funds and netting settlement. ...... | Multinational companies carrying out capital pool business shall apply to the local branch of the State Administration of Foreign Exchange (hereinafter referred to as the local foreign exchange bureau) for filing and registration, including: (1) Basic materials. 1. Application form (including the basic information of the multinational company and the sponsoring enterprise, the type of business to be carried out, the list of member enterprises, the shareholding structure of the sponsoring enterprise and the member enterprises, the cooperative bank to be selected, etc.); 2. Letter of authorization from the multinational corporation to the sponsoring enterprise to carry out capital pool business; 3. Confirmation of Centralized Operation of Cross-border Funds in Local and Foreign Currencies of Multinational Corporations jointly signed by the sponsoring enterprise and the cooperative bank; 4. A copy of the business license of the sponsoring enterprise and its domestic member enterprises; 5. Registration documents of overseas member enterprises (if the registration documents are non-Chinese, Chinese translations must be provided at the same time); 6. Financial business license and business scope approval document (only if the sponsoring enterprise is a financial company); 7.。 The second of the above materials should be stamped with the official seal of the multinational company, and the rest of the materials should be stamped with the official seal of the main enterprise. (2) Special materials. 1. Centralized management of foreign debt quotas. In addition to the basic materials, the sponsoring enterprise shall also provide the following special materials: in the application form, the name of the domestic member enterprise participating in the concentration of foreign debt quota, the unified social credit code, the place of registration, the audited owner's equity status of each domestic member enterprise at the end of the previous year, the foreign debt quota to be concentrated, and a copy of the balance sheet of the member enterprise contributing to the foreign debt quota at the end of the previous year shall be provided. 2. Centralized management of overseas loan quotas. ...... 3. Centralized receipt and payment of current account funds and netting settlement. ...... The above special materials should be stamped with the official seal of the sponsoring enterprise. ...... | Multinational companies carrying out capital pooling business shall apply to the foreign exchange bureau where the host enterprise is located for filing and registration, including: (1) Basic materials 1. Application form (including the basic information of the multinational corporation and the sponsoring enterprise, the type of business to be carried out, the list of member enterprises, the shareholding structure of the sponsoring enterprise and the member enterprises, and the information of the cooperative bank to be selected, etc.); 2. Letter of authorization from the multinational corporation to the sponsoring enterprise to carry out capital pool business; 3. Confirmation of Centralized Operation of Cross-border Funds in Local and Foreign Currencies of Multinational Corporations jointly signed by the sponsoring enterprise and the cooperative bank; 4. A copy of the business license of the sponsoring enterprise and its domestic member enterprises; 5. Registration documents of overseas member enterprises (if the registration documents are non-Chinese, Chinese translations must be provided at the same time); 6. Financial business license and business scope approval document (only if the sponsoring enterprise is a financial company, it must be provided); 7.。 The above second material shall be stamped with the official seal of the multinational company, and the rest of the materials shall be stamped with the official seal of the sponsoring enterprise. (2) Special materials 1. Centralized management of foreign debt quotas. In addition to the basic materials, the sponsoring enterprise shall also provide the following special materials when applying for the registration of the business of centralized foreign debt quota: in the application form, the name of the domestic member enterprise participating in the concentration of foreign debt quota, the unified social credit code, the place of registration, the audited owner's equity status of each domestic member enterprise at the end of the previous year, the foreign debt quota to be concentrated, and a copy of the balance sheet of the member enterprise contributing to the foreign debt quota at the end of the previous year. 2. Centralized management of overseas loan quotas. ...... 3. Centralized receipt and payment of current account funds and netting business management. ...... The above special materials should be stamped with the official seal of the sponsoring enterprise. ...... | Multinational companies carrying out capital pool business shall apply to the local branch of the State Administration of Foreign Exchange (hereinafter referred to as the local foreign exchange bureau) for filing and registration, including: (1) Basic materials 1. Application form (including the basic information of the multinational corporation and the sponsoring enterprise, the type of business to be carried out, the list of member enterprises, the shareholding structure of the sponsoring enterprise and the member enterprises, and the information of the cooperative bank to be selected, etc.); 2. Letter of authorization from the multinational corporation to the sponsoring enterprise to carry out capital pool business; 3. Confirmation of Centralized Operation of Cross-border Funds in Local and Foreign Currencies of Multinational Corporations jointly signed by the sponsoring enterprise and the cooperative bank; 4. A copy of the business license of the sponsoring enterprise and its domestic member enterprises; 5. Registration documents of overseas member enterprises (if the registration documents are non-Chinese, Chinese translations must be provided at the same time); 6. Financial business license and business scope approval document (only if the sponsoring enterprise is a financial company, it must be provided); 7.。 The above second material shall be stamped with the official seal of the multinational company, and the rest of the materials shall be stamped with the official seal of the sponsoring enterprise. (2) Special materials 1. Centralized management of foreign debt quotas. In addition to the basic materials, the sponsoring enterprise shall also provide the following special materials when applying for the registration of the business of centralized foreign debt quota: in the application form, the name of the domestic member enterprise participating in the concentration of foreign debt quota, the unified social credit code, the place of registration, the audited owner's equity status of each domestic member enterprise at the end of the previous year, the foreign debt quota to be concentrated, and a copy of the balance sheet of the member enterprise contributing to the foreign debt quota at the end of the previous year. 2. Centralized management of overseas loan quotas. ...... 3. Centralized receipt and payment of current account funds and netting settlement. ...... The above special materials should be stamped with the official seal of the sponsoring enterprise. ...... | Compared with Circular 7, the provisions of the three places are different (but the provisions of the three places are basically the same), the scope of applicants to submit materials has been expanded (the sponsoring enterprise can entrust a cooperative bank as the applicant), and the requirements for the application form are more detailed. |
| The sub-bureau shall complete the filing formalities on the date of receipt of the complete application materials for the filing of the centralized operation of cross-border funds of multinational corporations, and issue a filing notice through the foreign exchange bureau where the host enterprise is located. | The local foreign exchange bureau shall, in accordance with the relevant provisions of the administrative license, complete the filing formalities and issue a filing notice after receiving the complete application materials related to the centralized operation of cross-border funds in local and foreign currencies of multinational companies. | The local foreign exchange bureau shall, in accordance with the relevant provisions of the administrative license, complete the filing procedures and issue a filing notice after receiving the complete application materials related to the capital pool business. | The local foreign exchange bureau shall, in accordance with the relevant provisions of the administrative license, complete the filing formalities and issue a filing notice after receiving the complete application materials related to the centralized operation of cross-border funds in local and foreign currencies of multinational companies. | All three places stipulate "in conjunction with the local People's Bank", but there is no time limit. | |
| alter | If there is any change in the cooperative bank, the sponsoring enterprise, the member enterprise, the type of business, etc., during the processing of the centralized operation of cross-border funds of a multinational corporation, the sponsoring enterprise shall file the change with the branch office through the local foreign exchange bureau one month in advance. The sub-bureau shall complete the filing procedures within the date of receipt of the complete application materials for change, and issue a filing notice through the foreign exchange bureau where the host enterprise is located. If the name of the sponsoring enterprise or member enterprise is changed, the sponsoring enterprise shall report within one month from the date of occurrence of the matter, and submit a copy of the original filing notice, a description of the relevant circumstances of the enterprise involved in the change, and supporting materials related to the change (such as the business license after the change). | In the event of a change in the capital account of a member enterprise that does not involve foreign debts and overseas lending quotas, or a change in the name of the sponsoring enterprise or a member enterprise, the sponsoring enterprise shall, within 30 days from the date of occurrence of the event, submit a copy of the original filing notice, a description of the relevant circumstances of the enterprise involved in the change, and supporting materials related to the change (such as the business license after the change). If a multinational corporation intends to make adjustments to matters other than those listed in Article 9 during the period of handling the capital pooling business, the sponsoring enterprise shall apply to the local foreign exchange bureau for the change filing and registration within 30 days before the adjustment. The local foreign exchange bureau shall, on the date of receipt of the complete application materials for change, complete the filing procedures in accordance with the relevant provisions of the Administrative Licensing Law and issue a notice of filing. | In the event of a change in the capital account of a member enterprise that does not involve foreign debts or overseas loan quotas, or a change in the name of the sponsoring enterprise or a member enterprise, the sponsoring enterprise shall, within 30 days from the date of occurrence of the event, submit a copy of the original filing notice, a description of the relevant circumstances of the enterprise involved in the change, and supporting materials related to the change (such as the business license after the change). During the period of handling the capital pool business, if it intends to adjust the matters other than Article 10, the sponsoring enterprise shall apply to the local foreign exchange bureau for change and registration within 30 days before the adjustment. The local foreign exchange bureau shall, on the date of receipt of the complete application materials for change, complete the filing procedures in accordance with the relevant provisions of the Administrative Licensing Law and issue a notice of filing. | In the event of a change in the capital account of a member enterprise that does not involve foreign debts or overseas loan quotas, or a change in the name of the sponsoring enterprise or a member enterprise, the sponsoring enterprise shall, within 30 days from the date of occurrence of the event, submit a copy of the original filing notice, a description of the relevant circumstances of the enterprise involved in the change, and supporting materials related to the change (such as the business license after the change). If a multinational corporation intends to make adjustments to matters other than those listed in Article 9 during the processing of its capital pooling business, the sponsoring enterprise shall apply to the local foreign exchange bureau for filing and registration of the change within 30 days before the adjustment. The local foreign exchange bureau shall, on the date of receipt of the complete application materials for change, complete the filing procedures in accordance with the relevant provisions of the Administrative Licensing Law and issue a notice of filing. | The provisions of Circular No. 3 are different from those of Circular No. 7: (1) When the name of the sponsoring enterprise or member enterprise is changed, Circular No. 7 stipulates that it shall be reported to the "local foreign exchange bureau", and that of Circular No. 3 shall be reported to the "cooperative bank". (2) When other matters are involved, Circular No. 7 stipulates the time limit, and in 3 places, it stipulates "in conjunction with the local People's Bank of China". |
5. Time limit and cessation requirements for conducting business
After the filing notice is obtained, the sponsoring enterprise shall carry out the business related to the centralized operation of cross-border funds/capital pooling within the prescribed time limit. If you need to stop, you will also need to comply with the relevant requirements.
| Sentence No. 7 | Beijing Pilot Regulations | Guangdong Pilot Regulations | Shenzhen Pilot Regulations | Difference | |
| time limit | The sponsoring enterprise shall open a domestic capital master account and actually handle the business related to the centralized operation of cross-border funds within one year after obtaining the filing notice of the multinational company. | The sponsoring enterprise shall open a domestic capital master account and actually handle the capital pool business within one year of receiving the filing notice. | The sponsoring enterprise shall open a domestic capital master account and actually handle the capital pool business within one year of receiving the filing notice. | The sponsoring enterprise shall open a domestic capital master account and actually handle the capital pool business within one year of receiving the filing notice. | Circular 7 and the regulations of the three places require that the actual business be handled within "one year". |
| suspension | If a multinational corporation needs to stop handling the business of centralized operation of cross-border funds, the sponsoring enterprise shall, after handling the relevant claims and debts and closing the main account of domestic funds, file with the local foreign exchange bureau and submit an application for filing, including the concentration of foreign debt quota and overseas lending quota for the centralized operation of cross-border funds of multinational companies, cross-border receipts and payments, foreign exchange settlement and sales, and the closure of the main account of domestic funds. The sub-bureau shall complete the filing formalities on the date of receipt of the complete application materials for the filing of the centralized operation of cross-border funds of multinational corporations, and recover the original filing notice through the foreign exchange bureau where the host enterprise is located. | If a multinational corporation intends to cease to handle the capital pool business, the sponsoring enterprise shall, after completing the handling of the relevant claims and debts and closing the main account of domestic funds, apply to the local foreign exchange bureau for cancellation of filing and registration, and submit an application form, which shall indicate the concentration of foreign debt quota and overseas lending quota of the multinational company's capital pool business, foreign-related receipts and payments, settlement and sale of foreign exchange, and the closure of the main account of domestic funds. The local foreign exchange bureau shall, on the date of receipt of the application materials, complete the filing formalities in accordance with the relevant provisions of the Administrative Licensing Law and withdraw the original filing notice. | If a multinational corporation intends to cease to handle the capital pool business, the sponsoring enterprise shall, after completing the handling of the relevant claims and debts and closing the main account of domestic funds, apply to the local foreign exchange bureau for cancellation of filing and registration, and submit an application form indicating the concentration of the foreign debt quota and overseas lending quota of the capital pool business, the collection and payment of foreign-related foreign exchange and the settlement and sale of foreign exchange, and the closure of the main account of domestic funds. The local foreign exchange bureau shall, on the date of receipt of the application materials, complete the filing formalities in accordance with the relevant provisions of the Administrative Licensing Law and withdraw the original filing notice. | If a multinational corporation intends to cease to handle the capital pool business, the sponsoring enterprise shall, after completing the handling of the relevant claims and debts and closing the main account of domestic funds, apply to the local foreign exchange bureau for cancellation of filing and registration, and submit an application form, which shall indicate the concentration of foreign debt quota and overseas lending quota of the multinational company's capital pool business, foreign-related receipts and payments, settlement and sale of foreign exchange, and the closure of the main account of domestic funds. The local foreign exchange bureau shall, on the date of receipt of the application materials, complete the filing formalities in accordance with the relevant provisions of the Administrative Licensing Law and withdraw the original filing notice. | 3. The local government stipulates that it requires the submission of the "original filing notice" and stipulates that it will "work with the local People's Bank of China", but does not stipulate a time limit as in Circular No. 7. |
6. Centralized management of foreign debt quota and one-time foreign debt registration
An important part of the business related to the centralized operation of cross-border funds/capital pooling business of multinational corporations is the "centralized management of external debt quota", and the borrowing of foreign debts by the sponsors and member enterprises of multinational corporations shall be carried out in accordance with the macro-prudential principle, and the corresponding one-time registration procedures shall be completed. The details are summarized as follows:
| Sentence No. 7 | Beijing Pilot Regulations | Guangdong Pilot Regulations | Shenzhen Pilot Regulations | Difference | |
| principle | Multinational corporations may, in accordance with the macro-prudential principle, concentrate the external debt quota of domestic member enterprises and follow commercial practices to carry out external debt business within the concentrated quota. | Multinational corporations may, in accordance with the macro-prudential principle, concentrate the external debt quota of domestic member enterprises and follow commercial practices to carry out external debt business within the concentrated quota. | Multinational corporations may, in accordance with the macro-prudential principle, concentrate the external debt quota of domestic member enterprises and follow commercial practices to carry out external debt business within the concentrated quota. | Multinational corporations may, in accordance with the macro-prudential principle, concentrate the external debt quota of domestic member enterprises and follow commercial practices to carry out external debt business within the concentrated quota. | The provisions of Circular 7 and Circular 3 are the same. |
| Calculation formula | The host enterprise of a multinational corporation may concentrate the entire external debt quota of its domestic member enterprises according to the following formula. The concentration quota of foreign debt of multinational corporations ≤ * cross-border financing leverage ratio * macro-prudential adjustment parameters. In the initial period, the leverage ratio for cross-border financing was 2, and the macro-prudential adjustment parameter was 1. The State Administration of Foreign Exchange (SAFE) may adjust the leverage ratio and macro-prudential adjustment parameters of cross-border financing according to the overall external liabilities, maturity structure, currency structure, etc. | The host enterprise of a multinational corporation may concentrate the foreign debt quota of the domestic member enterprise according to the following formula. The concentration quota of foreign debt of multinational corporations ≤ * cross-border financing leverage ratio * macro-prudential adjustment parameters. =Σ Balance of foreign currency external debt + Σ Balance of foreign currency foreign debt * Exchange rate risk conversion factor. The risk-weighted balance of the foreign debt of the multinational corporation shall not exceed the concentration quota of the foreign debt of the multinational corporation. The leverage ratio and macro-prudential adjustment parameters of cross-border financing shall be determined in accordance with the relevant provisions on macro-prudential management of cross-border financing. The People's Bank of China and the State Administration of Foreign Exchange can adjust the leverage ratio and macro-prudential adjustment parameters of cross-border financing according to the overall external liabilities, term structure, currency structure, etc. | The host enterprise of a multinational corporation may concentrate the foreign debt quota of its domestic member enterprises in accordance with the following formula. The concentration quota of foreign debt of multinational corporations ≤ * cross-border financing leverage ratio * macro-prudential adjustment parameters. = ∑ balance of foreign debt in domestic and foreign currencies + balance of foreign debt in ∑ foreign currency * exchange rate risk conversion factor. The risk-weighted balance of the foreign debt of the multinational corporation shall not exceed the concentration quota of the foreign debt of the multinational corporation. The leverage ratio and macro-prudential adjustment parameters of cross-border financing shall be determined in accordance with the relevant provisions on macro-prudential management of cross-border financing. The People's Bank of China and the State Administration of Foreign Exchange can adjust the leverage ratio and macro-prudential adjustment parameters of cross-border financing according to the overall external liabilities, term structure, currency structure, etc. | The host enterprise of a multinational corporation may concentrate the foreign debt quota of the domestic member enterprise according to the following formula. The concentration quota of foreign debt of multinational corporations ≤ * cross-border financing leverage ratio * macro-prudential adjustment parameters. =Σ Balance of foreign debt in local and foreign currencies + Balance of foreign debt in foreign currency * Conversion factor of exchange rate risk. The risk-weighted balance of the foreign debt of the multinational corporation shall not exceed the concentration quota of the foreign debt of the multinational corporation. The leverage ratio and macro-prudential adjustment parameters of cross-border financing shall be determined in accordance with the relevant provisions on macro-prudential management of cross-border financing. The People's Bank of China and the State Administration of Foreign Exchange can adjust the leverage ratio and macro-prudential adjustment parameters of cross-border financing according to the overall external liabilities, term structure, currency structure, etc. | The provisions of the three places are the same (involving the proportion of concentration), which is different from Circular 7. |
| Special Requests | (1) The member enterprise borrows foreign debts In principle, a member enterprise that participates in the centralized operation of cross-border funds of multinational corporations and is subject to the concentration of foreign debt quota shall not, in principle, borrow foreign debt on its own from the date of submission of the application by the host enterprise. If a member enterprise has borrowed foreign debts on its own before the sponsoring enterprise submits the application, it shall not, in principle, participate in the concentration of foreign debt quota as a member enterprise until all the external debts borrowed by the sponsoring enterprise have been fully repaid. (2) Borrowing foreign debts The sponsoring enterprise may borrow foreign debts on its own behalf as the actual borrower, or the member enterprises may borrow foreign debts on behalf of the actual borrower. However, the borrowing and repayment of foreign debts shall be carried out through the host enterprise's domestic fund master account. | （1）。 （2）。 For the amount of external debt that has not been collected, each member enterprise shall handle the external debt business on its own in accordance with the current regulations. (3) If the sponsoring enterprise borrows foreign debts in a centralized manner with itself as the actual borrower or the member enterprise as the actual borrower borrows foreign debts on its behalf, it shall be handled through the main account of the sponsoring enterprise's domestic funds. If a member enterprise borrows foreign debts on its own, it shall handle it through the member enterprises' own external debt accounts within the uncentralized quota. | （1）。 （2）。 For the amount of external debt that has not been collected, each member enterprise shall handle the external debt business on its own in accordance with the current regulations. (3) If the sponsoring enterprise borrows foreign debts in a centralized manner with itself as the actual borrower or the member enterprise as the actual borrower borrows foreign debts on its behalf, it shall be handled through the main account of the sponsoring enterprise's domestic funds. If a member enterprise borrows foreign debts on its own, it shall handle it through the member enterprises' own external debt accounts within the uncentralized quota. | （1）。 （2）。 For the amount of external debt that has not been collected, each member enterprise shall handle the external debt business on its own in accordance with the current regulations. (3) If the sponsoring enterprise borrows foreign debts in a centralized manner with itself as the actual borrower or the member enterprise as the actual borrower borrows foreign debts on its behalf, it shall be handled through the main account of the sponsoring enterprise's domestic funds. If a member enterprise borrows foreign debts on its own, it shall handle it through the member enterprises' own external debt accounts within the uncentralized quota. | The regulations of the three places are the same, and there are special requirements. |
| One-time registration of external debts | When the foreign exchange bureau of the place where the host enterprise is located issues a filing notice for it, it shall handle a one-time foreign debt registration for the host enterprise in the relevant information system of the State Administration of Foreign Exchange in accordance with the recorded foreign debt concentration quota. When the sponsoring enterprise invests in and repays foreign debt funds through the main account of domestic funds, it shall declare the balance of payments in accordance with the current regulations, and there is no need to go to the local foreign exchange bureau to go through the foreign debt contract registration one by one. | When the foreign exchange bureau of the place where the host enterprise is located issues a filing notice for the host enterprise, it shall handle a one-time foreign debt registration for the host enterprise in accordance with the recorded foreign debt concentration quota in the relevant information system of the State Administration of Foreign Exchange. | When the foreign exchange bureau of the place where the host enterprise is located issues a filing notice for the host enterprise, it shall handle a one-time foreign debt registration for the host enterprise in accordance with the recorded foreign debt concentration quota in the relevant information system of the State Administration of Foreign Exchange. | When the foreign exchange bureau of the place where the host enterprise is located issues a filing notice for the host enterprise, it shall handle a one-time foreign debt registration for the host enterprise in accordance with the recorded foreign debt concentration quota in the relevant information system of the State Administration of Foreign Exchange. | The provisions of the three places are the same, which are basically the same as those of Circular 7. |
7. Special requirements for funds
| Sentence No. 7 | Beijing Pilot Regulations | Guangdong Pilot Regulations | Shenzhen Pilot Regulations | Difference | |
| Currencies and arbitrage | Not seen | In principle, the currencies of foreign-related receipts and payments under foreign debts collected by multinational corporations in the capital pooling business and foreign-related receipts and payments under overseas loans should be consistent, and cross-currency arbitrage between RMB and foreign currencies shall not be allowed. | In principle, the currencies of foreign-related receipts and payments under foreign debts collected by multinational corporations in the capital pooling business and foreign-related receipts and payments under overseas loans should be consistent, and cross-currency arbitrage between RMB and foreign currencies shall not be allowed. | In principle, the currencies of foreign-related receipts and payments under foreign debts collected by multinational corporations in the capital pooling business and foreign-related receipts and payments under overseas loans should be consistent, and cross-currency arbitrage between RMB and foreign currencies shall not be allowed. | The three local regulations are consistent. |
| Transfer | Not seen | Under the premise of not violating the relevant regulatory rules, the RMB foreign debt funds borrowed by the sponsor through the main account of domestic funds can be transferred from the main account of domestic funds to the domestic RMB bank settlement account of the member enterprise under the condition that the member enterprise needs to pay by itself, and the foreign currency foreign debt funds can be directly transferred from the master account of domestic funds to the domestic foreign exchange loan account of the member enterprise for relevant business. | Under the premise of not violating the relevant regulatory rules, the RMB foreign debt funds borrowed by the sponsor through the main account of domestic funds can be transferred from the main account of domestic funds to the domestic RMB bank settlement account of the member enterprise under the condition that the member enterprise needs to pay by itself, and the foreign currency foreign debt funds can be directly transferred from the master account of domestic funds to the domestic foreign exchange loan account of the member enterprise for relevant business. | Under the premise of not violating the relevant regulatory rules, the RMB foreign debt funds borrowed by the sponsor through the main account of domestic funds can be transferred from the main account of domestic funds to the domestic RMB bank settlement account of the member enterprise under the condition that the member enterprise needs to pay by itself, and the foreign currency foreign debt funds can be directly transferred from the master account of domestic funds to the domestic foreign exchange loan account of the member enterprise for relevant business. | The three local regulations are consistent. |
| use | Not seen | The use of funds in the master account of domestic funds shall comply with the relevant regulations of the current People's Bank of China and the State Administration of Foreign Exchange. The funds under the capital account collected in the master account of domestic funds shall not be used directly or indirectly (through member enterprises) for expenditures outside the scope of business of the enterprise or prohibited by national laws and regulations, shall not issue loans to non-affiliated enterprises, and shall not directly or indirectly invest in securities/wealth management products and real estate not for self-use. | The use of funds in the master account of domestic funds shall comply with the relevant regulations of the current People's Bank of China and the State Administration of Foreign Exchange. The funds under the capital account collected in the master account of domestic funds shall not be used directly or indirectly (through member enterprises) for expenditures outside the scope of business of the enterprise or prohibited by national laws and regulations, shall not issue loans to non-affiliated enterprises, and shall not directly or indirectly invest in securities/wealth management products and real estate not for self-use. | The use of funds in the master account of domestic funds shall comply with the relevant regulations of the current People's Bank of China and the State Administration of Foreign Exchange. The funds under the capital account collected in the master account of domestic funds shall not be used directly or indirectly (through member enterprises) for expenditures outside the scope of business of the enterprise or prohibited by national laws and regulations, shall not issue loans to non-affiliated enterprises, and shall not directly or indirectly invest in securities/wealth management products and real estate not for self-use. | The three local regulations are consistent. |
8. Summary
The Beijing Pilot Provisions require that from 28 June 2023, new cash pooling business within the jurisdiction of Beijing, as well as existing cash pooling business handled in accordance with Circular 7, shall be handled in accordance with the Beijing Pilot Provisions.
According to the Guangdong Pilot Provisions, starting from 30 June 2023, the new cash pooling business within the jurisdiction of the Guangdong Foreign Exchange Bureau, as well as the existing capital pool business handled in accordance with Circular 7, shall be handled in accordance with the Guangdong Pilot Provisions.
The Shenzhen Pilot Regulations clearly support the active participation of enterprises in Qianhai, Hetao and other eligible enterprises in Shenzhen.
Compared with Circular 7, the three pilot provisions have changed, which also means that multinational companies conducting cash pooling business under the jurisdiction of the Beijing State Administration of Foreign Exchange, the Guangdong State Administration of Foreign Exchange and the Shenzhen State Administration of Foreign Exchange should apply the corresponding provisions according to their actual conditions.
Compared with Circular 7, the policies for the centralized operation and management of cross-border funds in local and foreign currencies of multinational companies have been optimized and upgraded, mainly including: (1) optimizing and integrating the existing policies and requirements related to the centralized operation of cross-border funds of multinational companies to benefit more enterprises, (2) increasing the freedom of cross-border capital operation of enterprises and allowing multinational companies to decide on their own the proportion of foreign debt and overseas loans in accordance with macro-prudential principles, (3) supporting multinational companies to carry out centralized cross-border capital operation business in RMB, and (4) simplifying the filing process and reviewing materials related to the use of funds. For multinational companies, the procedures and contents of their cross-border capital centralized operation business have been optimized and supported, and from another point of view, it is easier to handle this business, and we also look forward to the introduction of more local pilot policies so that more multinational enterprises can use such support policies.
About the author
 | Wei Xie is a partner of the firm Mr. Xie has extensive experience in corporate listing and financing, cross-border mergers and acquisitions, banking and cross-border notarization. |
| | Junna Li is a lawyer at the firm Mr. Li's main areas of legal services are corporate listing and financing, cross-border mergers and acquisitions, and cross-border banking business. |
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