New Policy on Managing Cross-border Funds in Local and Foreign Currencies

Cross-border flows of funds in domestic and foreign currencies affect the national economy in different ways. In the past，separate accounts were maintained for local and foreign currencies under a program for centralized pooling of funds and cross-border fund movements. Local and foreign currency policies were managed by different regulatory departments. But the State Administration of Foreign Exchange (SAFE) recently issued its Regulations on the Centralized Operation of Multinational Enterprise Group Funds [SAFE Document No. 7 (2019)] and for the first time，the regulator proposed multi-currency accounts，including renminbi funds. That groundbreaking document suggests that there eventually will be a merging of the management responsibilities for cross-border domestic and foreign currencies.

The Notice of the People’s Bank of China on the Relevant Matters Concerning the Centralized Operation of Cross-border Renminbi Funds by Multinational Enterprise Groups [PBOC Document No. 324 (2014)]，currently serves as the policy foundation for the centralized cross-border collection and payment business in renminbi under the current account. The Notice of the People’s Bank of China on Further Facilitating Multinational Enterprise Groups to Launch Cross-border Two-way Renminbi Fund Pooling Business [PBOC Document No.279 (2015)] serves as the policy basis for cross-border two-way renminbi fund pooling while Document 7 also governs foreign currency-related cross-border fund management business.

Multinationals and Foreign Currency Fund Pooling

There are regulatory differences between the multinational enterprise groups’ local currency and foreign currencies fund pools in terms of entry barriers，quota management and risk controls.

One area where there are policy changes thanks to the new regulations is in the qualifications for group member companies. The member companies participating in the cross-border two-way renminbi fund pooling must be companies linked to group holding companies. They need to have a clear equity relation to the group in the calculation of overall equity for cross-border two-way renminbi fund pooling. Document 7 offers a broader scope for determining the qualifications of member enterprises for fund pooling covering foreign currencies.

Cross-border two-way renminbi fund pooling requires domestic and foreign member enterprises to have been in operation for more than one year. The total annual operating revenue of the domestic member companies should be at least one billion yuan and the annual operating revenue of overseas member companies should be at least 200 million yuan. Document 7 requires that domestic member companies must have international settlements in domestic and foreign currencies of over US$100 million. Moreover，a member company is barred from this business if it is demoted from a Class A rating under the government classification system that offers greater regulatory convenience for greater regulatory compliance.

Cooperating Banks

In previous two-way cross-border renminbi fund pools，the main enterprises could not have more than three partner banks，but Document 7 removes this restriction.

Both Document 279 and Document 7 require one-time filing. In addition to requiring basic information on the group company and its shareholders，Document No. 7 asks the companies to prepare materials for centralized management on external borrowing quotas，overseas lending quotas，and payment of current account funds and net settlements.

Document 279 states that multinational corporations can set up only one cross-border two-way renminbi fund pool. Document 7 states that multinational corporation sponsors and member companies must not apply for duplicate record filing. In terms of account usage，Document 7 stipulates that multinational corporations set up only one main account in China without any main accounts opened abroad. Foreign exchange loans borrowed by domestic member companies from domestic deposit-taking financial institutions may not be placed in the main account，except for repayment of foreign debts and overseas borrowings. Document 279 does not bar funds from these institutions from being placed in the main account阅读全部文章，请登录数字版阅读账户。 没有账户？ 立即购买数字版杂志