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The 11th Five-year Plan on Foreign Capital Utilization
The State Development and Reform Commission
November 10, 2006
Preamble
The 11th Five-year Plan on Foreign Capital Utilizationwhich is an important part of the 11th Five-year Plan of China’s national
economic and social development, based on making a summary of the overall situation of the 10th Five-year Plan on Foreign Capital
Utilization and analyzing the domestic and foreign environments that the 11th Five-year Plan faces, puts forward the guiding ideology,
strategic objective, key tasks, corresponding policy measures for foreign capital utilization in China for the 11th Five-year Plan,
and is an important guideline of the foreign capital utilization work of China during the 11th Five-year Plan.
During the 11th Five-year Plan, we shall, for the sake of the work of the foreign capital utilization, comprehensively implement the
scientific view of development, further propel the fundamental conversion of the foreign capital utilization from “being quantity
oriented” to “being quality oriented”, practically transfer the emphasis of foreign capital utilization from making up the shortage
of funds and foreign exchanges to introducing advanced technologies, management experiences and high-quality talents, focus more
on ecological construction, environmental protection, conservation and comprehensive utilization of resources and energies, and effectively
combine the foreign capital utilization with the upgrading of domestic industrial structure and technological level.
In accordance with the plan consented to by the State Council on formulating special planning, and based on widely soliciting opinions
from 40 related ministries, commissions and directly subordinate institutions under the jurisdiction of the State Council containing
the Ministry of Foreign Affairs, the Ministry of Finance, the Ministry of Commerce, the People’s Bank of China, 11 industrial associations,
the local departments of development and reform as well as some research institutions, enterprises, experts and scholars, this Plan
is formulated by the State Development and Reform Commission.
Contents
1. Basic Information on Foreign Capital Utilization of China during the 10th Five-year Plan
2. Guiding Ideology and Overall Strategic Objective of Foreign Capital Utilization of China during the 11th Five-year Plan
3. Major Tasks of Foreign Capital Utilization of China during the 11th Five-year Plan
(1) Guiding the industrial structure optimization and upgrading of foreign investments
(2) Promoting the construction of a resource-conservative and environment-friendly society
(3) Propelling the opening up of service industries to the outside world actively and prudently
(4) Promoting the construction of an opener independent system of innovation
(5) Promoting harmonious development of the regional economies
(6) Realizing diversification of the methods of foreign capital utilization
(7) Improving the quality and returns of the utilization of foreign loans
(8) Strengthening the macro-monitoring and full-aperture administration of foreign debts
4. China’s Policy Measures for Foreign Capital Utilization during the 11th Five-year Plan
(1) Constructing a fairer and sounder foreign investmentenvironment
(2) Intensifying the policy guidance to foreign investment industries and to the contribution thereof to selected regions
(3) Intensifying the implementation of resource conservation and environmental protection
(4) Guiding various forms of technical cooperation and united innovations of domestic and foreign funds
(5) Further strengthening the foreign loan borrowing administration
(6) Improving the level of the monitoring, control and management of the foreign debt risks
(7) Maintaining state economic security and public interests
(8) Actively taking part in formulating and coordinating international economic rules
The 11th Five-year Plan is a significant when the economic and social development of China serves as a link between the past and future.
With the domestic and foreign environmental changes that China faces as well as the wider opening up to the outside world, the main
purposes of the foreign capital utilization will be changed, and the philosophy, means, key industries, regional structure, etc.
of the foreign capital utilization will also change greatly. To actively and effectively utilize foreign capital, and to practically
transfer the emphasis to the introduction of foreign advanced technologies, management experiences and high-quality talents, are
the key points for improving the quality of foreign capital utilization during the 11th Five-year Plan .
1.
Basic Information on Foreign Capital Utilization of China during the 10th Five-year Plan
During the 10th Five-year Plan, marked by the entry into WTO, the opening up to the outside world of China has entered a completely
new stage of fully taking part in international economic cooperation and competition, and the foreign capital utilization has also
walked onto a new step. During the 10th Five-year Plan, a total of approximately USD 383 billion foreign capital was actually utilized
in China , of which approximately USD 286 billion was foreign direct investments, approximately USD 38 billion was raised by issuing
stocks overseas, and approximately USD 46 billion was foreign loans. The amount has far exceeded the actually completed amount during
the of the 9th Five-year Plan. The main features are as follows:
(1)
The scale of foreign investments has been extended, and the investment methods have been more diversified. In terms of foreign direct
investments, during the 10th Five-year Plan, the utilization of foreign direct investments has increased by 34% over that during
the 9th Five-year Plan. China has become one of the major destination countries of international capital and transnational companies’
investments. In respect of other foreign investments mainly through raising funds of overseas stocks, great progress has been made.
By the end of 2005, 122 companies from the Mainland have been listed in Hong Kong and other stock exchanges overseas, and a total
of USD 55,544 million funds have been raised (excluding red chip enterprises). A total of 34 overseas institutions are admitted as
qualified foreign institutional investors (QFII).
(2)
We have made prominent achievements in undertaking a new round of international manufacturing industry transfer. During the 10th Five-year
Plan, China grasped the opportunities of structural adjustment and transfer of global manufacturing industry successfully, brought
in large amounts of foreign direct investments in the manufacturing industry, and thus has become one of the important bases of production
in the world preliminarily. The foreign investments that were absorbed in fund-intensive and technology-intensive industries obviously
increased, and many large foreign-invested projects that had been prepared for years were carried out during the 10th Five-year Plan.
Foreign-invested enterprises played good exemplary roles in respect of technology, management and the philosophy of business operation,
etc., propelled the market forces and internalization of China’s economy and enterprises, promoted the formulation of a group of
fresh industries with international competitiveness including electronic information, integrate circuit, light industry, textiles,
household electrical appliances, common mechanical and electrical products, and so on..
(3)
With the entirely implementation of the promises for China’s entry into WTO in the service industry, apparent progress has been made
in the opening up to the outside world. By the end of 2005, a total of 71 foreign banks from 20 countries and regions have set up
238 business operative institutions in China. More than ten Chinese-invested commercial banks containing China Construction Bank,
Bank of China, Industrial and Commercial Bank of China brought in overseas strategic investments, and at the same time China Construction
Bank and Bank of Communications were successfully listed overseas. A total of 4 joint venture securities companies and 20 joint venture
fund management companies were set up upon approval. On the basis of the promises for entry into WTO, the insurance industry has
been opened to foreign-invested insurance companies in all regions and in all businesses except related statutory insurances. By
the end of 2005, the number of foreign-invested insurance companies has increased to 40 companies and 93 head companies and branches.
Foreign-invested enterprises have become an important part in the fields of logistics and commerce. In 2005, the foreign capital
utilized in the service industry of China exceeded one fifth of the total amount of foreign investments in the year.
(4)
Foreign loans increased steadily, which supported the construction of state key projects effectively. During the 10th Five-year Plan,
the foreign preferential loans actually utilized throughout China totaled approximately USD 20.7 billion, which supported 150 key
projects, including the reinforcing projects of the main dykes of the Changjiang River and the Yellow River, trunk line highways
in Sichuan and other provinces, several trunk line railways from Hubei province to Chongqing, the coal-bed gas project in Shanxi
province, pollution treatment along the basins of Huaihe River, the projects of the agricultural comprehensive development in the
Central and Western Regions, etc. Emphasis was laid on the Central and Western Regions, which gained more than 70% of preferential
loans when the foreign preferential loans being arranged. The financing channels and ways of international commercial loans took
a feature of diversification. During the10th Five-year Plan, approximately USD 25.8 billion of international commercial loans (except
loans granted by foreign-invested enterprises) have been borrowed in China, which mainly supported some urgently-needed projects
on energy source and traffic in national economic development as well as partial industrial projects with short construction, good
economic returns and ability to generate foreign exchange earnings through export, for example, the hydro-power station of the Three
Gorges, Lingao Nuclear Power Station in Guangdong, Tianwan Nuclear Power Station, Qinshan Nuclear Power Station, etc., the purchase
of airplanes by airline companies, and so on, helped introduce some important advanced technical equipment and key equipment which
could not be manufactured in China, relieved the situation on unsuitable structure of sources of foreign exchange funds of domestic
financial institutions, and enhanced the domestic institutions’ ability to optimally allocate funds .
(5)
Capacities of managing foreign debts have been further enhanced, and the foreign debt scale is in step with the level of the national
economic development and the situation of the international balance of payment. With regard to the tendencies which foreign debts
of China took on in recent years, namely, the flow increased by times, the total scale grew rapidly, and short-term foreign debts
took up a large proportion, the administrative department of foreign debts successively promulgated related provisions, effectively
controlled the growth of foreign debts and adjusted the structure of foreign debts in a timely manner, so as to keep the debt service
ratio, liability ratio, and debt-to-GDP ratio of China’s foreign debts within the safe lines that are accredited internationally.
(6)
The regulations and policies on foreign capital utilization have been improved constantly, and the management level has been advanced
gradually. On the basis of the requirements for the development of socialist market economy and China’s promises for entry into WTO,
the related laws and regulations on foreign capital utilization as well as the rules and regulatory documents of all departments
and localities have been completely cleaned up and amended. We have amended the Catalogue for the Guidance of Foreign Investment
Industries twice, have amended the Catalogue of Priority Industries for Foreign Investment in the Central and Western Regions, and
have promulgated the Implementation Opinions on the Promotion of the Old Industrial Base in Northeast China to widely Open up to
the Outside World . According to the spirit of the investment system reform of the State Council, the auxiliary reform of the management
system of the foreign capital utilization was conducted, the approval procedures for foreign loan projects have been regularized,
the approval system for foreign-invested projects has been changed into ratification system, the examination steps have been reduced,
and the work efficiency has been improved.
However, during the 10th Five-year Plan, there were still some problems on China’s foreign capital utilization worth paying attention
to: Firstly, the problem of “stressing quantity but ignoring quality”, which has existed in absorbing foreign capital for long, is
still prominent. Some local governments and departments absorbed foreign capital blindly without caring costs and pursued the quantity
of foreign capital unilaterally, and the phenomenon that the state industrial policies were broken occurred frequently. Secondly,
the leading enterprises in some industries were acquired and merged with foreign investments more and more frequently, and in a few
areas, the symptom of foreign investment monopoly arose or even expanded rapidly, which might threaten the state economic security,
particularly industrial security. Thirdly, the overall absorption scale and level of foreign direct investments in the Central and
Western Regions were comparatively low, and the gap from the foreign direct investments utilization in the Eastern Regions has been
further widened. Fourthly, the technology spillover of foreign-invested enterprises was not prominent, and some foreign-invested
enterprise abused intellectual property protection, which did not favor the domestic enterprises’ independent innovations. Fifthly,
the existing administration system of foreign capital utilization urgently needs to be improved, and a part of presently applicable
policies are not favor creating an environment for fair competition between domestic enterprises and foreign-invested enterprises.
Sixthly, a small number of projects of foreign loan utilization were not strictly administered, the fund utilization efficiency was
low, and the debt repayment was difficult. Seventhly, the proportion of foreign debts with short term increased rapidly, and the
potential risks of foreign debt also increased.
2.
Guiding Ideology and Overall Strategic Objective of Foreign Capital Utilization of China during the 11th Five-year Plan Period
During the 11th Five-year Plan, the overall domestic and foreign environments in respect of foreign capital utilization that China
faces still tend to be good, and have created conditions for China to improve the quality and level of foreign capital utilization,
and to continue keeping the foreign capital utilization in a large scale, as well. The 11th Five-year Plan is, at the same time,
also a period when the external environmental restrictions and internal risks of the economic development of China are centralized.
For one thing, uncertain factors for the world economic growth still exist has, the global economic development is unbalanced, the
international financial market is still likely to suffer from violent turbulence, the trade protectionism tendency is obvious, and
the dispute between all countries for international capital becomes increasingly severe. For another, some prominent problems still
exist there, for example, China’s energy sources and mineral resources are relatively insufficient, the ecological environment is
frail, the mode of the economic growth is changed slowly, and the comparative advantages of labor force cost have been weakened.
After making a summary of the domestic and foreign situations, it can be preliminarily concluded that, during the11th Five-year Plan,
the foreign capital utilization of China will have the following new changes: in respect of regional structure, with the rising of
the cost of production factors in the Eastern Regions, the Central and Western Regions will face very good opportunities in utilizing
foreign capital, and the smooth going of echelon transfer of foreign investments will become an important task of the Central and
Western Regions in utilizing foreign capital. In respect of industrial structure, the 11th Five-year Plan will be an important period
when China’s service industry is reformed and developed and the service industry, particularly modern service industry, becomes an
industry to which foreign investments will speed up to enter. In respect of investment scale, the cost of foreign investments will
be increased, and the speed of increase of foreign investments during the 11th Five-year Plan will be heavily influenced due to the
tendency of saturation of investments in domestic traditional manufacturing industries, the rise of the cost of domestic factors,
and the restrictions on energies and resources.. In respect of the foreign capital utilization methods, the credit standing of the
state and that of enterprises will be improved constantly, the reforms of formation mechanism of Renminbi exchange rate and of other
related systems will be propelled constantly, and the foreign exchange reserves with a large scale and the increasing development
of domestic investment banking industry have created conditions for China to utilize foreign capital and to reduce financial risks
in multiple ways. The layout of domestic traditional industries has been completed basically, and both the building up of new investment
projects and the merger and acquisition of enterprises will become important modes of foreign direct investments.
During the 11th Five-year Plan, the guiding ideology of foreign capital utilization of China shall be: To take Deng Xiaoping Theory
and the important thoughts of “Three Represents” as the guide, to comprehensively carry out the scientific view of development, and
to actively and effectively utilize foreign capital; to make an overall plan for domestic development and the opening up to the outside
world, to properly deal with the relationship between the foreign capital utilization and the balance of international payments,
that between utilizing foreign capital and making the best use of domestic funds, to promote adjusting and optimizing the structure
of domestic industry and regional economy, as well as to conscientiously improve the quality of foreign capital utilization; to propel
the construction of an opener independent innovation system, to intensify the integrated innovation ability and the re-innovation
ability to import, digest and absorb; to, in the process of further opening to the outside world, actively defend and eliminate various
risks, and to conscientiously guarantee the state economic security; to further reinforce, exert and create the comparative advantages
of China, to carry out the opening strategy for mutual benefit and common wins, and to actively take part in international economic
and technological cooperation and competition within a larger scope, in wider areas and at a higher level.
During the 11th Five-year Plan, the overall strategic objective of foreign capital utilization of China shall be: To further propel
the fundamental conversion of foreign capital utilization from “being quantity oriented” to “being quality oriented”, to conscientiously
transfer the emphasis of the foreign capital utilization from making up the shortage of funds and foreign exchanges to introducing
advanced technologies, management experiences and high-quality talents, and to focus more on ecological construction, environmental
protection, conservation and comprehensive utilization of resources and energies. By way of introducing foreign advanced technologies
and management experiences, we shall exert the functions of leading and eradiating of foreign-funded enterprises to domestic enterprises,
promote the improvement of the integrated innovation ability and the re-innovation ability to import, digest and absorb of China;
we shall strive for the further extension of foreign investments from the simple processing, assembly, and the production and manufacturing
at a low level to research, development, high-end design, modern circulation and other new areas, propel China to become one of the
manufacturing bases of high value-added products in the world; we shall greatly improve the level of opening up to the outside world
in the service industry; we shall markedly improve the scale, quality and level of foreign capital utilization in the old industrial
bases in the Central and Western Regions and those in Northeastern Regions, further intensify the Eastern Regions’ economic globalization
extent and international competitiveness; we shall utilize foreign preferential loans actively, reasonably and effectively, focus
more on their quality and returns; we shall strengthen the control of the structure and purposes of foreign debts, strictly prevent
the risks of foreign debt; the total scale of foreign capital shall grow steadily on the basis of the 10th Five-year Plan; up to
2010, the system of foreign capital utilization management shall be more reasonable and effective, and the foreign capital utilization
shall be more harmonious with domestic economic and social development.
3.
Major Tasks of Foreign Capital Utilization of China during the 11th Five-year Plan
(1)
Guiding the industrial structural optimization and upgrading of foreign investments
Foreign investors shall be encouraged to invest in and develop modern agriculture, to concentrate on developing ecological agriculture
and the planting and breeding industries with high technology content and high added value, to concentrate on comprehensively utilizing
agricultural wastes, developing biological mass energy, developing and manufacturing modern agricultural mechanical equipment, and
deeply processing of agricultural products, as well as to introduce modernized agricultural technologies and management modes.
We shall encourage foreign investors to continue the investment in electronic information industry, petro-chemical industry, chemical
industry, and automobile industry, and so on. They shall, on the basis of requirements for China’s industrial upgrading of the heavy
chemical industry, appropriately increase foreign investment projects including the large petro-chemical industry and chemical industry,
and so on. We shall particularly encourage the projects in which self-balance of resources can be realized, and foreign advanced
technologies shall be introduced by ways of joint venture cooperating and other ways. The automobile manufacturing industry shall,
when continues doing a good job in upgrading the joint venture enterprises’ products and improving the joint venture enterprises’
market competitiveness encourage foreign capital to be mostly contributed to automobile design, the building up of research and development
centers, and shall continue encouraging foreign capital to be contributed to develop the manufacturing of professional automobile
parts and components with high technology content.
We shall encourage foreign capital to continue to be used in reorganization and reform in mechanical industry, light industry, industries
concerning textiles, raw materials, construction and building materials, and other traditional industries, as well as be contributed
to improve enterprises’ technical level and product class, and to enhance enterprises’ international competitiveness. We shall reform
domestic traditional industries by ways of introducing advanced applicable technologies, equipment and management experiences, bring
in foreign investments to develop labor-intensive industries with comparative advantages of China and export processing industry,
and to promote the development of the medium and small enterprises featured as “professional, specialized, unique, new and excellent”.
Foreign capital shall be led to be used in the energy source area so as to accelerate exploring, exploiting, utilizing domestic petroleum
and natural gas as well as building up the transporting pipelines, and the development of redeemable energies shall be sped up.
We shall continue encouraging foreign capital to invest in the building up of infrastructures. Foreign investments shall be actively
utilized to speed up the construction of the traffic projects such as highways, ports and railways, as well as the urban infrastructures
such as track traffic, water supply, gas supply, heat supply, sewage and garbage treatment, and so on, and particularly be encouraged
to be invested in urban infrastructure construction in the old industrial bases in the Central and Western Regions and those in Northeastern
Regions, and in the development of the succeeding industries in resource-exhausted cities.
(2)
Promoting the construction of a resource-conservative and environment-friendly society
We shall intensify the policy guidance of resource conservation and environmental protection to the foreign capital utilization, and
strictly restrict foreign-invested projects at a low level, with high consumption and high pollution; we shall encourage the conservation
of water, land and materials in foreign capital utilization, strengthen comprehensive utilization of resources, and encourage the
introduction t of advanced applicable process, technology and equipment which may effectively conserve energy and reduce consumption
through foreign capital utilization.
We shall actively propel the foreign capital utilization in areas of environmental protection, and propel the carrying out of key
projects of environmental protection engineering. We shall intensify comprehensive prevention and control of pollution caused by
foreign-invested enterprises such as water pollution, air pollution and solid waste pollution, and so on, and effectively control
the pollutant discharge. Foreign investors shall be encouraged to invest in recycling and utilizing waste metal, worn tires, waste
electronic products and other industrial wastes as well as utilizing household garbage and sludge as resources. We shall speed up
the development of the building up of ecological environments in the Central and Western Regions, and encourage foreign investors
to invest in biological mass-energy conversion projects and clean energy projects.
(3)
Propelling the opening up of service industries to the outside world actively and steadily
The opening up of the banking industry to the outside world shall be in line with the principles of progressing in order, supervising
prudentially and controlling risks. We shall keep a reasonable structure and layout of both Chinese-invested banks and foreign-invested
banks within the territory of China. We shall, on the premise that the Chinese party controls the shares, allow domestic commercial
banks to bring in foreign strategic investors. We shall actively support the establishment of strategic partnerships such as stock
right cooperation, etc. between foreign-invested banks and Chinese-invested banks, and shall improve the corporate governance structure.
We shall encourage both Chinese-invested and foreign-invested banks to cooperate in terms of financial products, work skills, information
exchange, resource sharing and trainings, etc., introduce advanced business operation philosophy, operational modes and senior management
talents of the modern banking industry, and to promote the conversion of domestic commercial banks’ mechanism.
The insurance industry shall carefully fulfill the China’s promises on entry into WTO, lay emphasis on bringing in overseas insurance
companies and other financial institutions which are specialized in the areas such as pension, medical treatment, liability and agricultural
insurance, and so on, and we shall encourage foreign-invested insurance companies to conduct business by setting up business institutions
in the Central and Western Regions and in Northeastern Regions. We shall, on the premise that the Chinese party controls the shares,
allow State-owned insurance companies to bring in foreign strategic investors, and allow qualified domestic joint stock insurance
companies to bring in foreign investments. They shall, through foreign capital utilization, speed up the introduction of foreign
advanced insurance products, operational modes and senior management talents, so as to enhance insurance industries’ competitiveness
of China.
We shall propel the opening up to the outside world of the securities industry in an orderly way and step by step, and shall continue
bringing in foreign investors, promote securities business institutions to improve their corporate governance structure, to strengthen
their internal risk control and management, and to enhance their management level on the basis of the principle of prudentially supervising;
as well as to speed up the industrial integration, product and service innovation. We shall allow listed enterprises to bring in
strategic investments from overseas strategic investors after finishing the share-trading reform.
The telecommunication industry shall be steadily and orderly opened to foreign investors. It shall be done strictly according to China’s
promises for entry into WTO. Foreign investors shall be allowed to run domestic telecommunication business within the statutory scope
through joint venture, the proportion of foreign investments in the market of the value-added telecommunication service may be enlarged,
and the opening up of the basic service market shall be propelled prudentially. The policy system on the opening up to the outside
world of the telecommunication industry shall be improved.
The commercial sector shall lay emphasis on the improvement of the foreign investment absorption level. It shall, by aiming at the
introduction of business operation philosophy in modern commerce, foreign advanced distribution methods, marketing network and service
means as the objective, keep a proper increase of the number of foreign-invested commercial retail enterprises, and develop foreign-invested
commercial wholesale enterprises, large chain stores and distribution centers in an orderly way. Large domestic commercial enterprises
shall be supported to optimize the structure by bringing in foreign capital, and to improve the management level, as well. We shall
closely focus on the affects of foreign investments to the commercial development of China, conscientiously do well in supervision
over anti-trust and fair trading, and keep the Chinese-invested and foreign-invested commercial enterprises’ reasonable layout, market
shares and structure in large and medium cities.
Large foreign logistics enterprises shall be encouraged to set up logistics enterprises in China in light of related provisions of
the laws and regulations of China, and shall be encouraged to utilize foreign funds, equipment and technologies, and to take part
in constructing and operating domestic logistics facilities.
We shall actively propel the foreign capital utilization in the tourism industry. We shall utilize foreign capital to improve tourism
facilities, to protect and develop tourism resources, to attract overseas tourists, and to improve the management. We shall encourage
the wider opening up to the outside world in the industries of transport, construction, legal service, accounting service, consulting,
etc. through Chinese-foreign joint venture, Chinese-foreign cooperation, and so on. Foreign investments shall be actively and steadily
promoted to contribute to the cultural area, including distribution of audio and video products, operation and brokerage of performance
places and cultural products, etc. State cultural security shall be maintained, too.
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Order of the State Council of the People’s Republic of China
No.478
The Regulations of the People’s Republic of China on the Administration of Foreign-invested Banks has been adopted at the 155th Executive
Meeting of the State Council on November 8, 2006 and is hereby promulgated, and shall come into force as of December 11, 2006.
Premier of the State Council Wen Jiabao
November 11, 2006
Regulations of the People’s Republic of China on the Administration of Foreign-invested Banks
Chapter I General Provisions
Article 1
The present regulations are formulated for the purpose of strengthening and improving the supervision and administration of foreign-invested
banks and promoting the sound and stable operation of the banking industry so as to meet the demands arising from the work of opening
to the outside world and economic development.
Article 2
The term “foreign-invested banks” as mentioned in the present Regulations refers to the following institutions which have been approved
to be established to operate within the territory of the People’s Republic of China in accordance with relevant laws and regulations
of the People’s Republic of China:
1.
Solely foreign-invested banks established with sole investment of a foreign bank or joint investment of a foreign bank and other foreign
financial institutions;
2.
Chinese-foreign joint venture banks established jointly by foreign financial institutions and Chinese corporations and enterprises;
3.
Branches of foreign banks; or
4.
Representative offices of foreign banks.
The institutions listed in item 1 through item 3 in the preceding paragraph shall be hereinafter referred to as “foreign-invested
bank business institutions”.
Article 3
The term “foreign financial institutions” as mentioned in the present Regulations refers to financial institutions registered outside
the territory of the People’s Republic of China and approved or permitted by financial regulatory authorities in the countries or
regions where they are located. The term “foreign banks” as mentioned in the present Regulations refers to commercial banks registered
outside the territory of the People’s Republic of China and approved or permitted by financial regulatory authorities in the countries
or regions where they are located.
Article 4
Foreign-invested banks shall abide by the laws and regulations of the People’s Republic of China and shall not do harm to the national
interests, the social and public interests of the People’s Republic of China. The normal activities and legitimate rights and interests
of foreign-invested banks shall be protected by the laws of the People’s Republic of China.
Article 5
The banking regulatory institution of the State Council and the dispatched institutions thereof (hereinafter referred to as the banking
regulatory institution) shall be responsible for the supervision and administration of foreign-invested banks as well as their activities.
Where any other laws or regulations otherwise prescribe that other regulatory departments or institutions shall be responsible for
so doing, the provisions thereof shall prevail.
Article 6
The banking regulatory institution of the State Council shall be responsible for the formulation of relevant measures of encouragement
and guidance in accordance with the state regional economic development strategies and relevant policies, which shall come into force
upon approval by the State Council.
Chapter II Establishment and Registration
Article 7
The establishment of foreign-invested banks and the branches thereof shall be subject to the examination and approval of the banking
regulatory institution of the State Council.
Article 8
The minimum limit of registered capital for a solely foreign-invested bank or a Chinese-foreign joint venture bank shall be RMB 1
billion or convertible foreign currencies on a par with RMB 1 billion. The registered capital shall be the paid-in capital. The operating
capital of a branch of a solely foreign-invested bank and a Chinese-foreign joint venture bank within the territory of the People’s
Republic of China as provided by its head office shall be no less than RMB100 million or convertible foreign currencies on a par
with RMB100 million. The total operating capital of all branches as provided by the solely foreign-invested bank and the Chinese-foreign
joint venture bank shall be no more than 60% of the total capital of the head offices thereof. The operating capital of a branch
of a foreign bank as provided by its head office shall be no less than RMB200 million or convertible foreign currencies on a par
with RMB200 million. The banking regulatory institution of the State Council may, in light of the business scope of business institutions
of foreign-invested banks and the needs of prudent supervision, raise the minimum limit of registered capital or operating capital
thereof and prescribe the proportion of Renminbi thereof.
Article 9
Shareholders of solely foreign-invested banks and Chinese-foreign joint venture banks to be established or foreign banks that are
to establish branches or representative offices shall satisfy the conditions as follows:
1.
Having sustainable capability of gaining profits and good credibility and no record of major violations of the laws and regulations;
2.
Shareholders of the solely foreign-invested banks and foreign shareholders of Chinese-foreign joint venture banks to be established
or foreign banks that are to establish branches or representative offices shall boast experiences of engaging in international financial
businesses;
3.
Having effective anti-money laundering systems;
4.
Shareholders of the solely foreign-invested banks and foreign shareholders of Chinese-foreign joint venture banks to be established
or foreign banks that are to establish branches or representative offices shall be subject to effective supervision by the financial
regulatory authorities in the countries or regions where they are located from which they shall obtain approval for their applications;
and
5.
Other prudent conditions as prescribed by the banking regulatory institution of the State Council. The countries or regions where
shareholders of the solely foreign-invested banks and foreign shareholders of Chinese-foreign joint venture banks to be established
or foreign banks that are to establish branches or representative offices are located shall have complete financial supervision and
administration systems and good regulatory cooperation systems established between the financial regulatory authorities thereof and
the banking regulatory institution of the State Council.
Article 10
Shareholders of the solely foreign-invested banks to be established shall be financial institutions and the sole shareholder or the
controlling shareholder thereof shall satisfy, in addition to the conditions as prescribed in Article 9 of the present Regulations,
the following conditions:
1.
A commercial bank;
2.
Having a representative office within the territory of the People’s Republic of China for at least two years;
3.
With the total assets no less than US billion at the end of the year before the establishment application is put forward; and
4.
Having a capital adequacy ratio that is in accordance with the provisions of the financial regulatory authority in the country or
region where it is located and the banking regulatory institution of the State Council.
Article 11
Shareholders of the Chinese-foreign joint venture banks to be established shall satisfy the conditions as prescribed in Article 9
of the present Regulations, and in addition, the sole shareholder or the controlling shareholder thereof shall be a financial institution
and satisfy the following conditions:
1.
A commercial bank;
2.
Having a representative office established within the territory of People’s Republic of China;
3.
With the total assets no less than US billion at the end of the year before the establishment application is put forward; and
4.
Having a capital adequacy ratio that is in accordance with the provisions of the financial regulatory authority in the country or
region where it is located and the banking regulatory institution of the State Council.
Article 12
Foreign banks that are to establish branches shall satisfy, in addition to the conditions as prescribed in Article 9 of the present
Regulations, the following conditions:
1.
With the total assets no less than US billion at the end of the year before the establishment application is put forward;
2.
Having a capital adequacy ratio that is in accordance with the provisions of the financial regulatory authority in the country or
region where it is located and those of the banking regulatory institution of the State Council; and
3.
Where it is the first time for a foreign bank to establish branches, it shall have a representative office established within the
territory of the People’s Republic of China for at least two years.
Article 13
Foreign banks that have established business institutions within the territory of the People’s Republic of China shall not establish
new representative offices other than the existing ones, exclusive of regions that are supposed to be in accordance with the state
regional economic development strategies and related policies. Representative offices that have been converted into business institutions
upon approval shall go through formalities for the cancellation of registration of the former representative offices under law.
Article 14
To establish a foreign-invested bank business institution, preparations for the establishment shall be first applied for, and the
following application materials shall be submitted to the banking regulatory institution in the place where the institution is to
be established:
1.
An application form with the contents covering the name, site, registered capital or operating capital, types of business under application
of the institution to be established;
2.
A feasibility study report;
3.
The draft articles of association of the solely foreign-invested bank and the Chinese-foreign joint venture bank to be established;
4.
The operating contract signed by and between shareholders of all parties of the solely foreign-invested bank and the Chinese-foreign
joint venture bank to be established;
5.
The articles of association of shareholders of the solely foreign-invested bank and the Chinese-foreign joint venture bank to be established
or the articles of association of the foreign bank that is to establish branches;
6.
Chart of the institutional structure of the shareholders of the solely foreign-invested bank and the Chinese-foreign joint venture
bank to be established, the foreign bank that is to establish branches and the conglomerate to which they belong, name-list of major
shareholders, overseas branches and name-list of affiliated enterprises;
7.
The annual financial statements of the last three years of the shareholders of the solely foreign-invested bank and the Chinese-foreign
joint venture bank to be established and the foreign bank that is to establish branches;
8.
The anti-money laundering systems of the shareholders of the solely foreign-invested bank and the Chinese-foreign joint venture bank
and the foreign bank that is to establish branches;
9.
Copies of business licenses or copies of license documents on operating financial business issued by financial regulatory authorities
in the countries or regions where the shareholders of the solely foreign-invested bank to be established, the foreign shareholders
of the Chinese-foreign joint venture bank to be established and the foreign bank that is to establish branches are located together
with the letter of opinions on the application; and
10.
Other material as required by the banking regulatory institution of the State Council.
The banking regulatory institution in the place where the institution to be established is located shall submit the application materials
together with opinions on the application to the banking regulatory institution of the State Council in a timely manner.
Article 15
The banking regulatory institution of the State Council shall make a decision on whether or not to approve the preparations for establishment
within six months as of the day of receiving all the required application materials for establishing the foreign-invested bank business
institution and shall inform the applicant in written form. Where the application is rejected, reasons shall be specified. Under
special circumstances where the banking regulatory institution of the State Council fails to finish examination and make the decision
on whether or not to approve the preparations for establishment within the period as previously prescribed, the period may be extended
appropriately, and the applicant shall be informed in written form; however, the extended period shall not exceed 3 months. The applicant
shall receive the application form for starting business from the banking regulatory institution in the place where the institution
to be established is located.
Article 16
The applicant shall complete the preparations within 6 months as of the day of receiving the approval for preparing the establishment.
Where the preparations fail to be finished within the prescribed period, reasons shall be specified and the period may be extended
for 3 months upon the approval of the banking regulatory institution in the place where the institution to be established is located.
Where the preparation work can not be finished within the extended period, the decision made by the banking regulatory institution
of the State Council on approving the preparations for establishment shall be invalidated automatically.
Article 17
As regards those who have completed the preparations for establishment upon acceptance, the applicant shall fill in the application
form for starting the operation and submit it together with the following materials to the banking regulatory institution in the
place where the institution to be established is located:
1.
The name-list of the principals of the institution to be established and their resumes;
2.
Letters of authorization for principals of the institution to be established;
3.
Certification on verification of capital issued by a statutory capital verification agency;
4.
Safety measures and materials of other facilities related to business;
5.
Tax and liability guarantee of the foreign bank for its branch bank as in the case of applying for establishing a foreign branch bank;
and
6.
Other materials as required by the banking regulatory institution of the State Council.
The banking regulatory institution in the place where the institution to be established is located shall submit the application materials
together with opinions after examination and approval to the banking regulatory institution of the State Council in a timely manner.
Article 18
The banking regulatory institution of the State Council shall make a decision on whether or not to approve the starting of operation
within 2 months from the day of receiving all the required application materials for starting the operation and shall inform the
applicant in written form. Where the application is approved, the financial transaction license shall be issued; where the application
is not approved, reasons shall be specified.
Article 19
Where a foreign-invested bank business institution is established upon approval, the applicant shall make the registration with and
draw the business license from the administration of industry and commerce based on the financial transaction license.
Article 20
To establish a foreign bank representative office, the following application materials shall be submitted to the banking regulatory
institution in the place where the representative office to be established is located:
1.
An application form with the contents covering the post_title and site of the representative office to be established;
2.
A feasibility study report;
3.
The articles of association of the applicant;
4.
Chart of the institutional structure of the applicant and the conglomerate to which it belongs, name-list of major shareholders, overseas
branches and name-list of affiliated enterprises;
5.
Annual financial statements of the last three years of the applicant;
6.
The anti-money laundering system of the applicant;
7.
Copies of the identity card and the academic credentials, resume and report of negative records of the top representative of the representative
office to be established;
8.
Letter of authorization for the top representative of the representative office to be established;
9.
Copies of business license or copies of license documents on operating financial business issued by the financial regulatory authority
in the country or region where the applicant is located together with the letter of opinions on the application thereof; and
10.
Other documents as required by the banking regulatory institution of the State Council.
The banking regulatory institution in the place where the representative office to be established is located shall submit the application
materials together with opinions after examination and approval to the banking regulatory institution of the State Council in a timely
manner.
Article 21
The banking regulatory institution of the State Council shall make a decision on whether or not to approve the establishment within
six months as of the day of receiving all the required application materials for establishing a representative office of the foreign
bank and shall inform the applicant in written form. Where the application is not approved, reasons shall be specified.
Article 22
Where a representative office is established upon approval, the applicant shall make the registration with and draw the registration
certificate of industry and commerce from the administration of industry and commerce based on the approval documents.
Article 23
The materials indicated in Article 14 , Article 17 and Article 20 , except the annual financial statements, shall have a Chinese
translation attached if they are written in a foreign language.
Article 24
In accordance with the principles of legitimacy, prudence and sustainable operation and upon approval by the banking regulatory institution
of the State Council, the foreign bank may convert the branches it established within the territory of China into solely foreign-invested
banks with its sole investment. The applicant hereof shall put forward application for establishing solely foreign-invested banks
in accordance with the conditions for examination and approval, procedures and materials required by the banking regulatory institution
of the State Council.
Article 25
Where the branches of a foreign bank are converted into solely foreign-invested banks with the sole investment of the head office
thereof, the foreign bank may reserve one branch engaged in foreign exchange wholesale business within the prescribed time limit.
The applicant hereof shall put forward applications for establishing solely foreign-invested banks in accordance with the qualifications
for examination and approval, procedures and materials required by the banking regulatory institution of the State Council.
The term “foreign exchange wholesale business” as mentioned in the preceding paragraph refers to foreign exchange business with clients
exclusive of individuals.
Article 26
The qualifications for appointment of directors, senior managerial personnel and the top representative shall be in accordance with
the requirements regulated by the banking regulatory institution of the State Council and shall be examined and approved by it.
Article 27
The Foreign banks that are under any of the following circumstances shall, upon approval of the banking regulatory institution of
the State Council, furnish application materials in accordance with relevant provisions and go through related registration with
the administration of industry and commerce:
1.
To modify registered capital or operating capital;
2.
To modify the post_title, business premises or site of office of the institution;
3.
To adjust the scope of business;
4.
To modify or adjust the share proportion of shareholders;
5.
To modify the articles of association; and
6.
Other circumstances as regulated by the banking regulatory institution of the State Council.
Where the foreign-invested banks are to change directors, senior managerial personnel and the top representative, their qualifications
for appointment shall be submitted to the banking regulatory institution of the State Council for examination and approval.
Article 28
Where shareholders are modified in solely foreign-invested banks and Chinese-foreign joint venture banks, the shareholders after
modification shall satisfy the conditions for shareholders as prescribed in Article 9 , Article 10 or Article 11 of the present
Regulations.
Under special circumstances and upon the approval of the banking regulatory institution of the State Council, Item 2 of Article 10
or Item 2 of Article 11 of the present Regulations may not be applicable to the shareholders after modification.
Chapter III Scope of Business
Article 29
Solely foreign-invested banks and Chinese-foreign joint venture banks, in accordance with the scope of business approved by the banking
regulatory institution of the State Council, may engage in the following foreign exchange business and Renminbi business in part
or in whole:
1.
Absorbing public deposits;
2.
Issuing short-term, medium-term and long-term loans;
3.
Handling the acceptance and discount of negotiable instruments;
4.
Purchasing/sell government bonds, financial bonds and other foreign currency negotiable securities other than stocks;
5.
Providing letter of credit service and guarantee;
6.
Arranging settlement of both domestic and overseas accounts;
7.
Purchasing/selling foreign exchanges per se or as agents;
8.
Handling insurance business as agents;
9.
Doing inter-bank lending and borrowing;
10.
Running business of bank cards;
11.
Providing safe-keeping services;
12.
Providing services of credit rating and consulting; and
13.
Other business approved by the banking regulatory institution of the State Council.
Solely foreign-invested banks and Chinese-foreign joint venture banks, upon approval of the People’s Bank of China may run foreign
exchange settlements and sales.
Article 30
Where the branches of solely foreign-invested banks and Chinese-foreign joint venture banks carry out business within the scope of
authorization of the head offices, the liabilities shall be undertaken by the head offices thereof.
Article 31
The branches of foreign banks may, in accordance with the scope of business approved by the banking regulatory institution of the
State Council, engage in the following foreign exchange business and Renminbi business in part or in whole and the Renminbi business
with clients exclusive of citizens within territory of China:
1.
Absorbing public deposits;
2.
Issuing short-term, medium-term and long-term loans;
3.
Handling the acceptance and discount of negotiable instruments;
4.
Purchasing/ selling government bonds, financial bonds and other foreign currency negotiable securities other than stocks;
5.
Providing letter of credit service and guarantee;
6.
Arranging settlement of both domestic and overseas accounts;
7.
Purchasing/selling foreign exchanges per se or as agents;
8.
Handling insurance business as agents;
9.
Doing inter-bank lending and borrowing;
10.
Providing safe-keeping services;
11.
Providing services of credit rating and consulting; and
12.
Other business approved by the banking regulatory institution of the State Council.
Branches of foreign banks may absorb every fixed deposit no less than 1 million yuan from citizens within territory of China and,
upon approval of the People’s Bank of China, may engage in foreign exchange settlements and sales.
Article 32
The civil liabilities of the branches of foreign banks and affiliated agencies thereof shall be undertaken by the head offices.
Article 33
The representative offices of foreign banks may engage in liaison, market investigation, consulting and other non-business activities
which are related to the business of the foreign banks they represent. The civil liabilities arising from the activities of the representative
offices of foreign banks shall be undertaken by the foreign banks they represent.
Article 34
The foreign bank business institutions engaged in Renminbi business within the scope of business as prescribed in Article 29 or
in Article 31 of the present Regulations shall be approved by the banking regulatory institution of the State Council and shall
satisfy the conditions as follows:
1.
Having practiced within the territory of the People’s Republic of China for not less than 3 years before filling the application;
2.
Having made profits for 2 successive years before filing the application; and
3.
Other prudent conditions as prescribed by the banking regulatory institution of the State Council.
Where the branches of foreign banks are converted into solely foreign-invested banks with the sole investment of the head offices
thereof, the periods as previously prescribed in Item 1 and Item 2 shall be calculated as of the day of establishing the branches
of foreign banks.
Chapter IV Supervision and Administration
Article 35
Foreign bank business institutions shall, under relevant provisions, formulate business rules and principles thereof, establish and
improve risk management and internal control system and thereby carry them out.
Article 36
Foreign bank business institutions shall abide by the state uniform accounting system and provisions on information disclosure as
regulated by the banking regulatory institution of the State Council.
Article 37
Foreign bank business institutions shall raise foreign debts under relevant provisions of the state.
Article 38
Foreign bank business institutions shall determine the interest rates for deposits and loans and commission fees in accordance with
relevant provisions.
Article 39
In handling deposits, foreign bank business institutions shall lodge deposit reserve funds in accordance with the relevant provisions
as regulated by the People’s Bank of China.
Article 40
Solely foreign-invested banks and Chinese-foreign joint venture banks shall abide by the provisions on the administration of the
ratio of liabilities to assets as prescribed in Law of the People’s Republic of China on Commercial Banks. Solely foreign-invested
banks originating from branches of foreign banks with the sole investment of the head offices thereof, and solely foreign-invested
banks and Chinese-foreign joint venture banks established before the implementation of the present Regulations, as in case of impropriate
ratio of liabilities to assets that is against the provisions, shall, within the prescribed time limit, meet the requirements as
regulated by the banking regulatory institution of the State Council which may require solely foreign-invested banks and Chinese-foreign
joint venture banks with high risks but relatively weak risk management capabilities to raise the capital adequacy ratio.
Article 41
Foreign bank business institutions shall draw bad debts reserve funds in accordance with the provisions.
Article 42
Solely foreign-invested banks and Chinese-foreign joint venture banks shall abide by the provisions of the banking regulatory institution
of the State Council related to the governing of corporations.
Article 43
Solely foreign-invested banks and Chinese-foreign joint venture banks shall abide by the provisions of the banking regulatory institution
of the State Council related to affiliated transactions.
Article 44
Thirty percent of the operating capital of a foreign bank branch shall be in the form of interest-earning assets as designated by
the banking regulatory institution of the State Council.
Article 45
The ratio of the proportion of Renminbi in the totality of operating capital and reserve of a foreign bank branch to the risk assets
of Renminbi shall not be less than 8%.
The banking regulatory institution of the State Council may require branches of foreign banks with high risks but relatively weak
risk management capabilities to raise the ratio as previously prescribed.
Article 46
A foreign bank branch shall ensure the fluidity of its assets. The ratio of the balance of liquid assets and the balance of liquid
debts shall not be less than 25%.
Article 47
The balance of domestic and foreign currencies assets within territory of China of a foreign bank branch shall not less than the
balance of domestic and foreign currencies liabilities within territory of China.
Article 48
A foreign bank with two or more branches within the territory of the People’s Republic of China shall authorize only one branch to
carry out unified management of the other branch (es). The banking regulatory institution of the State Council shall carry out amalgamated
supervision and administration of branches established within the territory of the People’s Republic of China
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