(Promulgated by Decree No.193 of the State Council of the People's Republic of China on January 29, 1996, amended and promulgated on January 14, 1997 according to the Decision of the State Council on amending the Regulations of the People's Republic of China on Foreign Exchange Control)

Chapter I General Provisions

Article 1 These Regulations are formulated for the purpose of strengthening the foreign exchange control, keeping international payments equilibrium and promoting the healthy development of the national economy.

Article 2 The exchange control department of the State Council and its branches (hereinafter referred to as the exchange control department) shall exercise foreign exchange control according to law, and be responsible for the implementation of these Regulations.

Article 3 "Foreign exchange" mentioned in these Regulations means those payment instruments and assets in foreign currency which may be used for international payments, including the following:

(1) foreign currencies, including banknote and coins;

(2) foreign currency payment instruments, including negotiable securities, bank deposit certificates and postal savings certificates, etc.;

(3) foreign currency securities, including government bonds, corporate bonds and stocks, etc.;

(4) Special Drawing Rights and European Monetary Units; and

(5) other assets in foreign currency.

Article 4 These Regulations shall be applicable to foreign exchange receipts and disbursements and foreign exchange business operations by either domestic institutions and individuals or foreign institutions and individuals in China.

Article 5 The State shall not exercise restrictions on the frequent international payment and transfer.

Article 6 The state shall adopt a system of statistics and reporting of the international balance of payment. All organizations and individuals involved in international payments shall take statistics and make reports on their international balance of payment.

Article 7 No circulation of, or valuation and settlement in, foreign currencies shall be allowed in the territory of the People's Republic of China.

Article 8 Any organization or individual shall be entitled to accuse and expose the acts and activities that violate the exchange control.

Organizations and individuals having rendered great service in accusing, exposing, or assisting in the investigation of, violations of exchange control shall be awarded by the exchange control department, and the latter shall keep things secret.

Chapter II Foreign Exchange in Current Transactions

Article 9 Foreign exchange receipts from current transactions by domestic institutions must be transferred to China and may not be held abroad in violation of relevant provisions of the state.

Article 10 Foreign exchange receipts from current transactions by domestic institutions shall be sold to the authorized bank for dealing in foreign exchange in accordance with provisions of the State Council concerning the administration on foreign exchange settlements, sales and payments or, with an approval, a foreign exchange account may be opened for that with the authorized bank for dealing in foreign exchange.

Article 11 Foreign exchange needed for current transactions by domestic institutions shall be paid through buying from the authorized bank for dealing in foreign exchange by presentation of valid certificates and business papers in accordance with provisions of the State Council concerning the administration on foreign exchange settlements, sales and payments.

Article 12 Domestic institutions shall go through verification and cancellation formalities for their foreign exchange receipts from export and foreign exchange payments for import in accordance with provisions of the state concerning the administration on verification and cancellation of foreign exchange receipts from export and foreign exchange payments for import.

Article 13 Personal foreign exchange may be held by the individuals themselves, or they may also be deposited in the bank or sold to the authorized bank for dealing in foreign exchange.

The business in personal foreign exchange saving deposit shall abide by the principle of voluntariness in depositing, freedom of withdrawal, interest on every deposit and keeping in secret for the depositors.

Article 14 Foreign exchange needed by individuals on private business shall be bought within the specified limits; those beyond the specified limits may be applied for to the exchange control department, and may be converted when the exchange control department considers the application truthful.

Individuals carrying foreign exchange when leaving China shall go through the declaration formalities with the customs; those carrying foreign exchange exceeding the specified limits shall, in addition, present valid certificates to the customs.

Article 15 The profit arising from the domestic property owned by individuals having moved to and resided in foreign countries may, by presentation of specified certifying papers and valid certificates, be converted at the authorized bank for dealing in foreign exchange and be remitted or carried out of China.

Article 16 Without the approval from the exchange control department, no foreign exchange assets in forms of foreign currency payment instruments or foreign currency securities, etc., which are held by Chinese citizens residing in China, may be carried or sent by post out of China.

Article 17 Legitimate incomes in Renminbi obtained by foreign institutions or individuals in China may, when there is a need to remit them out of China, be converted at the authorized bank for dealing in foreign exchange by presentation of relevant certifying papers and certificates.

Article 18 Foreign exchange remitted or carried in from outside China by foreign institutions or individuals in China may be held by themselves, deposited in the bank or sold to the authorized bank for dealing in foreign exchange. They may also be remitted or carried out of China by presentation of valid certificates.

Chapter III Foreign Exchange in Capital Transactions

Article 19 Foreign exchange receipts from capital transactions by domestic institutions shall be transferred to China, except the State Council has provisions otherwise.

Article 20 Domestic institutions shall, in accordance with relevant provisions of the state, open foreign exchange accounts with the authorized bank for dealing in foreign exchange for their foreign exchange receipts from capital transactions; for selling said receipts to the authorized bank for dealing in foreign exchange, an approval from the exchange control department shall be obtained in advance.

Article 21 Domestic institutions wishing to make investment outside China shall, before applying to the competent department for examination and approval, have their sources of foreign exchange funds examined by the exchange control department; after obtaining the approval, they shall go through the fund remittance formalities in accordance with provisions of the State Council concerning the foreign exchange control relating to external investment.

Article 22 The raising of foreign loans shall be handled in accordance with relevant provisions of the state by government departments designated by the State Council or by financial institutions or enterprises approved by the exchange control department of the State Council.

Foreign loans raised by foreign investment enterprises shall be submitted to the exchange control department for the record.

Article 23 For issuing foreign currency bonds outside China, financial institutions shall apply to the exchange control department of the State Council for approval, and the issuance shall be handled in accordance with relevant provisions of the state.

Article 24 The provision of external guarantee may be handled only by the financial institutions and enterprises which are qualified according to relevant provisions of the state and, for the provision, an approval from the exchange control department shall be obtained in advance.

Article 25 The state shall adopt a registration system for external debts.

Domestic institutions shall go through external debt registration procedures in accordance with provisions of the State Council concerning the external debt statistics and monitoring.

The exchange control department of the State Council shall be responsible for the nationwide statistics and monitoring of external debts, and shall publish the external debt situation regularly.

Article 26 Where a foreign investment enterprise is legally terminated, among the assets after liquidation and taxation in accordance with relevant provisions of the state, the Renminbi owned by the foreign party may be converted at the authorized bank for dealing in foreign exchange and remitted or carried out of China; the foreign exchange owned by the Chinese party shall all be sold to the authorized bank for dealing in foreign exchange.

Chapter IV Foreign Exchange Business of Financial Institutions

Article 27 For launching foreign exchange business, financial institutions must apply for approval to the exchange control department and obtain a foreign exchange business license.

Without approval from the exchange control department, no organization or individual may engage in foreign exchange business. Financial institutions with the approval for foreign exchange business operations may not engage in business which are beyond the approved scope.

Article 28 Financial institutions engaging in foreign exchange business shall open foreign exchange accounts for their customers and handle relevant foreign exchange business in accordance with relevant provisions of the state.

Article 29 In operations of foreign exchange business, financial institutions shall deposit reserves for foreign exchange deposit in accordance with relevant provisions of the state, abide by provisions concerning the control of foreign exchange balance sheet ratio, and establish reserves for bad debts.

Article 30 The authorized bank for dealing in foreign exchange shall use their owned capital for the payment of Renminbi needed in the business of exchange settlement.

Revolving foreign exchange fund for settlement of accounts of the authorized bank for dealing in foreign exchange shall be managed within a proportional range, which shall be appraised and fixed in the light of actual situation by the People's Bank of China.

Article 31 In operations of foreign exchange business, financial institutions shall subject themselves to the inspection and supervision by the exchange control department.

Financial institutions engaging in foreign exchange business shall file with the exchange control department their foreign exchange balance sheets, foreign exchange profit and loss statements and other financial accounting statements and data.

Article 32 For terminating the operation of foreign exchange business, financial institutions shall apply to the exchange control department for approval. Financial institutions approved to terminate the operation of foreign exchange business shall make liquidation of foreign exchange creditor's rights and debts, and hand in the foreign exchange business license for cancellation.

Article 33 A single managed floating system on the basis of the supply and demand in the market shall be adopted to the Renminbi exchange rates.

The People's Bank of China shall, according to the prices shaped in the exchange market among banks, publish the exchange rates between Renminbi and major foreign currencies.

Article 34 Foreign exchange market transactions shall follow the principle of openness, fairness, impartiality and good faith.

Article 35 The currency varieties and forms of foreign exchange market transactions shall be specified and adjusted by the exchange control department of the State Council.

Article 36 The authorized bank for dealing in foreign exchange and other financial institutions engaging in foreign exchange business are transactors in the foreign exchange market among banks.

The authorized bank for dealing in foreign exchange and other financial institutions engaging in foreign exchange business shall determine the foreign exchange buying and selling prices for their customers and handle the foreign exchange business according to the rates and floating ranges published and specified by the People's Bank of China.

Article 37 The exchange control department of the State Council shall exercise supervision and administration on the foreign exchange market throughout the country according to law.

Article 38 The People's Bank of China shall exercise adjustment and control with regard to the foreign exchange market according to the needs of the monetary policies and the fluctuations of the foreign exchange market.

>Chapter VI Legal Responsibilities

Article 39 Whoever evades foreign exchange by committing any of the following acts shall be ordered to transfer the foreign exchange back to China within a specified time with a compulsory buying and exchanging of said foreign exchange and a fine from 30 per cent to five times the evaded amount imposed on by the exchange control department, or be investigated for the criminal responsibility if a crime is constituted:

(1) in violation of provisions of the state, holding the foreign exchange abroad without authorization;

(2) failing to sell the foreign exchange to the authorized bank for dealing in foreign exchange in accordance with provisions of the state;

(3) remitting or carrying foreign exchange out of China in violation of provisions of the state;

(4) carrying or sending by post foreign currency deposit certificates or foreign currency securities out of China without an approval from the exchange control department; or

(5) other acts of evading foreign exchange.

Article 40 Whoever engages in illegal procurement of foreign exchange by committing any of the following acts shall be given a warning with a compulsory buying and exchanging of the procured foreign exchange and a fine from 30 per cent to three times the amount procured imposed on by the exchange control department, or be investigated for the criminal responsibility if a crime is constituted:

(1) in violation of provisions of the state, paying in Renminbi or with physical goods for import or for others of the like which should be paid for in foreign exchange;

(2) paying domestic expenses for other persons in Renminbi while being repaid in foreign currency by those persons;

(3) without the approval from the exchange control department, foreign investors making investment in China with Renminbi or with goods and materials purchased in China;

(4) buying foreign exchange from the authorized bank for dealing in foreign exchange by cheating with false or invalid certificates, contracts or documents; or

(5) other acts of illegally procuring foreign exchange;

Article 41 Whoever engages in foreign exchange business without an approval from the exchange control department shall be confiscated of their illegal earnings with their illegal business forbidden by the exchange control department, or be investigated for the criminal responsibility if a crime is constituted.

Financial institutions engaging in foreign exchange business beyond the approved scope without authorization shall be ordered to make corrections by the exchange control department with confiscation of their illegal earnings, if any, and a fine from one to five times the illegal earnings, or a fine from 100,000 to 500,000 yuan if there is no illegal earnings. Where the circumstances are serious or no corrections have been made within the specified time, they shall be ordered to make consolidation or be revoked of their foreign exchange business licenses by the exchange control department. Where a crime is constituted, they shall be investigated for the criminal responsibility.

Article 42 The authorized bank for dealing in foreign exchange who fails to handle the foreign exchange settlements or sales in accordance with provisions of the state shall be ordered to make corrections and criticized by circulating a criticism notice by the exchange control department with confiscation of their illegal earnings and a fine from 100,000 to 500,000 yuan. Where the circumstances are serious, they shall be suspended from the business of foreign exchange settlements and sales.

Article 43 Financial institutions engaging in foreign exchange business who violate the control of Renminbi exchange rates, foreign exchange loan and deposit interest rates or foreign exchange market, shall be ordered to make corrections and criticized by circulating a criticism notice by the exchange control department with confiscation of their illegal earnings, if any, and a fine from one to five times the illegal earnings, or a fine from 100,000 to 500,000 yuan if there is no illegal earnings. Where the circumstances are serious, they shall be ordered to make consolidation or be revoked of their foreign exchange business licenses by the exchange control department.

Article 44 Domestic institutions committing any of the following acts in violation of the control of external debts shall be given a warning and criticized by circulating a criticism notice with a fine from 100,000 to 500,000 yuan imposed on by the exchange control department, or be investigated for the criminal responsibility if the a crime is constituted:

(1) raising foreign loans without authorization;

(2) in violation of relevant provisions of the state, issuing foreign currency bonds outside China without authorization;

(3) in violation of relevant provisions of the state, providing external guarantee without authorization; or

(4) other acts in violation of the control of external debts;

Article 45 Domestic institutions illegally using foreign exchange under any of the following circumstances shall be ordered to make corrections by the exchange control department with a compulsory buying and exchanging, confiscation of their illegal earnings and a fine not exceeding the value of the foreign exchange amount involved in the illegal acts, or be investigated for the criminal responsibility if a crime is constituted:

(1) valuating and settling in foreign currency in China;

(2) providing pledge with foreign currency without authorization;

(3) changing the uses of foreign exchange without permission; or

(4) other circumstances involved in illegal use of foreign exchange;

Article 46 Whoever buys and sells foreign exchange without permission or in a disguised form or scalps foreign exchange shall be given a warning by the exchange control department with a compulsory buying and exchanging, confiscation of their illegal earnings and a fine from 30 per cent to three times the foreign exchange amount involved in the illegal acts. Where a crime is constituted, they shall be investigated for the criminal responsibility.

Article 47 Domestic institutions who, in violation of the administration on foreign exchange accounts, open foreign exchange accounts inside or outside China without permission, lend or transfer their foreign exchange accounts, use each other's foreign exchange accounts in collusion, or use the foreign exchange accounts for other purposes than those approved shall be ordered to make corrections and criticized by circulating a criticism notice by the exchange control department with cancellation of their foreign exchange accounts and a fine from 50,000 to 300,000 yuan.

Article 48 Domestic institutions who, in violation of the administration of foreign exchange verification and cancellation, forge, alter, lend, transfer or repeatedly use export verification and cancellation certificates, or fail to go through the specified verification and cancellation procedures shall be given a warning and criticized by circulating a criticism notice by the exchange control department with confiscation of their illegal earnings and a fine from 50,000 to 300,000 yuan. Where a crime is constituted, they shall be investigated for the criminal responsibility.

Article 49 Financial institutions engaging in foreign exchange business who violate provisions of Article 28 or 38 of these Regulations shall be ordered to make corrections and criticized by circulating a criticism notice by the exchange control department with a fine from 50,000 to 300,000 yuan.

Article 50 Where any party concerned refuses to accept the penalty decision made by the exchange control department, he may, within 15 days from receiving the notification of the penalty decision, apply for reconsideration to the exchange control department at the immediately higher level, which shall make a reconsideration decision within two months from receiving the reconsideration application. The party concerned refusing to accept the consideration decision may bring a suit with the people's court.

Article 51 Where any domestic institution violates provisions concerning the foreign exchange control, in addition to the penalty on the institutions according to provisions of these Regulations, the person in charge directly responsible and other person directly responsible shall be given a disciplinary sanction, or be investigated for the criminal responsibility if a crime is constituted.

Chapter VII Supplementary Provisions

Article 52 For the purpose of these Regulations,

(1) "domestic institutions" mean enterprises, institutions, government departments, public organizations and army units, including foreign investment enterprises, within the territory of the People's Republic of China;

(2) "the authorized bank for dealing in foreign exchange" means a bank that engages in the business of foreign exchange settlement and sales with the approval of the exchange control department;

(3) "individuals" mean either Chinese citizens or foreigners who reside in the People's Republic of China up to one year;

(4) "foreign institutions in China" mean foreign diplomatic missions and consular posts in China, resident representative offices in China of international organizations, foreign commercial representative offices in China and resident business offices in China of foreign nongovernmental organizations;

(5) "foreign individuals in China" mean permanent personnel of foreign institutions in China, foreigners staying short terms in China, foreigners engaged by domestic institutions and foreign students studying in China;

(6) "current transactions" mean transactions that occur frequently resulting in international receipt and payment, including trade receipt and payment, service receipt and payment and unilateral transfer, etc.; and

(7) "capital transactions" mean capital exporting and importing resulting in increasing or decreasing of assets and liabilities, including direct investment, loans of all kinds and investment in securities, etc..

Article 53 Foreign exchange control measures for bonded areas shall be formulated separately by the exchange control department of the State Council.

Article 54 Foreign exchange control measures for frontier trade and transactions between inhabitants on either side of the border shall be separately formulated by the exchange control department of the State Council according to the principles prescribed by these Regulations.