Circular of the People's Bank of China and the State Administration of Foreign Exchange on Matters Relating to the Integrated Domestic and Foreign Currency Capital Pool Business of Multinational Corporations

Headquarters of the People's Bank of China, Branches in all provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed in the state plan; Branches of the State Administration of Foreign Exchange in all provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed in the state plan; China Development Bank; All policy banks and state-owned commercial banks; Postal Savings Bank of China; All joint-stock commercial banks:

To further facilitate the centralized collection and utilization of funds by multinational corporate groups, advance high-level financial opening-up, and support the high-quality development of the real economy, the People's Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE), drawing on the experience of pilots in some regions in the early stage, have decided to promote the integrated domestic and foreign currency capital pool business of multinational corporations nationwide. Relevant matters are hereby notified as follows:

I. Definition of Terms

For the purposes of this Circular, a multinational corporation refers to an enterprise consortium formed by domestic and overseas parent companies, subsidiaries, equity-participating companies and other member enterprises or institutions linked by capital ties. The integrated domestic and foreign currency capital pool business of multinational corporations (hereinafter referred to as the capital pool business) means that a multinational corporation, in light of its own operational and management needs, centrally operates and manages its domestic and overseas domestic and foreign currency funds to conduct businesses such as fund collection, surplus and deficiency adjustment, centralized receipt and payment of current account funds, and net settlement by set-off.

Financial institutions, local government financing platform companies and real estate enterprises are not allowed to participate in the capital pool business, except for financial companies acting as the leading enterprise.

II. Member Enterprises and Leading Enterprise

A member enterprise refers to a domestic or overseas company and its branch that participates in the capital pool business and has a direct or indirect equity holding relationship within the multinational corporation, or is controlled by the same parent company as the leading enterprise. A multinational corporation shall designate a domestic member enterprise with independent legal person status as the leading enterprise, which shall be responsible for completing the filing of the principal business, its implementation, data submission, situation feedback and other duties.

III. Eligibility Criteria for Multinational Corporations Engaging in the Capital Pool Business

A multinational corporation engaging in the capital pool business shall meet the following criteria:(1) Having genuine business needs;(2) Having a sound cross-border fund management structure and internal control systems;(3) Having established a corresponding internal management electronic system;(4) The aggregate annual domestic and foreign currency balance of payments scale of all domestic member enterprises in the previous year being no less than the equivalent of RMB 7 billion yuan, the aggregate annual operating income of all domestic member enterprises in the previous year being no less than RMB 10 billion yuan, and the aggregate annual operating income of all overseas member enterprises in the previous year being no less than the equivalent of RMB 2 billion yuan;(5) Having no major illegal or irregular acts in cross-border receipt and payment business in the recent two years. For enterprises established for less than two years, having no major illegal or irregular acts in cross-border receipt and payment business since their establishment;(6) For the leading enterprise and other member enterprises included in the foreign exchange receipt and payment list for trade, their cargo trade classification result being Category A;(7) Having a total of no less than three domestic and overseas member enterprises;(8) For overseas member enterprises established by domestic enterprises through overseas investment, complying with the relevant national administrative provisions on overseas investment;(9) Domestic member enterprises not being included in the key supervision list for cross-border RMB business.

If the cargo trade classification result of the leading enterprise is downgraded to Category B or C, the local SAFE branch where the leading enterprise is located shall notify the multinational corporation to replace the leading enterprise. If the cargo trade classification result of other member enterprises is downgraded to Category B or C, the leading enterprise shall terminate their participation in the business and complete the replacement of member enterprises in accordance with Article VI of this Circular.

Where a financial company acts as the leading enterprise, it shall simultaneously comply with the provisions of the industry regulatory authority.

IV. Eligibility Criteria for Cooperative Banks

A multinational corporation shall select a domestic bank within the provincial administrative region where the leading enterprise is located that meets the following criteria as the cooperative bank for handling the capital pool business (hereinafter referred to as the cooperative bank):(1) Having international settlement capacity and the qualification for foreign exchange settlement and sale business, and having obtained a rating of Category B or above in the assessment of compliance and prudent operation of bank foreign exchange business in the recent two years;(2) Having no major illegal or irregular acts in conducting cross-border receipt and payment and foreign exchange settlement and sale business in the recent two years;(3) Having sound anti-money laundering internal control systems and measures, and having no major deficiencies in performing anti-money laundering obligations;(4) Meeting other prudent regulatory criteria prescribed by the PBOC and SAFE.

If a cooperative bank no longer meets the above criteria in its ongoing operations, it may only handle the filed businesses for existing customers of the capital pool business, and shall not add new business categories for original capital pool customers or accept new capital pool customers.

V. Filing and Registration Procedures

A multinational corporation engaging in the capital pool business shall apply for filing and registration with the provincial-level SAFE branch (hereinafter collectively referred to as the provincial SAFE branch) in the province, autonomous region, municipality directly under the Central Government or municipality separately listed in the state plan where the leading enterprise is located. The application materials may be submitted to the local SAFE branch by the leading enterprise or a cooperative bank entrusted by the leading enterprise. The application materials include:

(1) Basic Materials

1. An application letter, including the basic information of the multinational corporation and the leading enterprise, the types of business to be conducted, the annual domestic and foreign currency balance of payments scale of all domestic member enterprises in the previous year, the audited annual operating income of all domestic and overseas member enterprises in the previous year, the record of illegal or irregular acts in cross-border receipt and payment business in the recent two years, the list of all domestic and overseas member enterprises, the equity structure and cargo trade classification of the leading enterprise and other member enterprises, the compliance status of overseas member enterprises established by domestic enterprises through overseas investment, the information of the intended cooperative bank, the cross-border fund management structure, internal control management and its system construction, etc.;

2. A power of attorney issued by the multinational corporation to the leading enterprise for conducting the capital pool business;

3. A capital pool business agreement signed between the leading enterprise and other member enterprises, or a certification document issued by the multinational corporation that clarifies the rights and obligations of all parties and is agreed by all parties;

4. A Confirmation Letter for the Handling of the Integrated Domestic and Foreign Currency Capital Pool Business of Multinational Corporations (see Annex 1) signed between the leading enterprise and the cooperative bank;

5. Copies of the business licenses of the leading enterprise and other domestic member enterprises;

6. Registration documents of overseas member enterprises. If the registration documents are not in Chinese, a Chinese translation shall be provided simultaneously;

7. For a financial company acting as the leading enterprise, a financial business license and the approval document for its business scope;

8. A power of attorney for the leading enterprise to entrust a cooperative bank to handle the filing and registration (if applicable).

Material 2 above shall be affixed with the official seal of the multinational corporation (if any); Material 3 shall be affixed with the official seals of the leading enterprise and other member enterprises or the multinational corporation (if any); all other materials shall be affixed with the official seal of the leading enterprise.

(2) Special Materials

1. For applying for the centralized management of external debt quotas: The application letter shall list the names, unified social credit codes, places of registration of domestic member enterprises participating in the centralized external debt quotas, the audited owner's equity of each domestic member enterprise in the previous year, the intended centralized external debt quota, and provide copies of the audited balance sheets of the member enterprises contributing to the external debt quotas for the previous year;

2. For applying for the centralized management of overseas lending quotas: The application letter shall list the names, unified social credit codes, places of registration of domestic member enterprises participating in the centralized overseas lending quotas, the audited owner's equity of each domestic member enterprise in the previous year, the intended centralized overseas lending quota, and provide copies of the audited balance sheets of the member enterprises contributing to the overseas lending quotas for the previous year;

3. For applying for the centralized receipt and payment of current account funds and net settlement by set-off: The application letter shall list the names, unified social credit codes and places of registration of domestic member enterprises participating in the centralized receipt and payment of current account funds and net settlement by set-off.

All the above special materials shall be affixed with the official seal of the leading enterprise.

(3) Supplementary Provisions on Application Materials

If the aforementioned basic and special materials are unclear, inaccurate or require verification of their content, the provincial SAFE branch may require the applicant to improve the application materials or provide a written explanation.

The provincial SAFE branch, in conjunction with the local PBOC branch, shall review the application materials, complete the filing procedures, and issue a Filing Notice (see Annex 2).

The leading enterprise shall open a domestic primary fund account and actually conduct the capital pool business within one year from the issuance of the Filing Notice; otherwise, the Filing Notice shall become invalid on the date of the first anniversary of its issuance.

VI. Modification of Filing

During the period of conducting the capital pool business, if a multinational corporation has any of the following changes, the leading enterprise shall apply for modification of filing and registration with the provincial SAFE branch within 30 days from the date of the change. The application materials may be submitted to the local SAFE branch by the leading enterprise or a cooperative bank entrusted by the leading enterprise. The application materials include:

(1) Change of the Cooperative Bank

1. An application for changing the cooperative bank, including the information of the intended cooperative bank, the handling method of the balance of the original account, etc.;

2. A statement of the balance of the original account affixed with the official business seal of the bank (not required for adding a new cooperative bank);

3. A Confirmation Letter for the Handling of the Integrated Domestic and Foreign Currency Capital Pool Business of Multinational Corporations signed between the leading enterprise and the new cooperative bank.

(2) Other Changes

For changes to the leading enterprise, business types, external debt and overseas lending quotas, etc., the materials related to the changes shall be submitted with reference to Article V of this Circular.

The provincial SAFE branch, in accordance with relevant provisions and in conjunction with the local PBOC branch, shall review the application materials for modification, complete the modification filing procedures, and issue a Modification Filing Notice.

For changes in member enterprises that do not involve external debt and overseas lending quotas, the leading enterprise shall report to the cooperative bank within 30 days from the date of the change, and simultaneously submit a copy of the Filing Notice, a relevant explanation of the enterprises involved in the change, and certification documents related to the change (such as the modified business license, etc.). The cooperative bank shall complete the modification procedures in the relevant modules of the SAFE Digital Foreign Exchange Administration Platform (Bank Version) and the RMB Cross-border Receipt and Payment Information Management System (RCPMIS) in accordance with the application of the leading enterprise.

VII. Cancellation of Filing

If a multinational corporation intends to cease the capital pool business, the leading enterprise shall, after settling all relevant creditor's rights and debts and closing the domestic primary fund account, apply for cancellation of filing and registration with the provincial SAFE branch. The application materials may be submitted to the local SAFE branch by the leading enterprise or a cooperative bank entrusted by the leading enterprise. The application materials include:(1) An application letter, including the centralized external debt and overseas lending quotas of the capital pool business, foreign-related receipts and payments, foreign exchange settlement and sale, the closing of the domestic primary fund account, and other relevant information;(2) The original Filing Notice.

The provincial SAFE branch, in accordance with relevant provisions and in conjunction with the local PBOC branch, shall review the application materials for cancellation, complete the cancellation filing procedures, and recover the original Filing Notice.

VIII. Provisions on the Centralized Management of External Debt Quotas

A multinational corporation conducting the centralized management of external debt quotas shall comply with the following provisions:(1) The risk-weighted balance of external debt of a multinational corporation at any time shall not exceed its centralized external debt quota.Centralized external debt quota of a multinational corporation = (Audited owner's equity of the leading enterprise in the previous year + Σ Audited owner's equity of domestic member enterprises in the previous year × Centralization ratio) × Cross-border financing leverage ratio × Macro-prudential adjustment parameter.Risk-weighted balance of external debt of a multinational corporation = Σ Balance of domestic and foreign currency external debt + Σ Balance of foreign currency external debt × Exchange rate risk conversion factor.Initially, the cross-border financing leverage ratio is 2, the macro-prudential adjustment parameter is 1.75, and the exchange rate risk conversion factor is 0.5.A financial company acting as the leading enterprise shall not participate in the centralized management of external debt quotas.

(2) Domestic member enterprises may independently decide the proportion of external debt quotas to be centralized, which may be adjusted at most once a year. For the non-centralized external debt quotas, member enterprises may handle external debt business through their own external debt accounts in accordance with relevant provisions.

(3) Within the centralized external debt quota, if the leading enterprise borrows external debt on its own behalf as the actual borrower, or acts as an agent for a member enterprise to borrow external debt with the member enterprise as the actual borrower, the business shall be handled through the domestic primary fund account of the leading enterprise.The currencies of foreign-related receipts and payments under the centralized external debt quota business shall be consistent in principle, and cross-currency arbitrage between RMB and foreign currencies shall not be conducted.

(4) After the issuance of the Filing Notice, the local SAFE branch where the leading enterprise is located shall complete a one-time external debt registration for the leading enterprise in the relevant information system of SAFE in accordance with the filed centralized external debt quota.

IX. Provisions on the Centralized Management of Overseas Lending Quotas

A multinational corporation conducting the centralized management of overseas lending quotas shall comply with the following provisions:(1) The risk-weighted balance of overseas lending of a multinational corporation at any time shall not exceed its centralized overseas lending quota.Centralized overseas lending quota of a multinational corporation = (Audited owner's equity of the leading enterprise in the previous year + Σ Audited owner's equity of domestic member enterprises in the previous year × Centralization ratio) × Overseas lending leverage ratio × Macro-prudential adjustment coefficient for overseas lending.Risk-weighted balance of overseas lending of a multinational corporation = Σ Balance of domestic and foreign currency overseas lending + Σ Balance of foreign currency overseas lending × Currency conversion factor.Initially, the overseas lending leverage ratio is 1, the macro-prudential adjustment coefficient for overseas lending is 0.8, and the currency conversion factor is 0.5.A financial company acting as the leading enterprise shall not participate in the centralized management of overseas lending quotas.

(2) Domestic member enterprises may independently determine the proportion of overseas lending quotas to be centralized, which may be adjusted at most once a year. For the non-centralized overseas lending quotas, member enterprises may handle overseas lending business through their own special overseas lending accounts in accordance with relevant provisions.

(3) Within the centralized overseas lending quota, if the leading enterprise provides overseas lending on its own behalf as the actual lender, or acts as an agent for a member enterprise to provide overseas lending with the member enterprise as the actual lender, the business shall be handled through the domestic primary fund account of the leading enterprise.The currencies of foreign-related receipts and payments under the centralized overseas lending quota business shall be consistent in principle, and cross-currency arbitrage between RMB and foreign currencies shall not be conducted.The use of overseas lending funds shall not violate the relevant national laws and regulations, shall not indirectly evade the regulatory requirements for overseas direct investment, securities investment, etc., and shall not be used directly or indirectly for expenditures outside the business scope of the borrower.

(4) After the issuance of the Filing Notice, the local SAFE branch where the leading enterprise is located shall complete a one-time overseas lending quota registration for the leading enterprise in the relevant information system of SAFE in accordance with the filed centralized overseas lending quota.

X. Provisions on the Centralized Receipt and Payment of Current Account Funds and Net Settlement by Set-off

Centralized receipt and payment of current account funds means that the leading enterprise centrally acts as an agent for domestic member enterprises to handle current account receipts and payments through the domestic primary fund account.Net settlement by set-off of current account funds means that the leading enterprise centrally accounts for the receivable and payable funds of its domestic and overseas member enterprises under the current account through the domestic primary fund account, and consolidates the receipt and payment transactions within a certain period into a single transaction. In principle, the net settlement by set-off shall be conducted at least once a calendar month.

A multinational corporation may, in light of its operational needs, handle the centralized receipt and payment of current account funds and net settlement by set-off through the leading enterprise. After the issuance of the Filing Notice, the local SAFE branch where the leading enterprise is located shall complete the registration for the centralized receipt and payment of current account funds and net settlement by set-off for the leading enterprise in the relevant information system of SAFE.

For businesses that domestic member enterprises are required to handle with the Foreign Exchange Business Registration Form for Cargo Trade in accordance with provisions, they shall be handled in accordance with relevant regulations and shall not participate in the centralized receipt and payment of current account funds and net settlement by set-off.

If a multinational corporation ceases to handle the centralized receipt and payment of current account funds and net settlement by set-off, the leading enterprise shall notify the cooperative bank within 30 days after the cessation, and report to the local SAFE branch on its own or entrust a cooperative bank to do so.

XI. Application of Facilitation Policies for Trade Foreign Exchange Receipts and Payments

When a cooperative bank handles the centralized receipt and payment of current account funds and net settlement by set-off for the leading enterprise and other member enterprises of a multinational corporation's capital pool, it may apply the measures under the facilitation policies for trade foreign exchange receipts and payments of high-quality enterprises, the pilot program for high-level opening-up of cross-border trade, and the pilot program for higher-level trade and investment facilitation (hereinafter collectively referred to as the facilitation policies) if the following conditions are met:(1) The cooperative bank being a pilot bank that meets the provisions of the corresponding facilitation policies;(2) In principle, the leading enterprise and other member enterprises of the multinational corporation's capital pool all being high-quality pilot enterprises under the corresponding facilitation policies, except for financial companies acting as the leading enterprise or enterprises with no trade-related foreign exchange receipts and payments on their own.