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Jun 2014, Issue 13

Cross-border forex fund pool now possible for multinational corporations


Early in September 2012, the State Administration of Foreign Exchange (SAFE) issued to its Shanghai and Beijing branches an internal circular <Reply Regarding the Pilot Programme of Centralised Foreign Currency (forex) Management for Headquarters of Multinational Corporations (MNCs)> (Circular Huifu [2012] No.167, hereinafter referred to as ‘the Reply’). The Reply, in principle, approved 13 qualified MNCs selected from companies in Beijing and Shanghai (including both foreign and domestic companies) as the first batch of pilot companies to centralise the forex management of their groups through bank accounts maintained with certain designated foreign or domestic banks. Since the Reply issued in 2012, a total of over 70 MNCs in 12 provinces have joined the pilot programme in three batches. The pilot programme is welcomed by companies, banks, in-charge SAFE branches and financial practitioners that participate in the pilot programme. However, given this is a pilot programme, the criteria for a company to be eligible for the pilot programme are not specified in the Reply which was not publicised either.

With the experience in the pilot programme, the SAFE issued (Circular Huifa [2014] No.23, hereinafter referred to as ‘the Notice’) on 18 April 2014 to expand the pilot programme nationwide effective from 1 June 2014. The Notice aims to facilitate trade and investment, to develop real economy, to ‘deepen the reform of marketisation of interest rate and forex rate, and gradually to make it possible for the free conversion of RMB capital accounts’ proposed in the Report of the 18th National Congress of the Communist Party of China. The Notice also sets forth the criteria for MNCs to apply for centralised forex management.

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