Huizongfa No. 124 [2003]September 9, 2003
To: Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, China Merchants Bank, Citibank Shanghai Branch, Shanghai Branch of the Hong Kong and Shanghai Banking Corporation, and Shanghai Branch of Standard Chartered Bank
The Provisional Regulations on Foreign Exchange Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors (QFII) has already been promulgated for implementation by the State Administration of Foreign Exchange (SAFE) on November 28, 2002. During the course of implementation, the SAFE has received from some institutional investors inquiries on foreign exchange administration issues related to domestic securities investment of QFII. In order to facilitate operation, the related matters are hereby notified as follows:
1. A domestic custodian of QFII (hereinafter referred to as "custodian" may open a renminbi special account for each QFII on presentation of the following materials:
A. A duplicate of the reply by SAFE on the approved investment quota for the QFII;
B. A reply by the SAFE on approving the QFII to open renminbi special account;
C. Other documents as required by the custodian.
2. The custodian may not open any sub-account for the renminbi special account opened by a QFII. The custodian may, at the request of the QFII, set up a subsidiary standing book for the capital collections and payments in the renminbi special account of the QFII, which is to record in detail the purpose of each capital collection or payment.
Except for the renminbi special account, a QFII may not open any other account for QFII investment business at its custodian.
3. The interest rate for the deposits in the renminbi special account shall be implemented with reference to the interest rate for corporate demand deposits as announced by the People's Bank of China.
4. During the course of investment business, various costs of a QFII in the Chinese territory, including custodial fee, management fee, audit fee and other costs shall be paid with its renminbi special account. Costs of the QFII incurred outside the Chinese territory shall not be paid with the renminbi special account.
5. If the investment quota of a QFII is US$50 million-100 million (including US$100 million), the first inward capital remittance shall not be less than 20 percent (including 20 percent) of the investment quota; if the investment quota is US$100 million-200 million (including US$200 million), the first inward capital remittance shall not be less than 15 percent (including 15 percent) of the investment quota; if the investment quota is US$200 million-400 million (including US$400 million), the first inward capital remittance shall not be less than 10 percent (including 10 percent) of the investment quota; if the investment quota is US$400 million-800 million (including US$800 million), the first inward capital remittance shall not be less than 5 percent (including 5 percent) of the investment quota.
6. If the capital remitted inward by a QFII is less than US$50 million, it may only be permitted to be converted into renminbi and put at the custodian in the form of deposit, and may not be used for securities investment. If the US$50 million is failed to be remitted inward within the valid term of the investment quota, the capital remitted inward may be remitted out by installment only after expiration of the closed period as provided by the Provisional Regulations on Foreign Exchange Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors.
7. A QFII may remit out its profits by annum, and the profits permitted to be remitted out are profits that have been accumulated over the years and already realized.
8. If a QFII transfers its investment quota, the recipient shall remit inward the capital within the approved investment quota, and also complete the related capital payment with the transferor in the Chinese territory. The custodian shall remit out the capital of the transferor within five working days after the transferor receives the proceeds from the transfer upon presentation of the reply by the SAFE that agrees to the transfer.
9. An overseas fund management company may only choose either the form of closed-end fund or open-end fund in each application. If the investment quota applied for by an overseas fund management company in the form of closed-end fund (or open-end fund) has already been approved, and it again applies for investment quota in the form of open-end fund (or closed-end fund), the case is regarded as two separate applications, instead of an increase in investment quota. An application for a new QFII foreign exchange registration certificate and a new renminbi special account are thus necessary. Besides, the two funds shall have separate accounting and managed in separate accounts.
10. If a QFII alters its custodian, the original custodian shall, while handing over all related files to the new custodian, also keep the duplicates of all related files for the record for a period of 15 years.
11. A custodian shall, according to provisions, timely report related on QFII statements to the SAFE. The form of the QFII statements submitted by custodians to the SAFE (see the annex) has been announced on the website of the SAFE (www.safe.gov.cn).
Custodians shall submit QFII statements to the SAFE respectively via fax and e-mail.
Fax number: (010) 68402349
E-mail: security@mail.safe.gov.cn
12. The QFII statements reported by custodians to the SAFE shall be compiled according to the codes for accrual accounting.
13. If a custodian finds any problem when handling QFII custodial service, it shall timely reflect the case to the Capital Account Management Department of the SAFE.
Contact person: Zhou Yongkun
Tel: (010) 68402347
