Conducting international business in the People's Republic of China (PRC) requires that foreign currency be exchanged. The main state agency that regulates this practice in the State Administration of Foreign Exchange (SAFE). When foreign currency exchange is conducted directly with the Chinese financial system that is under the governance of the People's Bank of China (PBC), there are additional procedures and rules to follow.
In order to exchange any foreign currency into the renminbi, PRC's official currency (or the reverse), the main regulations that must be followed are those of SAFE. SAFE permits exchanges in foreign currencies mainly in the form of cash (banknotes and coins), documents (negotiable instruments, bank deposit certificates, bank cards and other items.) and securities (stocks, bonds).
SAFE requires that all foreign currency be exchanged because it is illegal for foreign currency to circulate within the PRC.
Financial institution regulations
PBC directly governs how financial institutions exchange financial currency through both its own rules and SAFE. No financial institution is allowed to exchange foreign currency without first registering with PBC and SAFE. The combined rules of these organizations require that a financial institution first open a foreign exchange account with a customer before actually exchanging currency for the customer. All receipts and payments must be reported to PBC and kept on file for five years.
Financial institutions are required to be used by non-resident customers who are attempting to exchange renminbi into foreign currency. (Resident customers are not permitted to exchange renminbi into foreign currency.)
Exchange agency regulations
Foreign exchange agencies are companies that are registered with both PBC and SAFE to negotiate with domestic financial institutions to exchange foreign currency on their behalf. PBC rules limit foreign exchange agencies to exchanging only foreign banknotes and foreign traveler's checks into renminbi for both resident and non-resident customers.
Foreign exchange agencies are required to have at least two staff members that work exclusively on foreign currency exchange. These employees must document the name and nationality of the customer, the identification type and number, the date of the exchange and the name and value of the foreign currency to be exchange. The documentation is required to be filed for five years.
- The People's Bank of China: Provisional Administrative Rules for Foreign Currency Exchange Agencies
- The People's Bank of China: Provisional Procedures for Designated Bank's Purchase and Sale of Foreign Exchange
- State Administration of Foreign Exchange: Regulations of the People's Republic of China on Foreign Exchange Administration
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