1. Consolidated Management of Foreign Exchange Positions
Upon approval by Shanghai SAFE, domestic and foreign funded holding companies which are certified by Shanghai or Pudong New Area Government as holding company regional headquarters (RHQ) in Pudong are allowed to consolidate the foreign exchange positions of the holding company's group companies in China under an "entrustment loan" arrangement set up through an approved designated foreign exchange bank.
2. Offshore Banking Account
For those holding companies which have set up a finance centre or a treasury centre in Pudong New Area will be allowed to open an offshore bank account with a qualified PRC bank. The offshore bank account will be able to accept foreign exchange from approved loans extended by the holding company's group companies in China as well as funds from offshore group companies. The foreign exchange can be used for loans to offshore group companies, repayment of loans both from offshore group companies and group companies in China. There are references to loans also being made to PRC entities but further clarifications need to be sought as to the scope of such application as the relevant notice is not clear on this issue.
3. Loans to Offshore Entities
Qualified holding companies established in Pudong New Area upon approval may use renminbi to purchase foreign exchange for the purpose of facilitating or granting a loan to an overseas company. The amount of such a foreign exchange loan is capped at the total amount of undistributed retained earnings and declared but unpaid dividends of the qualified holding companies. The holding company may also handle forward settlement and sale of foreign exchange and foreign exchange swaps between renminbi and other foreign currencies in order to reduce and manage foreign exchange risks created by such foreign loans.
4. Consolidation of Trade Receipts and Remittances
Holding companies in Pudong which are certified also as RHQs may consolidate the collection and payment of foreign exchange related to import and export transactions carried out by its affiliates and group companies in China.
5. Flexibility in Remittance of Non-Trade Related Payments
Both holding companies and certified R&D Centres established in Pudong may now have more flexibility in remitting non-trade related payments out of China in relation to items not specifically provided under current legislation. Essentially, local SAFE approval limit of the sale and payment of foreign exchange for non-trade items that are not expressly specified in previous laws and regulations have been increased to US$100,000, thus allowing a bit more flexibility to qualified companies in Pudong.
6. Participation in Inter-bank FX Spot Exchange Market
Upon approval, holding companies in Pudong may, through its RHQ, finance centre or treasury centre, apply for membership in the China FX Exchange Centre, and participate in the Inter-bank FX Spot Exchange Market for self-trading.
7. Cross Renminbi/FX Financial Product
Subject to the approval of the China Banking Regulatory Committee to do transactions of financial derivative products, banks may apply to Shanghai SAFE for conducting cross renminbi and foreign currencies financial management services and products.
