The Measures for Foreign Exchange Administration in Bonded Zones were issued by the State Administration of Foreign Exchange on July 25, 2002 and came into force on October 1, 2002. The Measures are an amended version of the measures of the same name that were issued in December 1995 and came into force on January 1, 1996.
During the Asian financial crisis in 1998, the State Administration of Foreign Exchange imposed a prohibition on the purchase of foreign exchange by bonded zone enterprises in order to prevent the use of bonded zones to fraudulently obtain foreign exchange. The new Measures retain the general rule against foreign exchange purchases but introduce more exceptions to the rule. Among the exceptions set forth in the new Measures are the following:
- FEX may be purchased, after obtaining government approval, by a zone enterprise established with Renminbi funds for payments to parties outside of China or in non-zone areas if the enterprise's own FEX funds are insufficient.
- FEX may be purchased, without government approval, for payments for trade imports by zone goods distribution enterprises and zone processing enterprises to parties outside of China or in non-zone areas if the enterprise's own FEX funds are insufficient.
- FEX may be purchased, after obtaining government approval, for repayment of foreign debt or domestic FEX loans or performance of security given to parties outside of China by zone goods distribution enterprises and zone processing enterprises if the enterprise's own FEX funds are insufficient.
The Measures provide that no cap is to be imposed on the "foreign exchange account for current account items" of a bonded zone enterprise.
The new Measures also set forth rules on FEX payments pertaining to capital and finance items; the appropriate currency for pricing and settlement; duties of banks; transfer of FEX income to China; statistical reporting; FEX registration; the opening, use and closing of FEX accounts; FEX accounts outside of China; current account FEX receipts and payments; remittance of profits, dividends and bonuses; purchases from and sales to non-zone enterprises; liquidation of zone enterprises; and supervision, inspections and penalties.