8 June 2020
Introduction
On 20 May 2020, the State Administration of Foreign Exchange of China issued the Circular on Supporting the Development of New Forms of Trade (Circular). The Circular summarised previous pilot experiences and, established foreign exchange (forex) policies that are meant to optimise new forms of trade[1]. The Circular has been implemented since the date of its promulgation.
The major policies under the Circular are as follows:
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Category |
Main purpose |
Summary of policies |
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Relaxing forex administration |
Facilitating and improving fund settlement |
1. Cross-border e-commerce enterprises may offset (i.e., netting settlement) the warehousing costs, logistics costs, taxes etc., which are spent overseas for the exported goods, from the sales payments received for exporting the same goods.
2. Individuals in China can use their forex bank accounts to handle foreign exchange transactions settlement when engaging in cross-border e-commerce.
3. Entities (both individuals and enterprises) engaging in market procurement trade who entrust a third party to declare export to the customs, can receive forex payments in their names after meeting requirements such as completing relevant government filing.
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Optimising cross-border payments for customers |
Enterprises that run cross-border e-commerce platforms, domestic enterprises that provide international delivery services, and logistics enterprises, can pay for their customers the taxes and fees such as warehousing costs, logistics costs, and taxes, which are spent overseas and related to cross-border e-commerce. In principle, the customers shall pay back the foregoing taxes and fees within 12 months.
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Supporting agency services for receipt of forex paid for exports |
After meeting certain technical and services requirements, the comprehensive foreign trade service providers may handle, on a commission basis, the receipt of forex paid for exports.
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Improving forex services |
Widening settlement channels |
Competent banks may handle the settlement and sale and purchase of forex and the receipt and payment of funds for cross-border e-commerce entities based on electronic information of the transactions.
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Facilitating on-line forex operations |
Enterprises that fall into the new forms of trade may conduct more forex operations (such as filing trade reports, foreign-related income declarations, etc.) on the Internet.
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Optimising declaration in small- amount transactions |
Enterprises may declare in their names the receipt and payment of forex in small-amount transactions.
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The Circular also states that the Chinese government will keep track of the innovative development of new forms of trade, and will actively respond to the market demands. The policies under the Circular are conducive to improving the efficiency of the new forms of trade, and can help relevant businesses reduce operating costs.
[1] The new forms of trade include cross-border e-commerce, market procurement trade, comprehensive foreign trade services, etc. The key features of relevant transactions are "small-amount, high frequency, and electronisation".
For further information, please contact:
Myles Seto, Partner, Deacons
myles.seto@deacons.com.hk
