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Home > Resources > China Business Center > Foreign Exchange Controls
Foreign Exchange Controls
 
China does not have a freely convertible currency and has strict foreign exchange controls in place.  Foreign exchange transactions are monitored and controlled by the State Administration of Foreign Exchange (SAFE) and its branch offices located throughout China.
 
The regulatory controls on foreign exchange transactions depends on whether the transaction is considered a “current account” item or a “capital account” item.  Current account items refer to ordinary business transactions, including payments for receipt of goods and services.  Capital account items include currency transfers for increases or decreases in debt and equity. 
 
If a transaction is classified as a “current account” item, the foreign invested enterprise (FIE) can purchase and sell foreign currency through designated banks on the interbank foreign exchange trading system without prior approval from SAFE.  When the FIE needs to make a payment in foreign currency to a payee outside of China, it instructs its bank to make payment from the company’s foreign exchange account.  In most cases, it will be required that the FIE present supporting documents to the bank such as contracts, invoices, and shipping documents.  When the FIE receives foreign currency into China, it must sell its foreign currency to authorized banks and may only retain foreign currency up to a pre-approved limit set by the government authorities.
 
Cash payment for “capital account” items are subject to more restrictions and are subject to closer scrutiny by SAFE.
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