Announcement by the State Administration of Foreign Exchange of the Provisions on the Administration of Foreign Exchange in Domestic Securities Investments of Qualified Foreign Institutional Investors

[2009] No. 1

In accordance with the Regulations on the Foreign Exchange Administration of the People's Republic of China and the Measures for the Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors (Order No. 36 of 2006 of the China Securities Regulatory Commission, the People's Bank of China and the State Administration of Foreign Exchange), the State Administration of Foreign Exchange has formulated the Provisions on the Administration of Foreign Exchange in Domestic Securities Investments of Qualified Foreign Institutional Investors, which is hereby promulgated and shall come into effect on the date of its promulgation.

State Administration of Foreign Exchange

September 29, 2009

 Provisions on the Administration of Foreign Exchange in Domestic Securities Investments of Qualified Foreign Institutional Investors

 Chapter I General Provisions

Article 1 Pursuant to the Regulations on the Foreign Exchange Administration of the People's Republic of China and the Measures for the Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors (Order No. 36 of 2006 of the China Securities Regulatory Commission, the People's Bank of China and the State Administration of Foreign Exchange),  the Provisions is enacted to regulate the administration of foreign exchange of the qualified foreign institutional investors (hereinafter referred to as QFIIs) in the domestic securities market of China.

Article 2 A QFII shall entrust its domestic custodian (hereinafter referred to as custodian) to go through all the procedures stipulated in the Provisions on its behalf.

Article 3 A QFII and its custodian shall comply with relevant regulations and rules on foreign exchange administration in China.

Article 4 The State Administration of Foreign Exchange, its branches and foreign exchange administration departments (hereinafter referred to as the SAFE) shall implement according to law supervision, administration and inspection on quota, fund accounts, payment and exchange of domestic securities investment by QFIIs.

Chapter II Administration of Investment Quota

Article 5 The state implements the administration of quota on domestic securities investments by QFIIs. The SAFE shall approve the investment quota of an individual QFII and encourage medium and long-term foreign investment.

Article 6 A QFII, applying for investment quota and opening a foreign exchange account and a special Renminbi account, shall provide the SAFE with the following documents:

(1) A written application of a custodian and a QFII, including the basic condition of the QFII, an explanation of the source of funds and investment plan and a commitment of no repatriation of investment during the approval period, with Registration Form of the State Administration of Foreign Exchange for Qualified Foreign Institutional Investor attached (see appendix I for sample form);

(2) Photocopies of Securities Investment Business Operation License for QFII issued by the China Securities Regulatory Commission (hereinafter referred to as CSRC);

(3) A notarized warrant authorized a QFII to a custodian; and

(4) Other documents required by SAFE

Where a QFII applies for increase of investment quota, it shall, apart from the above documents, supply the Foreign Exchange Registration for QFII (Hereinafter referred to as Foreign Exchange Registration) and an explanation of existing investment quota in China, including assets allocation and alteration, profit and loss on investments, performance of compliance and average turnover rate in stock dealing.

Article 7 The investment quota applied for by a QFII shall be worth no less than USD50m each time, with the accumulative investment quota no more than USD1b. The SAFE may, based on the economic and financial situation, supply and demand of foreign exchange market and the international payment, adjust the aforesaid quota.

A QFII shall not file another application for increase of investment quota within one year after the approval of the previous investment quota.

Article 8 A QFII should remit deposit within 6 months upon the approval of investment quota, and overdue remittance of deposit shall not be allowed without authorization. Where full deposit fails to be remitted in the prescribed time but is worth more than USD20m, the actual remitted deposit shall act as investment quota.