PROCEDURES FOR THE ADMINISTRATION OF CHINESE FINANCIAL INSTITU-TIONS ABROAD

PROCEDURES FOR THE ADMINISTRATION OF CHINESE FINANCIAL INSTITU-TIONS ABROAD This English document is coming from the "LAWS AND REGULATIONS OF THE PEOPLE'S REPUBLIC OF CHINA GOVERNING FOREIGN-RELATED MATTERS" (1991.7) which is compiled by the Brueau of Legislative Affairs of the State Council of the People's Republic of China, and is published by the China Legal System Publishing House.

In case of discrepancy, the original version in Chinese shall prevail.

Whole Document PROCEDURES FOR THE ADMINISTRATION OF CHINESE FINANCIAL INSTITU- TIONS ABROAD (Approved by the State Council on March 12, 1990 and promulgated by Decree No. 1 of the People's Bank of China on April 13, 1990) Article 1 These Procedures are formulated for the purpose of strengthening the administration of Chinese financial institutions outside China and ensuring the sound development of financial undertakings.

Article 2 All banking and non-banking financial institutions inside China (hereinafter collectively referred to as "domestic financial institutions"), all non-financial corporations, enterprises and other organizations inside China (hereinafter collectively referred to as "domestic non-financial institutions"), all Chinese-invested banking and non-banking financial institutions outside China (hereinafter collectively referred to as "Chinese-invested financial institutions abroad"), and all Chinese-invested non-financial corporations, enterprises and other organizations outside China (hereinafter collectively referred to as "Chinese-invested non-financial institutions abroad") that wish to invest in the establishment or purchase of a financial institution abroad shall abide by these Procedures.

The term "financial institutions abroad" referred to in the preceding paragraph denotes institutions which are established or purchased abroad by domestic financial institutions or non-financial institutions, or Chinese-invested financial institutions or non-financial institutions abroad and which engage in such financial business operations as deposits, loans, discount of negotiable instruments, settlements, trust investment, financial lease, guarantees, insurance and deals in securities.

Article 3 The organ to examine, approve and administer the establishment or purchase of financial institutions abroad is the People's Bank of China.

Article 4 A domestic financial institution that applies for the establishment or purchase of a financial institution abroad shall satisfy the following requirements: 1) it has been approved by the State Council or the People's Bank of China, has been registered in accordance with the law and holds a Licence of Financial Business Operations issued by the People's Bank of China; 2) it has been permitted by the State Administration of Foreign Exchange Control to handle foreign exchange operations, holds a Licence of Foreign Exchange Operations issued by the State Administration of Foreign Exchange Control and has the experience in handling foreign exchange operations for over three years and the required specialized personnel; 3) it possesses legitimate sources of funds in foreign exchange; and 4) it possesses a foreign exchange fund of its own equivalent to no less than 80 million Renminbi yuan.

Article 5 A domestic non-financial institution that applies for the establishment or purchase of a financial institution abroad shall satisfy the following requirements: 1) it is a large corporation or enterprise that has been established upon approval by the department concerned and has been registered in accordance with the law; 2) it has a group corporation or group enterprise or other large enterprise operating abroad with a relatively solid foundation and good prospect of making profit; 3) it has been permitted by the department in charge to establish a financial institution abroad and possesses a foreign exchange fund of its own equivalent to no less than 100 million Renminbi yuan; and 4) it possesses the specialized personnel required for handling financial and foreign exchange operations.

Article 6 A Chinese-invested financial institution or non-financial institution abroad that applies for the establishment or purchase of a financial institution abroad shall satisfy the following requirements: 1) it has been established abroad upon approval by the department in charge in accordance with the law, possessing the official document of approval and the documents certifying that it is engaged in legitimate business operations in the locality; 2) the Chinese-invested financial institutions in the locality where the intended financial institution is to be established or purchased are in a relatively weak position, which renders it necessary to establish the financial institution; and 3) the application submitted is in conformity with the law of the country or region concerned.

Article 7 The application for the establishment or purchase of a financial institution abroad shall be submitted for approval in accordance with the following provisions: 1) the application by a domestic financial institution for the establishment abroad of a representative agency, a branch office, or for the establishment abroad of a Chinese-invested financial institution or a Chinese-foreign joint financial institution, or for the purchase of a financial institution abroad, shall be submitted to the People's Bank of China for approval; 2) the application by a domestic non-financial institution for the establishment abroad of a Chinese-invested financial institution or a Chinese-foreign joint financial institution or for the purchase of a financial institution abroad shall, upon verification and consent by the department in charge which has solicited the opinions of the Ministry of Foreign Economic Relations and Trade, be submitted to the People's Bank of China for approval; and 3) the application by a Chinese-invested financial institution or non- financial institution abroad for the establishment or purchase of a financial institution abroad shall, after its domestic investing unit has solicited the opinions of the Ministry of Foreign Economic Relations and Trade, be submitted to the People's Republic of China for approval.

Article 8 For the establishment or purchase of a financial institution abroad, the domestic investing unit concerned shall apply to the People's Bank of China. The application shall clearly state the name of the financial institution to be established or purchased, its business scope, the conditions, and the necessity therefor. After the content has been examined, verified and filed as an item for processing by the People's Bank of China, the application shall be submitted in accordance with the provisions of these Procedures.

The People's Bank of China shall examine the application submitted by the applying unit and shall, within three months of receipt of the same, make the decision as to whether or not it will grant the approval.

Article 9 After the establishment or purchase of a financial institution abroad has been approved, the domestic investing unit concerned shall, on the strength of the document of approval by the People's Bank of China and in accordance with the pertinent provisions, approach the State Administration of Foreign Exchange Control and go through the procedures to remit abroad the required foreign exchange.

Article 10 A domestic financial institution that applies for the establishment abroad of a representative agency shall submit the following documents: 1) an application duly signed by the chief person in charge of the applying unit, which shall include the name of the proposed representative agency, its address, the name of the chief representative and his/her curriculum vitae; and 2) the estimated expense of the proposed agency and the certificate of its source of foreign exchange.

Article 11 A domestic financial institution that applies for the establishment abroad of a branch office shall submit the following documents: 1) an application duly signed by the chief person in charge of the applying unit, which shall include the name of the proposed branch office, its address, the amount of its operating funds, the type(s) of business operations, the curriculum vitae of the chief person in charge; 2) the statements of assets and liabilities, the statements of loss and profit, and the financial reports of the applying unit for the three years prior to the submission of the application; 3) the feasibility study report; and 4) other relevant documents required by the People's Bank of China.

Article 12 A domestic financial institution or non-financial institution or a Chinese-invested financial institution or non-financial institution abroad that applies for the establishment abroad of a Chinese-invested financial institution shall submit the following documents: 1) an application duly signed by the chief person in charge of the applying unit, which shall include the name of the proposed Chinese- invested financial institution, its address, its registered capital and the actual capital, the source(s) of funds, the type(s) of business operations and the curriculum vitae of the chief person in charge; 2) the statements of assets and liabilities, the statements of loss and profit, and the financial reports of the applying unit for the three years prior to the submission of the application; 3) the feasibility study report; and 4) other relevant documents required by the People's Bank of China.

Article 13 A domestic financial institution or non-financial institution or a Chinese-invested financial institution or non-financial institution abroad that applies for the establishment abroad of a Chinese-foreign joint financial institution shall submit the following documents: 1) an application duly signed by the chief person in charge of the applying unit, which shall include the name of the proposed Chinese- foreign joint financial institution, its registered capital and the actual capital, the type(s) of business operations, the names of the respective investing parties and the percentage of their respective capital contributions, the source(s) of funds of the Chinese investor(s), and the curriculum vitae of the chief person in charge; 2) the statements of assets and liabilities, the statements of loss and profit, and the financial reports of the applying unit for the three years prior to the submission of the application; 3) the agreement, the contract and the articles of association of the joint financial institution initialled by the respective investing parties thereto; 4) the feasibility study report; and 5) other relevant documents required by the People's Bank of China.

Article 14 A domestic financial institution or non-financial institution or a Chinese-invested financial institution or non-financial institution abroad that applies for the purchase of a financial institution abroad shall submit the following documents: 1) an application duly signed by the chief person in charge of the applying unit, which shall include the name of the financial institution that is to be purchased, its address, the articles of association, the total capital and total assets, the state of affairs of the institution and its personnel, its financial position, the reasons of the purchase and the objectives thereof, the amount of the fund needed for the purchase, and the source(s) of the fund; 2) the statements of assets and liabilities, the statements of loss and profit, and the financial reports of the applying unit for the three years prior to the submission of the application; 3) the feasibility study report; and 4) other relevant documents required by the People's Bank of China.

Article 15 If a financial institution abroad is to make any one of the following changes, its domestic investing unit shall in advance submit an application to the People's Bank of China for examination and approval: 1) if a representative agency is to be upgraded to a branch office; 2) if a representative agency, or a branch office, or a Chinese-invested financial institution or a Chinese-foreign joint financial institution is to be disbanded; and 3) if the percentages of the shares held by the respective investing parties to a Chinese-foreign joint financial institution are to be adjusted or if the capital is to be increased.

Article 16 The domestic investing unit of a financial institution abroad shall, prior to the date of July 31 every year, submit to the provincial branch bank of the People's Bank of China in the locality where it is situated the work report of the financial institution abroad for the first half of the year, which shall include the changes in the personnel of the institution, a breakdown of the deposits and loans, a breakdown of the money sent abroad or received therefrom; a breakdown of the import and export settlements, an analysis of the projects of investment and an analysis of the business transactions in foreign exchange, securities and gold. The afore-said report shall then be transmitted to the People's Bank of China by its provincial branch bank.

Article 17 The domestic investing unit of a financial institution abroad shall, prior to the date of March 31 every year, submit to the provincial branch bank of the People's Bank of China the statement of assets and liabilities, the statement of loss and profit, and the annual work report of the financial institution abroad for the previous fiscal year, which shall then be transmitted to the People's Bank of China by its provincial branch bank.

Article 18 The People's Bank of China and its various provincial branch banks shall have the right to exercise supervision over the work of the financial institutions abroad.

Article 19 If any party, in violation of the provisions in Article 7 of these Procedures, establishes or purchases a financial institution abroad without the approval of the People's Bank of China, the People's Bank of China shall have the right to freeze a corresponding amount of the foreign exchange of the domestic investing unit thereof or of its Renminbi deposits, order it to disband the financial institution abroad or set a deadline for it to make up for the procedures of application for examination and approval, and conduct close investigations into the liability of the chief person in charge of the unit and of those who are directly responsible therefor. If any party violates the provisions in Article 15 of these Procedures, the People's Bank of China shall have the right to freeze a corresponding amount of the foreign exchange of the domestic investing unit thereof or of its Renminbi deposits and order it to stop the business operations of the financial institution abroad for rectification. If any party violates the provisions in Articles 16 and 17 of these Procedures, to a serious extent, the People's Bank of China may impose a fine of 100,000 Renminbi yuan or less on the domestic investing unit thereof.

Any party violates the regulations concerning foreign exchange control shall be penalized in accordance with the pertinent provisions of the State.

Article 20 If any party has, before these Procedures go into effect, established or purchased a financial institution abroad without approval of the People's Bank of China, it shall, within the time limit prescribed by the People's Bank of China, make up for the procedures of application for examination and approval.

Article 21 These Procedures shall not apply to the enterprises with foreign investment inside China.

Article 22 The People's Bank of China shall be responsible for the interpretation of these Procedures.

Article 23 These Procedures shall go into effect as of the date of promulgation.

lowing documents: 1) an application duly signed by the chief person in charge of the applying unit, which shall include the name of the proposed Chinese- foreign joint financial institution, its registered capital and the actual capital, the type(s) of business operations, the names of the respective investing parties and the percentage of their respective capital contributions, the source(s) of funds of the Chinese investor(s), and the curriculum vitae of the chief person in charge; 2) the statements of assets and liabilities, the statements of loss and profit, and the financial reports of the applying unit for the three years prior to the submission of the application; 3) the agreement, the contract and the articles of association of the joint financial institution initialled by the respective investing parties thereto; 4) the feasibility study report; and 5) other relevant documents required by the People's Bank of China.

Article 14 A domestic financial institution or non-financial institution or a Chinese-invested financial institution or non-financial institution abroad that applies for the purchase of a financial institution abroad shall submit the following documents: 1) an application duly signed by the chief person in charge of the applying unit, which shall include the name of the financial institution that is to be purchased, its address, the articles of association, the total capital and total assets, the state of affairs of the institution and its personnel, its financial position, the reasons of the purchase and the objectives thereof, the amount of the fund needed for the purchase, and the source(s) of the fund; 2) the statements of assets and liabilities, the statements of loss and profit, and the financial reports of the applying unit for the three years prior to the submission of the application; 3) the feasibility study report; and 4) other relevant documents required by the People's Bank of China.

Article 15 If a financial institution abroad is to make any one of the following changes, its domestic investing unit shall in advance submit an application to the People's Bank of China for examination and approval: 1) if a representative agency is to be upgraded to a branch office; 2) if a representative agency, or a branch office, or a Chinese-invested financial institution or a Chinese-foreign joint financial institution is to be disbanded; and 3) if the percentages of the shares held by the respective investing parties to a Chinese-foreign joint financial institution are to be adjusted or if the capital is to be increased.

Article 16 The domestic investing unit of a financial institution abroad shall, prior to the date of July 31 every year, submit to the provincial branch bank of the People's Bank of China in the locality where it is situated the work report of the financial institution abroad for the first half of the year, which shall include the changes in the personnel of the institution, a breakdown of the deposits and loans, a breakdown of the money sent abroad or received therefrom; a breakdown of the import and export settlements, an analysis of the projects of investment and an analysis of the business transactions in foreign exchange, securities and gold. The afore-said report shall then be transmitted to the People's Bank of China by its provincial branch bank.

Article 17 The domestic investing unit of a financial institution abroad shall, prior to the date of March 31 every year, submit to the provincial branch bank of the People's Bank of China the statement of assets and liabilities, the statement of loss and profit, and the annual work report of the financial institution abroad for the previous fiscal year, which shall then be transmitted to the People's Bank of China by its provincial branch bank.

Article 18 The People's Bank of China and its various provincial branch banks shall have the right to exercise supervision over the work of the financial institutions abroad.

Article 19 If any party, in violation of the provisions in Article 7 of these Procedures, establishes or purchases a financial institution abroad without the approval of the People's Bank of China, the People's Bank of China shall have the right to freeze a corresponding amount of the foreign exchange of the domestic investing unit thereof or of its Renminbi deposits, order it to disband the financial institution abroad or set a deadline for it to make up for the procedures of application for examination and approval, and conduct close investigations into the liability of the chief person in charge of the unit and of those who are directly responsible therefor. If any party violates the provisions in Article 15 of these Procedures, the People's Bank of China shall have the right to freeze a corresponding amount of the foreign exchange of the domestic investing unit thereof or of its Renminbi deposits and order it to stop the business operations of the financial institution abroad for rectification. If any party violates the provisions in Articles 16 and 17 of these Procedures, to a serious extent, the People's Bank of China may impose a fine of 100,000 Renminbi yuan or less on the domestic investing unit thereof.

Any party violates the regulations concerning foreign exchange control shall be penalized in accordance with the pertinent provisions of the State.

Article 20 If any party has, before these Procedures go into effect, established or purchased a financial institution abroad without approval of the People's Bank of China, it shall, within the time limit prescribed by the People's Bank of China, make up for the procedures of application for examination and approval.

Article 21 These Procedures shall not apply to the enterprises with foreign investment inside China.

Article 22 The People's Bank of China shall be responsible for the interpretation of these Procedures.

Article 23 These Procedures shall go into effect as of the date of promulgation.