This English document is coming from the "LAWS AND REGULATIONS OF THE

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 IMPLEMENTING RULES ON PUNISHMENT OF VIOLATION OF FOREIGN EXCHANGE CONTROL (Approved by the State Council on March 5, 1985, promulgated by the State Administration of Foreign Exchange Control on April 5, 1985) Article 1 These Rules are formulated for the implementation of Articles 31 and 33 of the Interim Regulations for Foreign Exchange Control of the People's Republic of China.

Article 2 The following acts shall be regarded as unlawful procurement of foreign exchange: 1) paying in Renminbi for imports or other items that ought to be paid in foreign exchange, unless otherwise approved by the State Administration of Foreign Exchange Control or its branch offices (hereinafter referred to as foreign exchange control agencies), or stipulated by the State; 2) paying in Renminbi by organizations within territory to defray the expenses in China for organizations stationed abroad, foreign organizations stationed in China, enterprises with overseas Chinese capital, foreign-capital enterprises, Chinese-foreign equity joint ventures, and individuals coming to China for a short stay, in return for reimbursement in foreign exchange which is not sold to the State; 3) paying in Renminbi by organizations stationed abroad to defray expenses with their own Renminbi in China for others in return for reimbursement in foreign exchange; 4) paying in Renminbi by foreign organizations stationed in China, enterprises with overseas Chinese capital, foreign-capital enterprises, Chinese-foreign equity joint ventures and the personnel thereof to defray expenses for others in return for reimbursement in foreign exchange or in other forms of a similar nature; 5) making repayments without approval of foreign exchange control agencies in Renminbi by delegations, working groups or members thereof sent abroad or to Hong Kong, Macao and other regions, who put to other uses or spend on purchase of goods the foreign exchange allocated for the mission or that earned from their various kinds of business operations; 6) offsetting export proceeds or other foreign exchange earnings against import costs or other expenditures by organizations within territory.

Article 3 Unlawful procurement of foreign exchange shall be penalized according to different circumstances in the following ways: 1) If the foreign exchange unlawfully procured remains unused, the party procuring the foreign exchange from others shall be ordered to repatriate the foreign exchange within a prescribed time limit for a compulsory sale to the State. If it has been used up, the party concerned must repay it either by a compulsory sale to the State of an equal amount of foreign exchange or by a deduction of the amount from the foreign exchange quota allotted to the said party. In case the said party has no foreign exchange to repay, the difference between the domestic and international market prices of the goods purchased with the unlawfully procured exchange shall be paid. In addition, a fine equivalent to 10-30% of the amount of the foreign exchange unlawfully procured may be imposed.

2) The party procuring foreign exchange for others shall be fined a sum equivalent to 10-30% of the amount of the foreign exchange illegally procured in light of the seriousness of the case.

Article 4 The following acts shall be regarded as evasion of foreign exchange control: 1) retaining, spending or depositing foreign exchange earnings abroad by organizations within territory without prior approval of the exchange control agencies; depositing foreign exchange earnings abroad in violation of the Regulations for Foreign Exchange Control Relating to Enterprises with Overseas Chinese Capital, Foreign-capital Enterprises and Chinese-foreign Equity Joint Ventures; 2) retaining or depositing abroad without authorization the foreign exchange which is concealed by organizations within territory, enterprises with overseas Chinese capital, foreign-capital enterprises and Chinese- foreign equity joint ventures and which is acquired through such means as reporting less foreign exchange receipts by understating the export prices or commissions, or reporting more foreign exchange expenditures by overstating the import prices, expenses and commissions.

3) retaining for business operations abroad or putting to other uses the profits that ought to be repatriated according to State provisions, by organizations stationed abroad or by Chinese joint venturers in Chinese- foreign equity joint ventures established abroad; 4) failing to use the foreign exchange allocated for the mission or earned from various kinds of business operations according to plans and depositing it abroad or putting it to other uses, without otherwise approval of the foreign exchange control agencies, by delegations or working groups and the members thereof sent abroad or to Hong Kong, Macao and other regions.

Article 5 Evasion of foreign exchange control shall be penalized according to different circumstances in the following ways: 1) if the foreign exchange acquired through evasion still remains unused, the evader or the involved competent department shall be ordered to repatriate it within a prescribed time limit for compulsory sale to the State; or the full amount of foreign exchange or part thereof shall be confiscated. In addition, a fine equivalent to 10-50% of the amount of the foreign exchange evaded may be imposed; 2) if the foreign exchange acquired through evasion has been used up, the evader shall be ordered to repay an equal amount of foreign exchange which shall be sold to the State or confiscated. In addition, a fine equivalent to 10-50% of the amount of the foreign exchange evaded may be imposed; 3) if the evader has no foreign exchange to repay, a fine equivalent to no less than 30% of but no more than the full amount of the foreign exchange acquired through evasion shall be imposed, or the illegal gains therefrom shall be confiscated, or the fine and confiscation shall be imposed concurrently.

Article 6 The following acts shall be regarded as disrupting financial stability: 1) engaging in foreign exchange business without prior approval of the State Administration of Foreign Exchange Control or on a scale beyond the approved business scope; 2) issuing securities denominated in foreign currencies in China or abroad, or accepting loans offered by banks or enterprises in foreign countries or in Hong Kong, Macao and other regions by organizations within territory without prior approval of the State Council or the departments authorized by the State Council; 3) using foreign currency by organizations within territory, without otherwise approval of the foreign exchange control agencies, as the monetary unit in settling accounts, borrowing or lending, making transfers or obtaining mortgages, or as a medium of exchange in business transactions; 4) buying and selling foreign exchange without authorization or in any disguised form, or at rates above those set by the State Administration of Foreign Exchange Control, or profiteering in buying and selling foreign exchange.

Article 7 The following penalties shall be imposed on the offenders involved in the cases listed in the preceding Article according to different circumstances: 1) For cases' referred to in paragraph (1), the offenders shall be ordered to cease their foreign exchange business or operations that exceed the approved scope, or their unlawful earnings shall be confiscated or a fine up to but no more than the full amount of the illegal operating fund shall be imposed, or the fine and confiscation shall be imposed concurrently.

2) For cases referred to in paragraph (2), the offenders shall be ordered not to issue new securities or not to accept new loans, and may also be fined a sum up to but no more than 20% of the securities issued or loans accepted.

3) For cases referred to in paragraphs (3) and (4), the offenders shall be ordered to sell their unlawfully transacted foreign exchange to the State and their illegal gains shall be confiscated, or a fine up to but no more than the full amount of the foreign exchange illegally transacted shall be imposed, or the fine and confiscation shall be imposed concurrently.

Article 8 For other acts in violation of foreign exchange control not specifically listed in Articles 2, 4 and 6, penalties may be meted out according to the seriousness of the case with reference to the most relevant provisions provided in these Rules.

Article 9 In cases of minor offences, the offenders who voluntarily confess to their unlawful activities before the foreign exchange control agencies, show sincere repentance and demonstrate meritorious conduct by informing against other offenders shall be dealt with leniently or exempt from punishment. Offenders who refuse to confess, try to cover up their offences or refuse to mend their ways despite repeated admonition shall be punished severely in accordance with Articles 3, 5 and 7 of these Rules.

Article 10 Serious cases of unlawful procurement of foreign exchange, evasion of foreign exchange control or disrupting financial stability shall be transferred to judicial organs for handling according to law.

Article 11 To prevent violators from transferring their unlawfully acquired funds when violations of foreign exchange control are under investigation, the foreign exchange control agencies may ask the banks to freeze the funds in question for a period of no more than two months. Upon expiry, the funds shall be unfrozen automatically. If an extension of the period is necessary under special circumstances, the relevant foreign exchange control agency shall renew the notification to the bank concerned. In case a violator refuses to pay the fine or the sum to be confiscated, the relevant foreign exchange control agency may enforce the penalty by deducting the sum from the violator's bank account.

Article 12 In cases where the foreign exchange control agencies impose penalties, notices of penalty decision shall be served to the units or individuals being penalized. If the party concerned does not agree with the penalty decision, it(he) may appeal to the foreign exchange control agency at the next higher level for reconsideration within 15 days as of the date of receipt of the notice. If the party concerned still does not agree with the decision of reconsideration, it(he) may bring a suit in the local people's court.

Article 13 Cases involving violation of foreign exchange control regulations shall be handled by the foreign exchange control agencies; cases involving unlawful procurement of foreign exchange and evasion of foreign exchange control that are of the nature of smuggling by means of illegally getting the goods into or out of the country as part of luggage and personal effects, by post or other means of transport, shall be handled by the Customs; and cases involving the use of foreign exchange or payment instruments in foreign currency for speculation and profiteering shall be handled by the administrative departments for industry and commerce.

Article 14 Measures for penalizing violations of foreign exchange control in the special economic zones shall be separately formulated by the Governments of Guangdong and Fujian Provinces by taking reference to these Rules.

Article 15 The State Administration of Foreign Exchange Control shall be responsible for interpreting these Rules.

Article 16 These Rules shall come into force as of the date of promulgation.