New rules take many decisions out of SAFE hands
Yi Lu and Sophie Han of Paul Hastings explain the implications of Circular 59, which promotes foreign direct investments and outbound investments
Last November, the State Administration of Foreign Exchange issued the Circular Regarding Further Improvement and Adjustment of Foreign Exchange Administration Policy of Foreign Direct Investments (Circular 59). It is a signal that SAFE is transitioning its role from micro to macro administration. It removes many of the approval requirements put in place over the past 10 years, thus expediting foreign direct investments. Mainland banks now have authority to review and process more foreign exchange transactions directly.
Investors planning to make greenfield investments are no longer required to obtain SAFE's approval to open foreign exchange bank accounts. They can now open them directly. If a foreign investor has opened a bank account to pay preliminary investment costs, they no longer need SAFE approval to convert foreign exchange in this account into RMB. They also don't need permission if they plan to use the profits to form another company in China or increase its capital.