Starting a business in China? You should familiarize yourself with China’s regulatory system. The following article talks about China’s State Administration of Foreign Exchange (SAFE), its duties, and its interactions with WFOEs.
PTL Group specializes in company registration in China. We make sure that China company registration is done right, because doing so will help us focus on the real goal: long-term WFOE management. To help our clients, we provide extensive operational support for registered entities. This is where our knowledge and expertise really make a difference.
We hope you find the following information useful.
Cross-border Money Transactions
Transactions in China are carefully scrutinized by the Chinese regulatory system. The institution in charge of China’s foreign exchange market is called SAFE. Here is what WFOEs should know about it.
What is SAFE?
The State Administration of Foreign Exchange is affiliated with the People’s Bank of China, and is involved in all foreign currency transfers. It enjoys unparalleled power and authority compared to similar institutions in other markets.
As SAFE is central to administering foreign money exchange, it is divided into 8 different departments and is spread all over China, throughout all municipal levels.
SAFE’s roles & responsibilities
SAFE’s duties support its goals: to ensure the stability and legitimacy of the foreign exchange market at the macro level, and to form a management framework for international capital flow at the micro level.
- Governing and overseeing China’s foreign exchange market
- Formulating regulations related to foreign exchange
- Implementing new policies pertaining to RMB convertibility
- Advising the People’s Bank of China on RMB exchange rate
- Taking measures to control exchange rate fluctuation and to prevent financial fraud and risks
- Monitoring all kinds of cross-border transactions, external credits and debts
- Safeguarding and managing financial assets and reserves
- Regulating cryptocurrency
Considerations for WFOEs
WFOE managers and CFOs must remember that SAFE is engaged in many types of foreign capital exchanges (e.g. capital registration, service fee payments, debt payments, etc.), in a wide variety of accounts. Foreign exchange is still very much controlled, and RMB isn’t convertible freely.
When screened by either SAFE itself or the local banks (to which some of SAFE’s responsibilities are delegated), WFOEs should make sure they possess necessary documentation that complies with local requirements, and that all overseas transactions are properly declared. SAFE and its execution arms will be present every step of the way, and violations will have consequences.
Regulations in China change relatively frequently. For the most up-to-date regulations, please check in with us.