The Pilot RMB Trade Settlement Scheme and RMB Internationalisation
May 30, 2009
- The Chinese mainland announced the pilot RMB Trade Settlement Scheme in April 2009, which is a small but one of the important steps of “internationalising” the RMB. Under the scheme, eligible enterprises in selected mainland cities and regions will be allowed to settle in RMB in trade with their corresponding enterprises in Hong Kong and other selected locations outside the Chinese mainland.
- With China’s fast-expanding economy and growing external trade, the RMB will ultimately acquire an international status truly reflective of its economic weight and trade scale, even though it at present remains largely a non-convertible currency. The RMB’s internationalisation will likely follow a three-stage process (i.e. when it is used in pricing and settlement of trade and financial transactions; use as an international investment vehicle; and use as an international reserve currency), especially after the demand for RMB has hit certain critical mass in external trade and financial transactions.
- Under the pilot RMB settlement scheme, eligible Hong Kong enterprises will benefit from having an option to quote and settle in RMB their Hong Kong-mainland trade, allowing them to better manage currency risks and reduce trade settlement costs. Hong Kong banks will have a new growth area aside from personal RMB services, where new products and services can be developed.
- As for Hong Kong, the pilot RMB settlement scheme will further strengthen it as an international financial centre, by far the largest RMB centre outside the mainland with an increasing offer of RMB products and services, including the issue of RMB bonds. It is expected that Hong Kong will have a continual role to play in the RMB’s internationalisation process, and considerable opportunities for developing additional RMB businesses over the medium-to-long term.
Pilot Renminbi Trade Settlement Plan
The Chinese government announced in April 2009 the scheme of allowing settlement in Renminbi (RMB) in the trade of Shanghai, Shenzhen, Guangzhou, Zhuhai and Dongguan with Hong Kong and Macau, and in the trade of Yunnan and Guangxi with ASEAN1 on a pilot basis.
Although the Chinese government has not yet announced the details of the regulatory and operational framework of the pilot scheme, eligible mainland enterprises in the selected regions are expected to be able to settle trade in RMB shortly with their corresponding enterprises outside the Chinese mainland under this Pilot RMB Trade Settlement Scheme (PRTSS), while the RMB presently remains a currency that is not fully convertible and is circulating predominantly on the Chinese mainland.
In principle, PRTSS will provide eligible enterprises2 engaged in trade between Hong Kong and the Chinese mainland with a new option to quote as well as to settle their trade in RMB based on their needs, which otherwise has been settled mostly in US dollar. Measures that will likely be implemented to facilitate the pilot scheme would include:
First, eligible enterprises in Hong Kong will be allowed to open “corporate RMB accounts” with selected Hong Kong banks for settling trade with eligible enterprises on the Chinese mainland. They will be allowed to deposit RMB into their own corporate banking accounts.
Second, eligible enterprises will be allowed to transfer RMB to other selected companies’ accounts on the Chinese mainland for trade-related transactions.
PRTSS: an expansion of RMB business scope for Hong Kong to benefit both enterprises and banks in Hong Kong
Following the first-phase introduction in 2004 of four types of pilot personal RMB business in Hong Kong, covering RMB deposits, remittances, exchanges and cards, there have been enhancements in the allowed business scope for Hong Kong banks, with RMB cheques for Hong Kong residents added, and limits for credit card transactions and transfers raised. Besides, designated merchants3 in selected business sectors in Hong Kong are allowed to open RMB cash deposit accounts and to exchange RMB deposits one-way into Hong Kong dollars.
Under the current RMB banking business in Hong Kong, personal RMB account holders are allowed to remit RMB 80,000 per day to the account under the same name on the mainland. Contrastingly, for trade to be effectively settled under PRTSS, the amount of RMB that would be allowed in a mainland-Hong Kong trade, or the RMB amount allowed for settlement by an eligible enterprise in a day, should be sufficiently large. Preferably, there would not be a cap for the amount allowed for daily trade settlement in RMB.
Tags: Hong Kong, rmb, YuanRelated Posts:
Setup, Extension, Alteration and Termination of Permanent Representative Bodies of Foreign Countries
April 11, 2009
A.Acceptance and Hearing
Qualifications:
Applicant shall submit the following materials:
1.Setup:
（1）Application signed by the Chairman of the Board or General Manager containing items of: basic information of the enterprise, purpose for setting up the Permanent Representative Body, Name of the body, Personnel appointed (Chief Representative and Representative), business scope, term of residence, Office address and so on.
（2）Practice Legality Certificate issued by the appropriate authority of the state that the enterprise locates in (duplicate);
（3）Credit Standing Certificate (original)issued by the bank having business connections with the enterprise;
（4）Power of Authority for the Chief Representative and Representative signed by Chairman of the Board or the General Manager of the enterprise; Resumes of the Chief Representative and Representative and their ID card copies. In case that the Chairman of the Board acts as the Chief Representative and Representative, the Power of Authority must be signed by at least 2 directors of the enterprise. For Enterprise with no board of directors, the Executive Director may sign the documents concerned.
（5）Lease Contract for the Office Site signed by person in charge or person authorized, as well as certificate concerning foreign affairs issued by Police
（6）Fill in Application form for setting up Permanent Representative Body of Foreign Enterprise;
（7）Other materials for application considered necessary by examination authority.
Pursuant to Article 12 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise
2. Extension
（1） Application for Extension signed by Chairman of Board or General Manager;
（2） Report of Business activity of this representative body during the last term of residence;
（3）Credit Standing Certificate (original) issued by the bank having business connections with the enterprise;
（4）Practice Legality Certificate issued by the appropriate authority of the state that the enterprise locates in( duplicate);
（5）Approval Certificate of the Permanent Representative Body and its register card copies;
（6）Lease Contract or Access Certificate of the Office Site signed by person in charge or person authorized of the enterprise.
（7）Fill in Application Form for Extending Permanent Representative Body of Foreign Enterprise.
(Pursuant to Article 17 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
3、Alteration
Any foreign, or Hong Kong and Macao enterprise that asks for alteration on the name of the Permanent Representative Body, changing or adding Chief Representative and Representative, alteration on the business scope, term of residence and office site of the Body, shall submit application signed by the Chairman of the Board or the General Manager and other materials related the alterations (the application for altering the office location may be signed by Chief Representative) , as well as fill in the Application Form for Alterations of Permanent Representative Body of Foreign Enterprise.
(Pursuant to Article 19 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
4、Termination
Upon the expiration of the term of residence or terminating business ahead of the term , the Permanent Representative Body of foreign or Hong Kong and Macao enterprises shall apply for cancellation of the permanent body . To fulfill this, the Chairman of the Board of Directors or the General Manager shall make signature on the Cancellation Application and the Original Approval Certificate, and submit them to the original approval departments for records through the original undertaking unit.
Criterion:
1.Application Materials shall be complete , standard and valid.
2.Application forms for Setup, Extension, Alteration and Termination of Permanent Representative Bodies of foreign, Hong Kong or Macao Enterprises as well as the Power of Authority for the Chief Representative and Representative shall be written in Chinese and if they are committed in other languages, the a Chinese version shall be attached. Other materials written in other languages shall also be attached by Chinese version. (Pursuant to Article 21 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
3.If necessary, the examination and approval authorities are empowered to request all of part of the application materials for the setting up of Permanent Representative Body submitted by Foreign Enterprise be notarized by the Notarization Authorities of the state concerned, meanwhile be authenticated by Chinese Embassy in that country. (Pursuant to Article 22 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
Person responsible for this post: the acceptance and hearing personnel of Foreign Enterprise Representative Office of the Foreign Trade Administration Department.
Duty and Power:
Examine and Check the application materials in accordance with the criterion for acceptance and hearing;
Accept and hear the case if the materials submitted is qualified; and transfer the materials to the examiner.
Unqualified materials will not be accepted, whereas inform applicant all materials needing further supplement and amending at one time. Meanwhile apply to the higher-up for records.
Time Limit: 1 working day
B. Examination
Criterion:
1.Application Materials shall be complete, standard and valid.
2.Applicant must be Trader, manufacturer, freight agent, contractor, consulting company, advertisement company, investment company, leasing company and other economic and trade organization (Pursuant to Article 2 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
3、The enterprise shall get legal register in home country(Pursuant to Article 8 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
4、Must have a good will (Pursuant to Article 8 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
5、Name of the Permanent Representative Body of foreign or Hong Kong and Macao enterprise shall be in the style of Country Name + Enterprise Name + City Name + Representative Office(Pursuant to Article 13 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
6、The maximum term of approval for once for the Permanent Representative Body of foreign or Hong Kong and Macao enterprise is 3 years .Term of Residence begins from the date of the issuance of the approval certificate by the authority. If the term needs extending upon the expiration, the foreign enterprise shall make application 60 days in advance to the original approval authority by means of the formal undertaking unit, and deal with the formality of extension. (Pursuant to Article 16 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
7、When applying for setting up the Permanent Representative Body , foreign or Hong Kong and Macao enterprise must entrust one company vested with foreign trade dealership by the approval of department of Chinese government in charge , or an organization dealing in foreign economic and trade or Foreign affairs service unit approved by MOFTEC as the undertaker to hand in all sorts of materials to the examination and approval authorities and deal with the application formalities. (Pursuant to Article 10 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
8、Examination and Approval authority dealing with the setting up of Foreign Chamber of Commerce in China is Ministry of Foreign Trade and Economic Cooperation and the register authority is Civil Administration Department. One country can only establish one chamber of Commerce in Beijing at present, and no chamber of Commerce or subsidiary chamber is allowed in other cities. (pursuant to Summery Notice of the Work Meeting on Examination and Approval for National Foreign Merchants’ Permanent Representative Bodies and Import Machinery and Electrical Products Maintaining Station, MOFTEC Official Release 1997,NO.1962 )
9、Chief Representative and Representative of Permanent Body of foreign or Hong Kong and Macao enterprises must be qualified in the following aspects:
（1）Foreign residence holding legal common passport( excluding overseas student in China)
（2）Chinese citizen obtaining permanent residence at abroad
（3）HK and Taiwan fellowmen holding valid certificates( Taiwan passport invalid);
（4）If employing Chinese citizen to act as the Chief Representative and Representative(excluding the NO.2 case of the above), foreign enterprise shall entrust the local foreign affairs service unit or other units appointed by Chinese government to handle the application formalities according to related laws and regulations of China (shall present the delegation letter issued by the empowered unit).
(Pursuant to Article 29 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
10、Enterprises of Taiwan, Semi-Official and Non-Diplomatic Countries whose name contains the words like “Study abroad” “Education” “Immigration” will not be allowed to establish permanent representative bodies at present. Permanent representative bodies of Consulting company, Management company, counseling company shall note clearly in their business scope that “ will not engage in the contacting activity of overseas study and immigration” (Pursuant to Notice of Problems concerned with Examination, approval and management of Foreign Permanent Representative Body, MOFTEC Official Release 1999, NO.1802)
11. Chinese enterprises overseas that was established less than 1 year ago shall not be approved to establish permanent representative body in China; Overseas enterprises of non-productive type are generally not allowed to establish permanent representative body back in China; Enterprises running in deficit are not allowed to set up permanent representative body; Chinese Enterprises overseas in the name of the Parent Company, Subsidiary company intending to set up representative office will not be allowed in principle. (Pursuant to Notice of Rules in Understanding some Problems concerned with Examination and approval of Foreign Permanent Representative Body, MOFTEC Official Release 1993, NO.1794).
12、When applying to set up permanent representative bodies, Foreign enterprises engaged in the industries of Finance and Insurance shall apply to the Peoples’ Bank of China for approval; Enterprises in marine, marine agency shall apply to the Ministry of Communication of China for approval; enterprises in aviation transportation shall apply to General Bureau of Civil Aviation of China for approval; enterprises of other industries shall apply to the Commissions, Departments or Bureaus of Chinese government in charge for approval. For example, Law firms shall apply to Ministry Judiciary for approval and Accounting Firms shall apply to Ministry of Finance for approval. ( pursuant to Provisional Regulations on Management of Permanent Representative Bodies of Foreign Enterprises ,State Council of China)
13、Chief Representative and Representative cannot act as Chairman of the Board, General Manager or Manager and other positions in domestic foreign invested enterprises.(Pursuant to Summary Notice of the Work Meeting on Examination and Approval for National Foreign Merchants’ Permanent Representative Bodies and Import Machinery and Electrical Products Maintaining Station, MOFTEC Official Release 1997,NO.1962).
Person responsible for this post: Examination personnel in Foreign Trade Administration Department
Duty and Power:
Examine and Check the application materials in accordance with the examination criterion;
If the materials submitted are qualified, put forward the approval comment, fill in the examination form, then return materials and the comment to the reviewer;
If materials are unqualified, put forward the disagreement comment, then return it to applicant.
Time Limit: 4 working days
D. Review
Criterion: Same as the examination criterion.
Responsible person for this post: Vice director of Foreign Trade Administration Department in charge
Duty and Power:
Review the examination comment according to the criterion.
If agree to the examination comment, sign the reviewer’s comment in the Examination form and issue the Certificate.(If submit to MOFTEC, must transfer to Director of the Department in charge for approval.)
If disagree to the examination comment, exchange ideas with examiner, then put forward review comment and reasons, transfer them together with that of the examiner to the approval personnel.
Time Limit: 1 working day
D. Approval
Criterion: Same as the review criterion.
Responsible person for this post: Commission Leader in charge
Duty and Power:
Make approval in a fixed time to the collected examination comment according to the Criterion.
If agree to the review comment, put forward comment in the approval form then transfer it to the acceptance personnel.
If disagree to the review comment, exchange ideas with reviewer, put forward the approval comment and reasons in the approval form, then return it to the acceptance personnel by way of the original means.
Time limit: 1 working day
E. Print and Proof
Criteria
1.Submitted Documents shall be signed by the issuing leader, has clear classification and legible writing;
2.Material to be printed shall be in consistency with original document and has no omissions, mistakes and accretions;
Responsible person for this post: Printing personnel and examination personnel of this department
Work Criterion
1、Put the Approval Certificates for Foreign Representative Body in Beijing complete, accurate and valid;
2、Proof shall be correct and has no errors.
Duty and Power
For the approved materials, Print the Approval Certificate for Foreign Representative Body in Beijing in triplicate as provided, and notify the proof personnel to make proof.
Time Limit: 1 working day
F. Notification
Person responsible for this post: acceptance and hearing personnel in Foreign Trade Administration Department
Criteria:
1.Notify the applicant the result of the matter handled timely and accurately;
2.Make the certificate complete, accurate and valid;
3.Keep the examination documents complete and standard for file.
Duty and Power:
Make notification and issue approval documents and keep them on file according to the above criteria;
With respect to the approved application, issue documents concerned and notify the applicant to receive it; announce the result by way of the Internet if the management through Internet is necessary.
With respect to the denied application, make all materials needing further supplement and amending, the requirement, and related rights of applicants and means of making complaint altogether known to applicants in written form at one time. Meanwhile return the application documents to the applicant.
In terms of the unapproved cases, make the reasons, requirement and related rights of applicants, as well as the means to make complaint known to the applicant, and return the application materials to applicant.
Time Limit: 1 working day
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RMB Trade Settlement Start in Five Cities
April 10, 2009
The State Council announced a pilot policy allowing cross-border trades in five cites to be settled in yuan, instead of foreign currencies as previously required, reported the Daily Sunshine The program will be implemented in Shanghai and four cities in Guangdong Province: Guangzhou, Shenzhen, Zhuhai and Dongguan.
Some observers have interpreted the government’s move as a response to a potential depreciation of the US dollar in the future. The Beijing News quoted Zhao Xijun, an economist from Renmin University, stating that with America increasing the monetary supply, its currency is facing downward pressure.
Also on the front page is the news about Larry Yung’s resignation from his position as chairman of the state-owned overseas investment company CITIC Pacific yesterday. The newspaper previously reported that Yung (荣智健) and other board members were investigated by Hong Kong’s Securities and Futures Commission in January.
Another widely-reported news item concerns a Ministry of Finance announcment that the government is planning to provide 850 billion yuan in three years to fund medical service reform package proposed by the State Council. 2/3 of the fund will be spent to cover the expenses of the patients and the rest would be used to improve the service quality of the the hospitals.
In non-financial news, seven suspects, including five former officials of the county government of Xishui, Guizhou Province, stood trial yesterday on charges of engaging in sex with minors. The news media previously reported the defendants paid the victims, who were under the age of consent, for sex. According to the article, a China Youth Daily reporter testified that sex trade involving underage girls is rampant in the province.
Tags: quality, Shenzhen, BeijingRelated Posts:
Hong Kong, Mainland to Connect Payment Network
April 4, 2009
Beginning March 16, Hong Kong and the rest of the mainland will link their foreign-currency payment and clearing systems to reduce cross-border payment risks and costs.
Mainland Chinese banks can now make cross-border payments and settlements in Hong Kong dollars, United States dollars, euros and pounds through the network.
More currencies will be accommodated depending on market demand. According to Shanghai Daily, the linkage will improve multi-currency payment efficiency while also facilitating capital turnover efficiency of participating banks.
Cross-border settlements will be carried out by the mainland banks; China Construction Bank, the Bank of China, the Industrial and Commercial Bank of China, and Shanghai Pudong Development Bank.
The Hong Kong agent banks for the mainland one will also be China Construction Bank, the Bank of China, the Industrial and Commercial Bank of China and Citibank.
Source: China Briefing
Tags: dollar, efficiency, USRelated Posts:
Hong Kong has Friendliest Tax Regime in the Region
April 4, 2009
According to the 2009 Tax Misery and Reform Index, Hong Kong was ranked as the friendliest tax regime in the Asia-Pacific region and the third in the world.
The annual index was done by business magazine, Forbes Asia, by comparing 50 jurisdictions around the world. The score was calculated based on the sum of the corporate, personal, social security and sales tax rates. Tax policies are vital to economic growth because it affects how talent is retained and dictates the flow of capital.
The special administrative region ranked the highest in Asia with a score of 41.5 because of its low corporate tax at 16.5 percent, personal income tax at 15 percent and employer and employee social security levy at 5.0 percent each.
Taiwan followed next as the region’s second-most friendly with a score of 75. “This year, most Asian jurisdictions continue to have (a) more tax-friendly environment compared with other parts of the world,” Forbes said in a press statement.
China and Japan were ranked as having the two harshest tax regimes in the region.
China’s score increased by seven points to 159 compared to last year because of higher employer and employee social security taxes. China also levied a 25 percent tax on corporate income, 45 percent on personal income, 49 percent for employers’ social security, 23 percent for employees social security and a 17 percent tax on goods and services.
The rise in employer and employee social security taxes were implemented to aid workers hit by the global slowdown.
Forbes added:”The survey shows that outside of China and Japan, the rest of Asia continues to enjoy stable, low tax advantage.”
Source: Forbes & China Briefing
Tags: Hong Kong, tax, personal income taxRelated Posts:
