How to get your money out of China has increasingly been a serious and significant issue not only for foreigners but also for Chinese people themselves.
In 2017, the Wanda Group – a vast Chinese multinational conglomerate and owner of Wanda Cinemas and the Hoyts Group, was stopped by the government in the process of making overseas mergers and acquisitions. The China Banking Regulatory Commission prohibited large state-owned banks from granting loans to Wanda for these overseas M&A projects. At the same time, privately held enterprise groups such as Wanda were forced by the Chinese government to sell overseas assets and transfer funds back to China. The same happened to Anbang Insurance Group who acquired the Dutch insurance company Vivat in 2015 and within four years is now divesting it again.
In late 2016 the Chinese government began to strictly control all foreign exchange transactions and is even boosting this control since 2018. In addition to statistical foreign balance of payment (“BOP”) purposes, the controlling of foreign exchange (“forex”) transactions for both corporations and private individual citizens, the ultimate focus of forex control is to limit Chinese capital investments abroad.
For individuals, since the beginning of 2017, the PRC State Administration of Foreign Exchange (“SAFE”) announced new regulations on the restriction of purchase of forex in overseas real estate and capital market investment. Furthermore, while maintaining the US$ 50,000 foreign exchange purchase limit, a specific application form needs to be filled in.
For enterprises, China has moved towards a more foreign currency system, however, still under substantial monitoring. Under China’s BOP, there are two types of bank accounts: firstly, the current account which covers frequent payment transactions for services and sales. The other one is the capital account which is meant to cover capital transactions for real estate, shares (stocks), bonds, securities and savings deposits.
For current account transactions, companies need to go to the Tax office first to pay and file all related tax like VAT and Corporate Income Tax. Then companies need to show all required documents including tax clearance certificate, contracts, invoices at the bank’s counter when completing the forex transaction – as PRC banks are authorized to check and approve the currency exchange on behalf of SAFE as their front office and only consult SAFE if they are unsure about the rule or its execution.
Currency exchange under capital account need approval from both the PRC Ministry of Commerce (“Mofcom”) and SAFE. A loan for example, is only allowed for intra-group lending to foreign subsidiaries or affiliates (daughter or sister companies). Although there is no formal (published) need, SAFE does check the controlling power of the shareholder. Getting your money out of China therefore may require a more creative approach. There are several options available to this end.
Wintertaling China Desk is ready to figure out and assist you in finding the most suitable approach for you.