Recently, the People’s Bank of China issued the Notice on Further Improvements to Cross-Border Renminbi Business Policies to Facilitate Trade and Investment (the “Notice”) to implement the Circular of the State Council on Measures to Promote Foreign Investment Growth (Guo Fa  No.39), improve and optimize RMB cross-border business policies, promote trade and investment facilitation, create a good business environment, serve the One Belt, One Road initiative, and create a new open stage. The Notice primarily pertains to cross-border settlement of RMB and related carbon trade, direct RMB investment by overseas investors, and inward remittance of RMB funds raised overseas for domestic use.
1. More RMB cross-border settlement possibilities
Pursuant to Articles 1 to 3 of the Circular, enterprises may use RMB to settle any cross-border transaction that may be settled using foreign exchange under law. For individuals, banks can handle cross-border RMB settlement transactions on their behalf under the three fundamental principles of “know your customer,” “understand your business” and “due diligence”. For overseas trading organizations, those that engage in carbon trade in RMB via a domestic carbon trading agency pursuant to the relevant requirements of the carbon trade authority under the State Council may also set up a dedicated RMB deposit account to handle the payment and receipt of funds for carbon trade.
2. Facilitation of direct RMB investment by overseas investors
To facilitate direct investment in RMB by overseas investors, Article 4 of the Notice stipulates as follows:
(1) An overseas investor seeking to set up multiple foreign-invested enterprises or projects in China may open separate dedicated RMB deposit accounts for front-end expenses.
(2) Foreign-invested enterprises may open dedicated accounts for RMB capital at different banks as well as multiple such accounts. Funds may be transferred among these dedicated RMB capital accounts that are held by the same holder.
(3) For RMB capital and borrowed overseas funds of foreign-invested enterprises for use in making payment of wages, travel expenses or petty purchases, the banks can directly take on the enterprise’s payment instructions based on the aforementioned three principles.
(4) Where an overseas investor uses RMB in a transaction involving the title transfer of a state-owned property by a domestic enterprise, if the transaction is concluded, the RMB security deposit remitted to the institution designated by the state-owned property supervision authority may be remitted to the corresponding dedicated deposit account for use in subsequent property transactions or as the capital contribution for a subsequently established foreign-invested enterprise. If the transaction is not successful, the RMB security deposit would be repatriated. For other business activities involving the inbound remittance of a RMB security deposit by an overseas investor for a direct foreign investment project, or the receipt of a RMB transaction payment by a domestic third-party entity as required by the state, the fund transfer may be executed in reference to the above requirements.
(5) For investment income such as profits or dividends received by an overseas investor from China, banks are required to conduct cross-border RMB settlement by reviewing the relevant supporting materials to ensure that such income may be freely repatriated pursuant to law.
3. Facilitation of inbound remittance of RMB funds raised overseas
For RMB funds raised by domestic enterprises overseas through the issuance of stocks or bonds, the Notice states that those funds may be remitted based on actual needs by following the relevant formalities.
In conclusion, this Notice eases the scope of cross-border RMB settlement and better facilitates trade and investment of enterprises, providing more openness to the China market.