Because the Renminbi is not yet fully convertible, restrictions apply to the exchange for so-called capital account items, such as loans and contributions to share capital in an enterprise. Foreign Exchange for Current Account items and profits to be distributed to foreign investors are both fully convertible. No approval by the State Administration of Foreign Exchange (SAFE) is required for the acquisition and transfer of foreign exchange to settle debts based on legal transactions that are classified as Current Account Items. However, the banks authorized to handle such matters are charged with reviewing the documents to be submitted.
Capital Accounts, in contrast, are still subject to SAFE approval. Items include, for example, contributions to the share capital of Foreign Funded Enterprises and also foreign exchange loans. The procedures on foreign exchange, especially that related to current account items, have been relaxed in the last several years. Still, foreign businesses must take care that they obtain and keep relevant documentation on business transactions.
