Two different regimes for transactions with cross-border element
In China, transactions involving a cross-border element are divided into current account transactions which are liberalized and only require proof to be provided to the remitting and converting or receiving bank in China that there is a genuine and lawful underlying transaction, and capital account transactions which are still restricted and more strictly regulated.
What's the background to the new controls?
There is currently a heightened sensitivity in China in relation to outflows of capital from China. This suggests that Chinese individuals and companies may have been trying to move their money out of China in significant amounts in recent years as the growth curve and future growth prospects for the Chinese economy have weakened. More recently, concerns have been raised about questionable outbound transactions being used by Chinese companies and individuals to move assets overseas, leading to a lot of new policy pronouncements restricting certain types of outbound transaction, and imposing new gating reviews on transactions involving outflows of funds from China. These new policies have important implications for all Chinese companies seeking to make outbound investments and their overseas transactions counterparties, as well as those seeking to execute transactions involving payments from China, wherever located.
Click here to read our full briefing and find out what this all means to you and your transaction involving a Chinese counterpart.