China's leadership gathered at a three-day meeting to set economic policy and reform priorities for 2014. The meeting also lay out the blueprint of a bold reform agenda for the next decade.
In November 2013, the State Council revised the Regulation for International Payments Balance Reporting, to be enacted on January 1, 2014. Revised Article 7 states: Chinese nationals shall complete the international payment reporting to the State Administration of Foreign Exchange, if the transactions occur in China with foreign nationals. The revised Article 15 states: the State Administration of Foreign Exchange and its regional offices can investigate and verify certain transactions between Chinese nationals and foreign nationals if the transactions occur in China.
The Chinese leadership is expected to maintain a "prudent" monetary policy in 2014. The Economic Reform priorities would include making preparations for freeing up bank deposit rates, including the establishment of a deposit insurance system.
It is widely believed that the new law targets high net worth individuals in the private sector, government officials and the executives of state-owned enterprises and individuals who have monetized government connections. Their assets outside of China will be subject to strict scrutiny. Chinese nationals who transferred assets overseas and the financial institutes who facilitate such transaction will be obligated to report to the State Administration of Foreign Exchange. The commentators stated that in the next three years even more high net worth individuals in China will immigrate to the US and Europe before this new law is fully implemented on the state level and on the local level in China .
The currency restriction rule in general has not changed. According to the Regulation of State Administration of Foreign Currency, each Chinese national can only exchange maximum of $50,000 dollars/per person/per year for personal consumption purpose.
Since October 2012, the Bank of China in Guangzhou, now available in Shanghai and Beijing, has launched a pilot program to facilitate the foreign currency exchange procedure. Bank of China conducted its due diligence by requiring the investors to submit source of investment funds documents and the EB-5 offering documents prior to the currency exchange. The due diligence process takes up to three weeks.
Once the investors’ source of funds and legitimate use of the funds is approved, Bank of China exchanges the RMB equivalent of $500,000 at once via an internal offshore account in London. This new currency exchange method so far is accepted as a legitimate traceable path of the EB-5 investment by the USCIS. Though the new pilot program at Bank of China saved investors’ trouble going through 10 relatives to exchange $50,000 each, some investors rather use 10 currency exchange facilitators. The Bank of China’s due diligence process could take longer than three weeks and it prolongs the overall process.
It remains to be seen whether or how the economic policy and the reform priorities will affect the already loosened foreign currency exchange rules in China. The Bank of China pilot program is delightful changes suggesting that the restriction on foreign currency exchange may be gradually lifted. However, in reality some has expressed concerns about the mixed signals the Chinese government is sending to the world. The author has learned recently that several EB-5 investors who have active US dollar account have been closely monitored. Their accounts have been suspended temporarily and their international payment ability has significantly been curtailed. It is unknown whether this incident is related to the tightened monitory policy.
 Procedures for Reporting Balance of International Payments, People's Bank of China, Approved by the State Council of the People's Republic of China on November 9, 2013 and will be enacted on January 1, 2014.
 Information from the official website of State Administration of Foreign Exchange: http://fj.safe.gov.cn/110000/110000f0263005.htm (Last retrieved on May 26, 2012 materials in Chinese)
 Leadership Conference Opens with Mixed Signals on China Economy, Business Week, By Dexter Roberts, December 10, 2013 http://www.businessweek.com/articles/2013-12-10/leadership-conference-opens-with-mixed-signals-on-china-economy
Yi Song is a dual licensed attorney in the US and in China. She is based in New York City at Mona Shah & Associates focusing on EB-5 financing and securities law. She has authored many published articles on EB-5 financing and China Practice. She practiced tax law in China and worked at one of the most prestigious law firms in China King & Wood (Now known as King & Wood Mallesons). She also clerked at the Supreme Court of China in the country’s capital Beijing. Yi is a graduate from Georgetown University Law Center in Washington, DC.
This article represents the author’s personal opinion. No legal advice is provided in this article. Please consult the counsel for advice applicable to your particular circumstances.
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