How to get your money out of China

Foreign exchange controls play a critical but often overlooked role in the operations of companies in mainland China (whether domestic capital or foreign invested). How such foreign exchange policies operate and translate into facts on the ground is often a serious concern for foreign investors unfamiliar with the legal framework. The question always being asked in this area by foreign investors is: once I have invested in China, can I get my money out? Even for many Chinese investors and professionals, understanding and keeping pace with the fast-evolving foreign exchange law is challenging.

The cornerstone of Chinese foreign exchange policies is the distinction between current account transactions and capital account transactions. The Chinese government has liberalised the conversion of renminbi on current account transactions since its acceptance of Article VIII of the Articles of Agreement of the International Monetary Fund Agreement in December 1996. However, free conversion of renminbi on capital account transactions remains a long-term goal. The Chinese government has striven to promote use of the renminbi in both cross-border trade and cross-border direct investment, with a view to ultimately achieving the conversion of renminbi on the capital account and making renminbi an internationally-accepted trading and reserve currency on a par with the US Dollar. The Chinese government's efforts towards relaxation and renminbi internationalisation have manifested themselves in the acts highlighted in Table 1.

Current or capital account transactions

At present, the renminbi is not freely convertible into foreign currencies on the capital account, and foreign currency inflows to and outflows from mainland China are regulated. The State Administration of Foreign Exchange (SAFE) and the central bank, the People's Bank of China (PBOC), are the main regulatory bodies administering foreign exchange controls. The Chinese government has enacted a number of regulations, including the Foreign Exchange Regulations (外汇管理条例), issued on January 29 1996 and amended on January 14 1997 and August 1 2008, which lay out the basic framework of the foreign exchange regime.