In "What are the Legal Paths for Large Amount Funds Transfer from Domestic to Overseas (Part 1)", we learned about three common legal ways for large amount funds to leave the country: immigration property transfer, international trade, and overseas direct investment (ODI). In addition, there are other ways for large funds to exit the country, such as overseas loans, QDLP/QDIE and QDII/RQDII [1], and multinational corporations' integrated domestic and foreign currency fund pools. This article will continue to provide a brief introduction.

1、 Overseas loans

Domestic enterprises can borrow RMB funds to overseas enterprises through settlement banks or through entrusted loans from enterprise group finance companies to overseas enterprises through settlement banks.

Case: The client, Mr. Bai, is the owner of a multinational group company. Mr. Bai wants to use domestic enterprise A to transfer RMB 100 million to overseas enterprise B. At this point, what does Mr. Bai need to do? What are the precautions?

Firstly, according to the relevant regulations of regulatory agencies such as the People's Bank of China and the State Administration of Foreign Exchange, Mr. Bai has two ways to remit money overseas:

1. Lending RMB funds to overseas enterprises through settlement banks;

2. The finance company of the enterprise group loans RMB funds to overseas enterprises through a settlement bank through entrusted loans.

Secondly, Mr. Bai needs to pay attention to the following points:

1. Establishment requirements: Domestic enterprise A must be registered and established for at least 1 year;

2. Equity relationship: There is an equity related relationship between domestic enterprise A and overseas enterprise B (borrower);

3. Source of funds: The source of funds for domestic enterprise A's loans shall not be its own debt Financing or personal funds;

4. Loan purpose: It must comply with the laws and regulations of China and the country or region where the borrower is located;

5. Foreign exchange registration: Domestic enterprise A needs to register with the local foreign exchange management department before making loans;

If the above requirements are met, domestic enterprise A can handle business loans to overseas enterprise B within the approved loan balance.

2、 QDLP/QDIE and QDII/RQDII

To put it simply, QDLP/QDIE is a private equity fund in which a domestic natural person or institutional investor acts as a qualified domestic limited partner, and an enterprise recognized by the local financial management department acts as the manager and invests overseas. At present, China implements a pilot system for QDLP/QDIE. The State Administration of Foreign Exchange is responsible for verifying the total amount of foreign investment in the pilot areas, while the foreign exchange bureaus in the pilot areas are responsible for foreign exchange registration, account opening, and fund receipt and payment business management in the pilot areas. The manager of QDLP needs to register as a private fund manager with the China Securities Investment Fund Industry Association and apply for pilot qualifications and external investment quotas to the approval department led by the local financial management department. Beijing, Tianjin, Qingdao, Shanghai, Jiangsu Province, Ningbo, Chongqing, Shenzhen, Guangdong Province, Hainan Province and other places have issued relevant regulations on QDLP/QDIE. The requirements for the external investment scope of QDLP/QDIE in pilot areas are not consistent, and local regulations need to prevail. Taking Beilun District, Ningbo City as an example, QDLP's investment scope includes the equity and debt of overseas unlisted enterprises, stocks and bonds non-public issued and traded by overseas listed enterprises, overseas securities markets, overseas private equity investment funds, and private securities investment funds.

QDII/RQDII is managed by specific financial institutions such as commercial banks, trust companies, securities companies, fund management companies, insurance institutions, etc. that have obtained the qualification of qualified domestic institutional investors. They raise funds domestically and invest in overseas financial markets. Among them, RQDII is a product priced in Chinese yuan that is invested in Chinese yuan. The State Administration of Foreign Exchange shall periodically announce the QDII foreign exchange quotas of various financial institutions. RQDII does not require quota approval, and the actual fundraising scale shall prevail. However, in order for RQDII to conduct overseas investments, it is necessary to submit to the Shanghai headquarters of the People's Bank of China, in accordance with regulations, the basic information of RMB qualified investors, custodian banks, source and scale of funds, investment plans, inflow and outflow of funds, and overseas holdings.

3、 Multinational Corporation Local and Foreign Currency Integrated Fund Pool

For multinational corporations, they can operate and manage domestic and foreign currency funds in a centralized manner according to their own business and management needs, carry out fund collection and adjustment of surplus and shortage, centralized receipt and payment of current account funds, and net settlement of differences. At present, China (Shanghai) Pilot Free Trade Zone Lingang New Area, Beicang District of Ningbo City, Hainan Yangpu Economic Development Zone, and Guangzhou Nansha New Area of China (Guangdong) Pilot Free Trade Zone have all issued regulations on the management of domestic and foreign currency integrated capital pool business for multinational corporations. This business can only be carried out in various domestic and foreign companies or branches (hereinafter collectively referred to as "member enterprises") that are directly or indirectly held by multinational corporations and have independent legal personality, and each region has certain requirements for member enterprises. For example, Shanghai proposes that the total operating revenue of domestic member enterprises in the previous year should not be less than RMB 10 billion, and the total balance of payments in domestic and foreign currencies in the previous year should not be less than RMB 7 billion There are multiple requirements for overseas member enterprises to have a total operating revenue of no less than the equivalent of 2 billion yuan in the previous year.

References and annotations:

[1] QDLP (Qualified Domestic Limited Partner) refers to qualified domestic limited partner; QDIE (Qualified Domestic Investment Enterprise) refers to a qualified domestic investment enterprise; QDII (Qualified Domestic Institutional Investor) refers to a qualified domestic institutional investor; RQDII (RMB Qualified Domestic Institutional Investor) refers to RMB qualified domestic institutional investors.