The State Administration of Foreign Exchange (SAFE) is the authority in the People’s Republic of China (PRC) responsible for administering the country’s foreign exchange reserves and regulating the cross-border flow of funds between the PRC and other countries or regions.
Over the past year we have seen an increasing number of multinational commodities companies’ Chinese subsidiaries being subject to various measures taken by SAFE, for example, being subject to an onsite inspection by SAFE or being downgraded by SAFE from a Class A company to a Class B company. What does such SAFE action mean? How serious is the situation?
The purpose of this note is to help you to understand the various measures that SAFE takes to monitor and regulate PRC companies and their cross-border trading activities. The scope of this note is limited to administrative measures that may be taken by SAFE and so does not cover any civil or criminal liabilities that a company may incur due to violation of PRC law or regulations.
2. Trading Company List
For any company that wishes to carry out cross-border trading activities, after the company obtains its business licence, the first thing to do is to register with the local branch of SAFE and become a member of the List of Companies which Conduct Trading Activities and Pay and Receive Foreign Exchange (Trading Company List).