On April 6, 2022, the Beijing Administration of Foreign Exchange further issued the "Notice on Printing and Distributing the" Implementation Rules for the Pilot Policy of Deepening Capital Account Facilitation Reform in Beijing "(the" Implementation Rules "), which is another major policy update following the" Notice on Further Improving the Capital Account Facilitation Level in Beijing "issued by the Beijing Administration of Foreign Exchange on March 10, 2020. The implementation rules aim to further enhance the level of cross-border investment and financing facilitation in Beijing, promote the expansion and opening up of the capital's financial industry, and assist in the construction of the comprehensive demonstration zone for the expansion and opening up of the national service industry and the China (Beijing) Pilot Free Trade Zone. The implementation rules include nine chapters, which mainly include expanding the pilot scope of one-time registration of foreign debts, simplifying the management of foreign debt accounts, simplifying the foreign exchange management of the qualified overseas limited partner system, simplifying the foreign exchange registration management of overseas listing of domestic companies, simplifying the foreign exchange registration management of foreign employees of domestic listed companies participating in equity incentive plans, and expanding the pilot scope of domestic and foreign currency integrated fund pools for multinational companies Institutional innovations have been made in matters such as in-process and post event supervision and risk prevention and control, and one-time registration of foreign debts of enterprises in the Beijing Free Trade Zone, the Qualified Foreign Limited Partner System (QFLP) in Beijing, the registration, change, and cancellation of overseas listing of domestic companies in Beijing, and the registration, change, and cancellation of participation of foreign employees in equity incentive plans of domestic listed companies in Beijing, Specific business guidelines have been issued in the form of annexes to the implementation rules for the five businesses of multinational companies' local and foreign currency integrated fund pools. The relevant provisions of the Implementation Rules and its annex, "Guidelines for the Pilot Foreign Exchange Management of the Qualified Foreign Limited Partner System (QFLP) in Beijing" ("QFLP Foreign Exchange Guidelines"), further clarify the relevant landing issues of QFLP funds in Beijing. This article will attempt to provide a brief introduction to the QFLP foreign exchange guidance in conjunction with the "Interim Measures for Conducting Qualified Foreign Limited Partners Pilot Projects in this City" (the "Interim Measures") issued by the Beijing Local Financial Supervision and Administration Bureau and the Beijing Municipal Market Supervision and Administration Bureau on May 6, 2021.

1、 Regulatory mechanism

The QFLP pilot project in Beijing is led by the local financial work management department to establish a joint working mechanism ("joint working mechanism") with the participation of relevant departments to carry out the work; The Beijing Foreign Exchange Management Department is responsible for supervising the registration of foreign exchange and capital exchange related to the pilot projects of qualified overseas limited partners.

2、 Clarify the basic framework of QFLP foreign exchange management

According to the QFLP foreign exchange guidelines, management enterprises or their controlling shareholders, actual controllers, or executive partners as applicants can apply to the joint working mechanism for pilot qualification and scale of overseas funds raised (i.e., the QFLP scale of management enterprises, "QFLP scale"); After obtaining the pilot qualification and QFLP scale, the management enterprise should go through the QFLP scale foreign exchange registration procedures with the local foreign exchange bureau. Subsequently, the management enterprise may initiate the establishment of one or more pilot funds. Consistent with the Provisional Measures, the QFLP Foreign Exchange Guidelines stipulate that pilot funds can take the organizational forms of corporate, partnership, and contractual systems.

3、 Single landing requirements

From the perspective of the provisional measures, there are no clear landing requirements for fund management enterprises or pilot funds. However, the QFLP foreign exchange guidance clearly sets out the requirements for pilot funds to be launched in Beijing.

4、 Clearly propose QFLP scale and balance management

The QFLP foreign exchange guidance clearly proposes the concept of "QFLP scale" (managing the scale of overseas funds raised by enterprises), as well as supporting registration application requirements. Without exceeding the QFLP size of the management enterprise approved by the joint working mechanism, the management enterprise can freely allocate the overseas fund size of the pilot fund under management, providing some flexibility for the management enterprise.

Balance management is implemented for the QFLP scale. In principle, management enterprises can flexibly adjust the scale of overseas funds raised by a single fund among pilot funds ("single fund QFLP scale"), and the QFLP scale of each single fund cannot exceed the QFLP scale.

5、 Refinement of custodian workflow and simplification of foreign exchange registration process

1. The concept of "QFLP dedicated account" (i.e., the capital account of the pilot fund) is explicitly proposed, which can be used as a dedicated escrow fund account for depositing capital contributions remitted from overseas or transferred from within China by overseas partners. The inward and outward remittance of funds must be completed through a dedicated escrow fund account. On the premise of truthfully declaring the purpose of the funds, the pilot fund can directly handle the settlement of foreign exchange funds in the bank.

2. The requirements for QFLP business foreign exchange reinvestment registration, currency contribution entry registration, and opening a foreign exchange settlement account to be paid have been cancelled.

3. In response to the general requirement in the interim measures that custodians regularly submit capital flow reports to the pilot joint review office, the QFLP foreign exchange guidance is detailed as follows: custodians should report relevant data on the outward and inward remittance of pilot fund funds to the relevant foreign exchange bureaus and local financial work management departments in accordance with the "Custodian Statement of QFLP Pilot Fund" within 10 working days after the end of each quarter. After the pilot fund conducts business, the management enterprise shall, within 10 working days after the end of each quarter, report relevant investment asset information to the relevant foreign exchange bureau and local financial work management department in accordance with the "QFLP Pilot Fund Management Enterprise Statement I" and "QFLP Pilot Fund Management Enterprise Statement II".

6、 Regulatory linkage with China Securities Investment Fund Industry Association

The QFLP business foreign exchange and provisional measures have the same criteria for whether the management enterprise and the pilot fund need to register with the China Securities Investment Fund Industry Association, and should be handled in accordance with the current regulations. The relevant information about the registration of the management enterprise and the pilot fund should be provided to the SAFE. The time requirement is to replenish the funds in the QFLP special account before they arrive.

7、 Tax commitment upon exit is sufficient

The management enterprise can directly handle cross-border revenue and expenditure using the tax commitment letter as the pilot fund before liquidation, without providing tax payment certification materials.

epilogue

This QFLP foreign exchange guidance further clarifies the temporary measures in foreign exchange related regulatory policies, and provides regulatory guidance for the implementation of foreign exchange work. We look forward to providing customers with services to further clarify and understand the regulatory boundaries in practice, and to implement QFLP funds in Beijing.