Emerging Markets Rates and Currencies Handbook

Settlements between two onshore resident entities can only be done in CNY, unless either party is located in special-purpose zone (e.g. free-trade zone or export zone) or otherwise approved by SAFE on a case-by-case basis. Resident and Non-Resident entities are allowed to book FX transactions with onshore authorized banks. Settlements between two onshore resident entities can only be done in RMB, unless either party is located in special-purpose zone (e.g. free-trade zone or export zone) or otherwise approved by SAFE on a case-by-case basis. Deal Management Rollover: Permitted for forwards subject to the client’s actual underlying needs and justification provided to the bank. Any resulting profits or losses will be settled in RMB or FCY (FCY only applies to non-resident client). Unwinding: Permitted for forwards, subject to the same requirements for rollovers / extensions. A new rate will be generated in the near leg for early settlement and far leg normally has no difference. Early Maturity: Permitted for forwards, subject to the same requirements for rollovers / extensions. A new rate will be generated in the near leg for early settlement and far leg normally has no difference. Settlement: Net settlement is allowed for derivatives according to a new regulation starting Feb 2018, the settlement currency shall be in RMB or FCY ( FCY only applies to non- resident client). *Deal management shall be basing on client real needs. Documentation Requirements FX Spot: To remit FCY into or out of China, an instruction and supporting documents are needed. FX Forwards: Upon maturity, the transaction settlement has to abide by spot settlement and delivery regulations. Supporting documents are to be provided at settlement. FX Swaps: Sell/Buy — clients’ FX funds settled at the near leg shall be eligible for spot settlement under the provisions on foreign exchange administration. Buy/Sell — clients may directly purchase foreign exchange with RMB at the near end, and use them for foreign payments in accordance with the relevant provisions; Settlement at the far end shall be eligible for spot settlement under the provisions on foreign exchange administration. Banks shall settle the interest which is earned from the deposit in foreign exchange accounts under current items. The supporting documents requirements should follow existing Compliance check process on both legs. FX Options: The major risk characteristics of the single option transactions or combined option transactions handled by banks for clients shall be reasonably related to the genuine business needs of clients. The foreign exchange receipts and expenditures incurred to clients from the exercise of option may not exceed the actual underlying business needs. An instruction should be provided by clients if the option need to be reversed. For CNY involved option transactions or combined option transaction type can be European, American or Asian options. Local regulatory restrictions or approvals may vary on a case by case basis. Requirements for supporting documents for Spot & forward/ option settlements are listed below for different underlying payments products. Clients’ Instructions need to be clear about parties, transaction amount, currency, direction, maturity, account number and all details related to the transaction. Clients’ authorized signature and financial chop/company chop may be required based on different internal procedure. Trade Flows For trade of goods (Clients classified under Category A): Making foreign currency payments for import (non- bonded area business)— at least one of the following 3 items as supporting documents (in original): a) Invoice, b) Contract, c) Custom Slip. Custom slip online verification is compulsory starting May 2017 if the payment amount is over 100,000 USD or equivalent (may be waived under certain circumstances). Receiving FCY payments for export (Clients classified under Category A) — generally no supporting documents needed but the bank shall confirm the nature of the incoming transaction with the clients. Supporting documents or additional evidence is requested in case of doubt. An instruction to the bank is always needed for both of the directions. For trade of service: Making foreign currency payments for services import: Tax Bureau Certificate, Invoice, Contract, or other documentation depending on the category of service. For dividend payments: Tax Bureau Certificate, Board