The September Foreign Exchange Notice Increases Difficulties for Chinese EB-5 Investors
China employs firm currency regulations that are designed to prevent large amounts of currency moving out of the country. Each Chinese citizen can only exchange an equivalent amount of USD 50,000 within one calendar year, while Chinese companies can exchange yuan for foreign currencies only for approved business purposes, such as paying for imports or approved foreign investments.
Earlier (May) this year, the news coming out of Beijing was optimistic. A statement from the State Council, China’s cabinet, was expected, which would ease restrictions for overseas investments. This would allow individual Chinese and businesses to directly purchase stocks, bonds and real estate in foreign markets, thus removing limits on such transactions. However, following the devaluation of the yuan on August 11, 2015, rather than ease restrictions, the Chinese government has taken a stricter approach on its foreign exchange policy, making transfers more difficult for EB-5 investors.
According to an insider, the Shanghai Branch of the State Administration of Foreign Exchange, issued an urgent notice on September 9, 2015 (hereinafter “September Foreign Exchange Notice”), requiring the banks to strengthen the supervision of foreign exchange transactions. Banks have been told to be on alert for individuals attempting to circumvent the quota management, for example remitting funds through the use of 10 friends. Banks are even allowed to reject the foreign exchange application if necessary.
The following activities are considered suspicious activities by the Chinese government:
· Five or more individuals separately exchanging foreign currency on the same day, every other day, or in two or more consecutive days. Thereafter depositing the RMB capital into the RMB account of a single individual or institution;
· An individual withdrawing five times or more foreign currency approximately equivalent to USD10,000, from the same foreign exchange savings account within seven days;
· Five or more direct relatives of the same individual separately purchasing foreign exchange within the annual quota and then transferring the foreign exchange to the foreign exchange savings account of the individual.
Pursuant to the September Foreign Exchange Notice, banks are now required to follow these guidelines: (i) enhanced auditing standards are being introduced for temporary, especially non-local clients; to prevent high-frequency foreign exchanges; (ii) in the event of a large foreign exchange, banks will check contracts and invoices to verify the transaction; (iii) The introduction of the “Watch List”. Here, banks are required to audit split settlements every two months. If five or more different individuals separately settle foreign exchange in the total amount of more than $200,000, on a single day, every other day or in two or more consecutive days, for the first 90 trading days, and further deposit the RMB capital into or remit it to the RMB account of a same individual or institution, the individuals shall be included in the watch list.
“Banks [that] fail to spot those on the list or turn a blind eye on it will be published and fined by the regulator as well”. As cited by an official at Citic Bank.
The stringent measure outlined in the September Foreign Exchange Notice may be a result of the decline in China’s foreign-currency reserves. The People’s Bank of China, commented on September 7, 2015, that its reserves had fallen by USD93.9 billion at the end of August, the biggest-ever monthly drop in dollar terms and the largest in percentage terms since May 2012. The drop in foreign reserves is primarily due to China’s recent devaluation of the yuan, which resulted in the acceleration of exodus of Chinese investors’ money.
Undoubtedly, these strict restrictions on foreign exchange, will create headaches for the Chinese EB-5 Investors, attempting to wire the funds out of Mainland China.
 Chapter 1, Article 2 of Detailed Rules for the Implementation of the Measures for the Administration of Individual Foreign Exchange. Please refer to www.fdi.gov.cn/1800000121_39_3577_0_7.html for the full context of the regulation.
 Notice of the State Administration of Foreign Exchange on Further Improving the Administration of the Business of Individual Foreign Exchange Settlement and Sale (No.56  of the State Administration of Foreign Exchange). For the full context of the notice, please refer to http://www.safe.gov.cn/wps/
Reprinted with permission.
Mona Shah, Esq. has over 17 years of legal experience, with more than 13 years concentrated in U.S. immigration and family law and litigation. Mona’s extensive knowledge of all facets of U.S. immigration law, and her practical expertise ranges from specialist business petitions to complicated, multi-issue deportation and removal litigation. Her firm, Mona Shah and Associates, represents individual, high profile and corporate clients from all over the world. Mona is highly proficient and experienced in EB-5 law and practice, and is the author of a published book for investors on the EB-5 laws and procedures (EB5 for the Chinese Investor, available on Amazon). The second updated edition is scheduled to be published shortly. Mona is voted Top 25 EB-5 Attorneys by eb5investors.com and Top 10 EB-5 Attorneys by eb5info.com. She is also an adjunct professor at the Zicklin School of Business at Baruch University
Hui Zeng, ESQ, is focused primarily on business immigration and corporate law. Hui works on the firm's high profiled business immigration and corporate cases, representing clients with a diverse set of legal issues and concerns. Hui is also experienced in EB-5, having drafted numerous source of funds petitions. She has built a solid set of skills in identifying important issues and delivering positive messages to USCIS' reviewing officers through her composition of the documents. Hui is familiar with various methods of proving EB5 investors' source of funds and can guide the clients accordingly.