As highlighted in KPMG China Tax Weekly Update (Issue 48, December 2016) and (Issue 47, December 2016), the international business media has increasingly reported that the Chinese forex authorities have been tightening limitations on outbound flows of investment from China, on profit remittances by foreign-invested enterprises (FIEs) from China, and on servicing of cross-border financing. The view has been expressed in these media reports that China’s measures against capital flight are having the consequence of undermining China’s cross border trade.
In response, on 6 December 2016, the State Administration of Foreign Exchange (SAFE) along with three other Chinese government authorities clarified supervision arrangements for China’s outbound investment. At the same time, SAFE made a statement that no new restrictions had been imposed on profit remittances out of China. In addition, SAFE further stated on 25 January 2017 that no new restrictions had been imposed on cross-border trade finance. Most recently, on 26 January, the SAFE issued Hui Fa  No. 3 (“Circular 3”), effective from that date. This sets out 9 measures grouped in 3 categories, clarifying how effective forex supervision is to be reconciled with improved checks on the authenticity of the cross-border trading transactions purported to underpin them. Categories 1, 2 and 3 are set out below.
1. Facilitate trade and investment
2. Authenticity and compliance verification for outbound remittances
3. Ensure proper reporting of Chinese enterprise RMB/foreign currency holdings overseas/loans from China and compliance with relevant regulations
On 25 December 2016, the Standing Committee of the National People’s Congress authorized the State Council to carry out a pilot program to merge the social security contributions made by employees and employers under the maternity insurance and employees’ basic medical insurance schemes (hereinafter referred as the “two public insurance schemes”) in 12 cities*. Both of maternity insurance and basic medical insurance are mandatory contributions in China.
On 4 February 2017, with the issuance of Guo Ban Fa  No. 6, the State Council released the detailed plan for the said pilot program, which will start from the end of June 2017, and last for one year. The plan highlights:
* 12 pilot cities include: Handan (Hebei province), Jinzhong (Shanxin province), Shenyang (Liaoning province), Taizhou (Jiangsu province), Hefei (Anhui province), Weihai (Shandong province), Zhengzhou (Henan province), Yueyang (Hunan province), Zhuhai (Guangdong province), Chongqing, Neijiang (Sichuan province), Hunming (Yunnan province).
As highlighted in KPMG China Tax Weekly Update (Issue 35, September 2016) and (Issue 39, October 2016), China has been in the process of revising its inbound investment rules. Following various pilot programs in certain localities, a new nationwide system for the administration of foreign investment approvals is being rolled out. Whereas previously, all foreign investment into China needed pre-approval by the Ministry of Commerce (MOFCOM), the new system generally allows for simple recordals to be made for investments in industries where foreign investment is encouraged/permitted, with pre-approvals limited to industries where investment is restricted. This is the so-called “Negative List” system (under the “special administrative measures for foreign investment access”) and it is effective from 1 October 2016. Accordingly, establishment and alteration of foreign invested enterprises (FIEs) that are not included in the “Negative List” shall be subject to recordals, and the recordal procedure with MOFCOM would remain unchanged. Upon completion of recordals, FIE may obtain a "Filing Acknowledgement for Establishment of Foreign Investment Enterprise" or a "Filing Acknowledgement for Change Matter of Foreign Investment Enterprise“.
To implement this foreign investment administration reform from the customs angle, on 3 February 2017, the General Administration of Customs (GAC) issued Announcement No. 9, effective from the date of promulgation. This clarifies that the documentation requirement for an FIE’s registration with Customs, i.e., copies of the MOFCOM filing acknowledgement, can be submitted to Customs. This would be done for an FIE which handles the registration formalities for consignor/consignee for imports/exports.
(Currently, an FIE may provide (i). registration form for filing of foreign trade business operator or (ii). its "Approval Certificate for Foreign Investment Enterprise“ for the registration, however, with issuance of Announcement No. 9, any of the said three documents (i.e., (i) or (ii) or MOFCOM filing acknowledgement), can be submitted. There is now more flexibility on which documents can be filed.)
On 3 February 2017, the GAC issued Announcement  No. 8 (Announcement No. 8). Pursuant to this announcement, paperless customs clearance shall be expanded and be applicable to all enterprises regardless of their customs credit rating, effective from date of promulgation.
Prior to this, the paperless customs clearance was only applied to enterprises with a customs credit rating of category B and above (This is a measure of the enterprise’s customs compliance history/capability). The earlier arrangements provided that an agreement for electronic data application would be entered into between an enterprise, a customs office (subordinate to the GAC) where the enterprise handles its customs clearance, and a third-party authentication institution (i.e., China E-port Data Centre) – with these arrangements in place the paperless customs clearance could be applied, but only for the customs office entering into the agreement.
With the issuance of Announcement No. 8, paperless customs clearance now will now be applied to enterprise customs clearance activity across the whole country, no matter with which individual customs office the agreement was signed.