SAFE Government China

Consult an Expert

Learn about our solutions and receive a proposal and guidance about your business inquiry.

Share this article

A common challenge which foreign-invested enterprises in China experience is the in and outflow of funds and making of cross-border payments. The reason for this is that the Chinese authorities retain a high level of control over the foreign exchange market and cross-border capital flows.

Here the State Administration of Foreign Exchange, also commonly referred to as the ‘SAFE’, plays an essential role for companies in China. The SAFE is part of the People’s Bank of China and is the regulatory body which is responsible for governing China’s foreign exchange market and overseeing the foreign exchange of the RMB. The power of the State Administration of Foreign Exchange is incomparable to those of regulatory bodies in other market-driven economies and therefore it is important to gain a better understanding of the SAFE. In this article we discuss how the State Administration of Foreign Exchange works, what their responsibilities are and how  the SAFE impacts foreign-invested enterprises active in China.

General Overview of SAFE

Shortly after the opening-up of the Chinese economy in 1978, the State Administration of Foreign Exchange was established (formally in March 1979).

The SAFE is represented in all provinces, autonomous regions, municipalities, and cities with sub-provincial status directly under control of the central government. Moreover, the administration operates sub-branches in prefectural-level cities and county-level cities. As a result, the network of the SAFE in Mainland China consist of 36 Administrative offices with 309 Central Sub-branches and 517 Sub-branches. In addition, the SAFE has official representations present in Hong Kong, Singapore, London and New York.

As mentioned above, the State Administration of Foreign Exchange (SAFE) is part of the People’s Bank of China and is the administration responsible for governing the foreign exchange market activities in China, and managing foreign exchange of the RMB. The goal of the administration is to establish a macro prudential and micro regulatory management framework for cross-border capital flows.

Macro prudential measures are taken to reverse the cyclical fluctuation of the foreign exchange market, prevent cross-market, cross-institutional, cross-currency and cross-border contagion of international economic and financial risks and maintain stability of the foreign exchange market. Whereas micro regulatory supervision should maintain the order of the foreign exchange market in accordance with PRC laws and regulations, emphasizing anti-money laundering, anti-terrorist financing and anti-tax evasion.

Responsibilities of the State Administration of Foreign Exchange

In line with the goal of the State Administration of Foreign Exchange to establish a macro prudential and micro regulatory framework, several responsibilities of the administration can be identified. Firstly, the SAFE has the following responsibilities related to drafting of policy and regulations:

  • Propose policy suggestions on the reform of the foreign exchange administration system;
  • Implement policy measures for the advancement of the convertibility of the RMB and the cultivation and development of the foreign exchange market;
  • Provide suggestions to the People’s Bank of China to formulate policy on the RMB exchange rate;
  • Drafting of laws, regulations and departmental rules on foreign exchange administration.

On the other hand, the SAFE is responsible for the supervision and implementation of rules and regulations in relation to foreign exchange, including:

  • Monitoring of cross-border capital flows, balance of payments and external credit and debt;
  • Undertake supervision and management of the settlement and sale of foreign exchange;
  • Supervision of authenticity and legality of the receipt and payment of foreign exchange under the current account;
  • Implement foreign exchange administration under the capital account.

Furthermore, the SAFE is also responsible for the management of the foreign exchange reserves, gold reserves and other foreign exchange assets of the state as well as management of the balance of payments equilibrium.

Impact of SAFE on Businesses in China

Although some of the responsibilities of the State Administration of Foreign Exchange relate to policy formulation, it is expected that all foreign-invested enterprises in China will have to deal directly or indirectly with the SAFE in some instances. Generally, whenever funds are transferred to or from a foreign country, the SAFE will be involved. It is necessary to obtain foreign exchange approval from SAFE for among others:

  • All capital account transactions (e.g. related to the registered capital account);
  • For current account transactions (local banks implement approval process as set out by the SAFE);
  • All company loans (inward and outward) are under scrutiny of the SAFE.

The above occasions include among others bringing in of the registered capital, service fee payments, profit repatriation, trade payments, loan and interested related payments. Over the past years the SAFE has delegated most of the approval responsibilities to the banks. Banks will screen the necessary documents on behalf of the SAFE and execute the transactions should these meet the necessary requirements. However, approval for trade payments, accounts payable extensions and loan extensions still must be filed directly with the SAFE.


The in and outflow of funds for foreign-invested enterprises is tightly regulated by the Chinese authorities, and this responsibility is delegated to the State Administration of Foreign Exchange (SAFE). It is important for businesses to understand the functioning of the SAFE and the requirements to engage in the foreign exchange market in order to remain compliant and limit any impact or delay on your Chinese operations.

If you have any further questions about the SAFE or other related subjects, don’t hesitate to contact us. To learn more about methods to repatriate profit, you can request our Profit Repatriation White Paper here.