China Allows Foreign Exchange Cash Pooling

On October 12, 2009, the State Administration of Foreign Exchange ("SAFE") issued the Administrative Rules on Foreign Exchange Cash Pooling of Group Members of Enterprises in China, Hui Fa [2009] No. 49 (the "Rules"). The Rules provide guidelines for the establishment and operations of cash pooling in foreign exchange for enterprises and their affiliated members within China. The Rules came into effect on November 1, 2009.

Eligible Participating Members

The Rules regulate only cash pooling in foreign exchange among enterprises or other organizations within China and do not apply to cross-border cash pooling. Members that can participate in cash pooling of a group include (1) the parent company, (2) a subsidiary of which the parent owns 51 percent or more, (3) a company of which the parent and subsidiaries separately or jointly own no less than 20 percent, (4) a company that does not satisfy the 20 percent ownership requirement, but the parent or subsidiary or both