Article 23 The foreign exchange and the foreign exchange settlement funds under the capital account shall be used according to the purposes approved by relevant competent departments and foreign exchange administrative departments. Foreign exchange administrative departments are entitled to supervise and inspect the use of foreign exchange and foreign exchange settlements funds under the capital account as well as the changes of accounts.

Chapter IV Administration of the Foreign Exchange Business of Financial Institutions

Article 24 Where financial institutions operate or terminate the business of foreign exchange settlement and sale, they shall be approved by foreign exchange administrative departments. Where financial institutions operate or terminate other foreign exchange businesses, they shall be approved by foreign exchange administrative departments or financial regulatory departments according to their functions.

Article 25 Foreign exchange administrative departments implement the general position management on the foreign exchange business of financial institutions. The specific measures shall be formulated by the foreign exchange administrative departments of the State Council.

Article 26 Where financial institutions need conversions between renminbi and foreign currencies for their principals and profits or due to mismatch of renminbi assets and foreign currency assets, they shall be approved by foreign exchange administrative departments.

Chapter V Administration of Renminbi Exchange Rate and Foreign Exchange Market

Article 27 The managed floating exchange rate system based on market supply and demand is adopted for renminbi exchange rate.

Article 28 Financial institutions engaged in foreign exchange settlement and sale businesses and other institutions that meet requirements of the foreign exchange administrative department of the State Council may conduct foreign exchange transactions in the inter-bank foreign exchange market in accordance with provisions of the foreign exchange administrative department of the State Council.

Article 29 Transactions in the foreign exchange market shall follow the principles of openness, fairness, impartiality and honesty.

Article 30 The currencies and transaction forms in the foreign exchange market shall subject to provisions of the foreign exchange administrative department of the State Council.

Article 31 The foreign exchange administrative department of the State Council shall supervise and manage the foreign exchange market of the whole country according to law.

Article 32 The foreign exchange administrative department of the State Council may regulate the foreign exchange market according to the changes in foreign exchange market and the requirements of monetary policies.

Chapter VI Supervision and Administration

Article 33 Foreign exchange administrative departments shall fulfill their responsibilities according to law and are entitled to take measures as follows:

(1) Conducting spot inspections over financial institutions engaged in foreign exchange businesses;

(2) Entering places where there are suspected illegal acts regarding foreign exchange for inspection and collection of evidence;

(3) Inquiring institutions and individuals who have foreign exchange income or expenditure or involved in activities of foreign exchange operation and requiring them to make explanations on issues directly related to illegal events regarding foreign exchange under investigation;

(4) Consulting and copying materials including transaction documents that are directly related to illegal issues regarding foreign exchange under investigation;

(5) Consulting and copying financial accounting materials and relevant documents of parties involved in and of institutions and individuals directly related to illegal issues regarding foreign exchange under investigation, and sealing up documents and materials that may be transferred, hidden or damaged;

(6) Inquiring accounts of parties involved in and of institutions and individuals directly related to illegal issues regarding foreign exchange under investigation with approvals of the person-in-charge of the foreign exchange administrative department of the State Council or foreign exchange administrative departments at provincial level, except personal deposit accounts;

(7) Applying to the people's courts for freezing or seal in involved assets including illegal funds which prove with evidence to have been or may be transferred or hidden, and key evidences which prove with evidence to be hidden, counterfeited or damaged.

Institutions and individuals involved shall cooperate with the supervision and inspection of foreign exchange administrative departments, tell the truth and provide relevant documents and materials. They shall not refuse or hinder supervisions and inspections by the aforesaid departments or disguise facts.

Article 34 When foreign exchange administrative departments make inspection or investigation according to law, there should be at least two persons carrying out inspection or investigation who shall present their identification cards. Institutions and individuals are entitled to refuse the inspection or investigation if there are less than two inspection or investigation persons or the persons do not present their identification cards.

Article 35 Domestic institutions engaged in foreign exchange businesses shall submit their materials including financial accounting reports and statistical statements in accordance with provisions of the foreign exchange administrative department of the State Council.

Article 36 Financial institutions engaged in foreign exchange businesses shall report to foreign exchange administrative departments in a timely manner when they find any illegal acts regarding foreign exchange committed by their clients.

Article 37 The foreign exchange administrative department of the State Council may acquire necessary information from relevant departments and institutions of the State Council for the purpose of fulfilling its responsibility of foreign exchange administration, and relevant departments and institutions of the State Council shall provide the information.

The foreign exchange administrative department of the State Council shall notify the relevant departments and institutions of the State Council about the administration situation of foreign exchange.

Article 38 Any institution or individual is entitled to report illegal acts regarding foreign exchange.

Foreign exchange administrative departments shall keep secret for the informers and reward the informers as well as institutions and individuals that make contributions to the investigation over illegal acts regarding foreign exchange.

Chapter VII Legal Responsibilities

Article 39 Where any institution or individual has any acts involving the evasion of foreign exchange including transfer of domestic foreign exchange abroad, or transfer of domestic funds abroad in a deceitful manner in violation of provisions, foreign exchange administrative departments shall order it/him to repatriate the foreign exchange within a time limit and impose a fine of less than 30 percent of the evaded foreign exchange; under any serious circumstances, a fine of more than 30 percent up to the same amount of the evaded foreign exchange shall be imposed. Where any crime is constituted, criminal responsibilities shall be ascertained according to law.

Article 40 Where any institution or individual has any illegal acts of arbitrage of foreign exchange including receiving or paying funds that should be receivable or payable in renminbi in foreign currencies, or buying foreign exchange from financial institutions engaged in foreign settlement and sale businesses against false or invalid transaction documents in violation of provisions, foreign exchange administrative departments shall order it/him to re-exchange the illegally exchanged funds and impose a fine of less than 30 percent of the illegally exchanged funds; under any serious circumstances, a fine of more than 30 percent up to the same amount of the illegally exchanged funds shall be imposed. Where any crime is constituted, criminal responsibilities shall be ascertained according to law.

Article 41 Where any institution or individual remits foreign exchange into the territory of China in violation of provisions, foreign exchange administrative departments shall order it/him to make corrections and impose a fine of less than 30 percent of the illegal funds; under any serious circumstances, a fine of more than 30 percent up to the same amount of the illegal funds shall be imposed.

Where any institution or individual conduct any illegal settlement of foreign exchange, foreign exchange administrative departments shall order it/him to re-exchange the illegally settled funds and impose a fine of less than 30 percent of the illegally settled funds.