Key Points

  • The Measures have seven sections which specify the administration over the registration of external debts, debt accounts and specifies administration over the use of funds etc.
  • The Measures divide debtors into three categories – governmental department of finance, the domestic banks and any other entities in China.
  • SAFE grants certain authorization to particular banks in the PRC with authorized banks will be in charge of opening special account, settlement and repayment of the external debts.
  • The Measures consolidate previous guidelines and manuals in relation to the registration of domestic loans guaranteed by the external credit line.

Background

On 28 April 2013, the State Administration of Foreign Exchange (“SAFE”) of the People’s Republic of China released the Notice on Promulgating the “Administrative Measures for Registration of External Debts” (the “Measures”), which has been effective since 13 May 2013. The Measures has seven sections which specify the administration over the registration of external debts, external debt accounts, administration over the use of funds and foreign exchange settlement and sale. They also cover foreign exchange administration for the issuance of external credit letters of guarantee for domestic loans, foreign exchange administration for the transfer of nonperforming assets to external parties, amongst other matters.

Since the issuance of the first foreign exchange regulation in 1996, SAFE has introduced a number of regulations to regulate and control the external debt and its relevant approval or registration work. Compared with previous regulations and rules issued by the SAFE, the Measures are considered to be more systematic, integrated and practical.

Highlights of the Measures

According to the Measures, the debtor shall file with the local department of the SAFE with respect to the execution, revision and termination of the external debt agreements and the external guarantee agreements as well as the funding, repayment, settlement and remittance of the external debts thereunder. The Measures divide the debtors into three categories, namely the governmental department of finance, the domestic banks and any other entities in China.

The filings of external debts by the governmental departments and the domestic banks are processed through independent filing systems, so that most of the provisions under the Measures focus on the registration of the external debts incurred by the PRC companies.

One of the characters of the Measures is that the approval and registration procedures for the external debts have been simplified. SAFE has granted certain authorization to particular banks in the PRC and, once the external debts are filed with the SAFE, the authorized banks will be in charge of opening special account, settlement and repayment of the external debts.

The Measures also consolidate the previous guidelines and manuals in relation to the registration of domestic loans guaranteed by the external credit line. The foreign invested companies incorporated in China are allowed to obtain the loan in RMB from the domestic financial institutions with their offshore credit line or assets as the guarantee. However, in the event that the domestic PRC companies intend to obtain any loan secured by its offshore credit or assets, such loan arrangement shall be subject to the approval from the SAFE, and the amount of the loan shall be within the total budget approved by the SAFE.

The Measures also specified the procedure for the registration of the external transfer of the non-performing assets that have been duly approved by the governmental authorities. A comprehensive operational guideline for registration works is attached to the Measures, which covers the list of application materials, the examination principles and key points, and the authorizations among the departments of SAFE at different levels.

Upon the effectiveness of the new measures, eights rules previously issued by SAFE in relation to the control of the external debts and the disposition of non-performing assets have been terminated.