Following the success of the pilot program in the Shanghai Free Trade Zone, effective from January 25, 2016, the People’s Bank of China (“PBOC”) has extended the new crossborder financing management regime to the remaining three free trade zones (Guangdong, Tianjin and Fujian, together with Shanghai, jointly referred to as “FTZs”).

The new crossborder financing management regime applies to so-called “crossborder financing,” defined as financing in RMB or a foreign currency provided by a non-resident entity or individual to the enterprises and 27 financial institutions within the four FTZs. The program excludes non-bank financial institutions and real estate companies. 

Some highlights: 

  • Pilot companies and financial institutions can raise crossborder financing within a limit based on their capital or net assets designated at a macro level, and they no longer need to apply for pre-approval. Instead, they are requested to make a filing with the State Administration of Foreign Exchange (“SAFE”) within three days before withdrawal after the agreement has been signed. 
  • Crossborder financing in foreign exchange can be converted into RMB based on actual needs. However, the currency of signing, withdrawal and repayment must be consistent.
  • Foreign invested entities and banks can choose to apply either the existing foreign debt quota regime1 or the new regime, and must comply with the filing and record procedure with the relevant authority.

The PBOC has explained in its official website that the new regime aims to increase the autonomy and utilization efficiency of crossborder financing and improve the cost situation, and that it plans to expand the regime nationwide.

Detailed implementation rules will soon be released by the SAFE.

Date of issue: January 22, 2016. Effective date: January 25, 2016