Administrative Measures on Foreign Debt Registration (“Measures”)

Measures has been taken into effect on May 13th 2013, it mainly has clarified and regulated the following aspects:

Measures simplify the procedures for registering foreign debt and eliminate several approval requirements stipulated in the previous SAFE regulations. For example, except for registration of foreign debts, the opening of a foreign debt account, foreign exchange settlement of funds, repayment of capital and interests, etc., shall be directly examined and verified by a designated foreign exchange bank.

Measures further clarify the management of foreign debts account, usage of capital and conversion of foreign exchange. For example, proceeds of foreign debt borrowed by foreign invested enterprises may be converted into RMB directly by the account bank when making RMB payments that conform to the regulatory requirements. However, unless otherwise stipulated, foreign debt borrowed by onshore financial institutions and Chinese enterprises in foreign exchange may not be converted into RMB.

Measures strictly control the usage of foreign debts. For example, the usage stipulated in the contract shall meet the requirements of Measures. The short-term foreign debts shall be only used as liquidity, and shall not be used to purchase foreign exchange to repay loan.

Measures highlight the specific rules on domestic loans with foreign guarantees. For example, qualified debtors can accept guarantees provided by foreign entities and individuals when borrowing money from domestic financial institutions. Foreign-invested enterprises may enter into a guarantee contract directly with overseas guarantors and creditors, while domestic companies shall apply to the local foreign exchange bureau in advance for the approval of guarantee quota.