Laws of the People's Republic of China

Circular on Relevant Issues relating to the Implementation of Measures for the Administration of Foreign Debts of Foreign-funded Banks in China

Hui Fa [2004] No. 59 June 21, 2004

The branches of the State Administration of Foreign Exchange (the SAFE) in all provinces, autonomous regions and municipalities under the Central Government, departments of foreign exchange, branches of Shenzhen, Dalian, Qingdao, Xiamen and Ningbo:

On May 27, 2004, the National Development and Reform Commission, the People’s Bank of China and the China Banking Regulatory Commission jointly promulgated the Measures for the Administration of Foreign Debts of Foreign-funded Banks in China (hereinafter referred to as the Measures), which has been implemented since June 26. Relevant issues relating to the administration of foreign exchange in the course of implementation are notified as follows:

1.

Issues on verification of the short-term foreign debt balance quota in 2004 of foreign-funded banks in China

(1)

Short-term foreign debts of foreign-funded banks in China refer to all the short-term debt capital with stipulated term not more than 1 year that foreign-funded banks in China borrow from beyond the border of China, including overseas loans, overseas inter-bank borrowing, overseas inter-bank deposits, the business of overseas inter-bank and their subordinated institutions (debtor), non-resident deposits and other forms of foreign debts.

(2)

In the remaining time of 2004, the short-term foreign debt balance quota of foreign-funded banks in China shall be approved respectively by the branches of the SAFE in the place where the foreign-funded banks are located in accordance with short-term foreign debt balance data that each foreign-funded bank has filled out in the foreign debt statistic system, and a written notice shall be released to each foreign-funded bank to carry it out. All the branches of the SAFE shall finish the quota approval work before June 26, and shall report the situation to Capital Department of the SAFE for archival purpose by means of fax and E-mail in the SAFE system respectively (the archival-filling format shall be referred to the appendix).

(3)

The branches of the SAFE shall take the arithmetic mean (round to 10 thousand US dollars) of the short-term foreign debt balance before June of 2004 that is reported to the foreign exchange bureau by each domestic foreign-funded bank according to relevant provisions as the short-term foreign debt balance quota of the corresponding bank in 2004. All the foreign-funded banks in China shall, prior to December 31, 2004, adjust their actual short-term foreign debt balances into the scope of approved short-term foreign debt balance quota step by step, and none of short-term foreign debt balance at any time within this term may exceed the short-term foreign debt balance of the corresponding bank on June 30, 2004. In case that the actual short-term foreign debt balance of the foreign-funded bank on June 30 is not more than the short-term foreign debt balance quota that is approved by the SAFE, then, after the implementation of the Measures, none of the short-term foreign debt balance thereof at any time may exceed short-term foreign debt balance quota approved by the SAFE.

(4)

Where the foreign-funded banks in China need to adjust their requirement of short-term foreign debt quota within the year, an application may be filed to the SAFE or to the branches in accordance with the procedures provided for by the Measures, and be reported directly or indirectly to the SAFE for examination and approval.

(5)

As for the foreign-funded banks in China newly established after May 1, 2004, their 2004 short-term foreign debt quota shall be approved by the SAFE branches in the place of registration thereof in accordance with the annual credit extension quota that their overseas parent banks or regional administration departments have determined to the debtors within the territory of China in this year, fluidity requirement and loan project requirement in China, but the utmost short-term foreign debt balance quota of the current year may not be five times more than their foreign exchange paid-in capital or working capital.

The approach of approving the short-term foreign debt balance quota in 2005 for all the foreign-funded banks in China shall be formulated separately by the SAFE on the basis of the investigation and study in light of the principles confirmed by the Measures.

2.

Issues on the registration of foreign debts and the settlement of exchange of domestic foreign exchange loan

(1)

As of June 26, for the foreign exchange loan contract that takes the foreign-funded banks in China as the debtees, it is not necessary for the debtors to go to the SAFE branches to go through the formalities of registration of foreign debts any longer. Foreign-funded banks in China shall conduct the foreign exchange loan business for the institutions in China in accordance with the Circular on the Implementation of Foreign Exchange Administration Mode Reform of Domestic Foreign exchange Loan (Hui Fa [2002] No. 125) and other relevant documents.

(2)

For the undrawn money or drawn but unused money under the foreign exchange loan contract that the debtors has concluded with the foreign-funded banks in China and that the registration of foreign debts has been conducted before June 26, the debtors shall continue to open or keep foreign debt special account and special account of repaying principal and interests in accordance with the existing relevant provisions of foreign exchange administration, go through such formalities as drawing, settlement of exchange, repaying principal and interests, cancellation of special account and registration of foreign exchange. In case that the capital under the loan contract has been used up, the account shall be canceled. For the debtors that have drawn money and the capital that has been used up before June 26, the foreign exchange administration formalities such as repaying principal and interests shall also be gone through according to the foreign debt administration mode.

(3)

For the short-term credit extension quota contract that the debtors have concluded with the foreign-funded banks in China and that the registration of foreign debts has been conducted, the debtors may also file applications for opening or keeping foreign debt special account. But the cumulative amount of the foreign exchange capital that is put into the account this year (including the foreign exchange amount that has already been put into the account before June 26) may not exceed the top balance that the credit extension contract stipulates and is available for borrowing short-term loan. In case the credit extension quota that reaches the top balance is re-used, relevant provisions relating to the domestic foreign exchange loan shall be abided by to open otherwise special account of domestic foreign exchange loan to deposit it.

(4)

As of June 26, for the domestic foreign exchange loan credited by the Chinese-funded or foreign-funded financial institutions, settlement of exchange may not be conducted with the exception of bill purchased. The relevant provisions relating to packaged loans and settlement of exchange in the Circular on the Implementation of Foreign exchange Administration Mode Reform of Domestic Foreign exchange Loan (Hui Fa [2002] No. 125) shall be invalidated automatically.

3.

Issues on guarantee

(1)

For the foreign exchange guarantee that takes the institutions in China as the debtors and takes the foreign-funded banks in China as the beneficiary, as of June 26, the domestic bondsman may not conduct registration of external guarantee; where the registration of external guarantee has been conducted and the implementation of the contract of guarantee has not been completed, the bondsman shall, within one month since the Measures comes into force, return the relevant registration materials to the former branch of the SAFE in charge of the formalities of registration and write off the registration of external guarantee. The former contract of guarantee and the rights and obligations of the parties concerned shall maintain constant. Execution of contract of foreign exchange guarantee shall be implemented referring to relevant provisions governing the purchase of foreign exchange by debtors of domestic foreign exchange loan.

(2)

The external guarantee that the foreign-funded banks in China present before June 26, no matter whether it is implemented completely, shall be conducted according to the past administration mode unifiedly, but each foreign-funded bank shall, before the end of July, report to the SAFE the situation of external guarantee that a contract has been concluded but its implementation has not been completed before June 26 in a concentrated way.

Where the external guarantee takes place after June 26 and the former due external guarantee needs to extend a time limit, they shall be implemented according to the principles confirmed by the Article 20 of the Implementation Rules of the Measures for Administration of External Guarantee of Domestic Institutions promulgated by the SAFE in 1997, and the formalities of registration of external guarantee shall be gone through according to the relevant provisions.

(3)

No foreign-funded bank in China may present foreign exchange guarantee for domestic enterprises’ Renminbi loan. The relevant articles and paragraphs in the Circular on Improving the Administration of Renminbi Loan under Foreign Exchange Guarantee (Yin Fa [1999] No.223) shall be invalidated automatically.

4.

Issues on the approved short-term foreign debt quota of Chinese-funded banks and Chinese-funded enterprise

Since the foreign exchange loan granted by the foreign-funded banks in China to Chinese-funded enterprises in China is not deemed as foreign debts, and the short-term foreign debt quota that the Chinese-funded enterprises use to conduct trade financing and circulating capital loan to foreign-funded banks in China is not applicable, the short-term foreign debt quota that the SAFE branches already approved and assigned to the Chinese-funded enterprises in 2004 shall be nullified. Since the short-term foreign debt quota approved and assigned to the Chinese-funded banks is primarily used in overseas inter-bank borrowing, the short-term foreign debt quota thereof shall remain valid and the financing thereof from the foreign-funded banks in China does not occupy the short-term foreign debt quota.

5.

Issues on the foreign debt administration in other financial institutions with foreign capital except foreign-funded banks

For the external debts of other domestic financial institutions with foreign capital (including foreign-funded financial companies under the jurisdiction of the China Banking Regulation Commission, domestic commercial banks of stock holding system and foreign-funded insurance companies and securities companies respectively under the jurisdiction of the China Insurance Regulation Commission and China Securities Regulation Commission and other institutions), the state competent department of foreign debt shall, in accordance with the situation of balance of payment and special need of industrial administration, formulate relevant provisions separately. Prior to the promulgation of relevant provisions, the short-term foreign debt thereof shall be conducted according to the administration mode of Chinese-funded institutions of the same kind.

6.

Notice

Where there is any discrepancy between the former provisions and the present Circular, the latter shall prevail.

All the sub-bureaus and branches of the SAFE shall transmit the present Circular to the foreign-funded banks and Chinese-funded banks within their jurisdictions.

Please follow and implement the aforesaid Circular. In case of any problem encountered, please report it to the Capital Department of the SAFE in time.

Appendix:

The Table of Putting on Record the Situation on Approving the Short-term

Foreign Debt Quota of Foreign-funded Banks in China in 2004

　　The branches of           of the State Administration of Foreign               Exchange (seal) Unit: 10,000 US dollars

　　Checking person:       Person filling in the table:         Telephone:          Date of filling in the table:         

　　Note: All the branches of the SAFE shall, prior to June 26, report this table to the Capital Department of the SAFE by fax (010-68402208) and E-mail (genl@capital.safe) respectively.