Laws of the People's Republic of China

the General Office of the Ministry of Commerce

Circular of the General Office of the Ministry of Commerce on Strengthening the Administration of Examination and Approval of Utilizing Foreign Investment for Bad Asset Disposal

Shang Zi Zi [2005] No. 37

Competent departments of commerce of all provinces, autonomous regions, municipalities directly under the Central Government and Xinjiang Production & Construction Group as well as various national economic and technological development zones:

Upon the approval of the State Council, since the promulgation of the Interim Provisions on the Attraction of Foreign Investment for Asset Restructuring and Disposal by Financial Asset Management Companies in 2001, steady development with remarkable success has been made in utilizing foreign investment to dispose financial assets (mainly the debt assets), related matters on further regulating the attraction of foreign investment for bad asset restructuring and disposal in China as well as maintaining the sound development of bad asset disposal markets are hereby notified as follows:

1.

For the purpose of accelerating the disposal of bad assets of state-owned banks in China and financial asset management companies, and reducing the loss of state assets, in 2001 the matters were approved by the State Council as follows: to utilize foreign investment for asset restructuring and disposal by financial asset management companies, to transfer to foreign traders bad assets like equity and debt, or to establish foreign-funded enterprises to carry out such bad asset disposal activities as debt restructuring and debt recovery. Investment modes of these kinds shall be strictly controlled for examination and approval since they, covering a wild field, are heavily policy-oriented and highly sensitive. The establishment of foreign-funded enterprises of these kinds shall be reported to the Ministry of Commerce for approval and shall not be approved by either the local competent departments of commerce at various levels or national economic and technological development zones.

2.

The Circular on the Banning of Debt-Collection Companies of Various Kinds and the Cracking down on Illegal Debt Collection Activities (Guo Jin Mao Zong He [2000] No.568) as issued by the State Economic and Trade Commission, the Ministry of Public Security, and the State Administration for Industry and Commerce in 2000, expressly stipulated to ban debt-collection companies of various kinds and forbid any entity and individual to establish debt-collection companies in any form. Local competent departments of commerce at various levels and national economic and technological development zones shall strictly comply with the foregoing provisions and be granted no approval for establishing debt-collection companies with foreign investment and debt-collection companies in disguised forms.

3.

When examining and approving foreign-funded enterprises engaged in entrustment of economy, commercial agency, management consulting, financial consulting, and asset consulting, all entities shall require such enterprises to give written undertakings not to conduct such operational activities on bad asset disposal as debt restructuring and debt recovery.

4.

If any enterprise is found to, without the approval from the Ministry of Commerce of China, deal with bad asset disposal and debt recovery at its own discretion beyond its business scope, such case shall be promptly reported to the Ministry of Commerce. Should such enterprise fails to make corrections, it shall be punished accordingly in compliance with relevant laws and regulations.

5.

Each entity is, upon the receipt of this Circular, requested to immediately transmit it to its subordinated competent departments of commerce at various levels for strict implementation. In case of any question during such enforcement, please submit it to the Foreign Investment Department of the Ministry of Commerce in time.

General Office of the Ministry of Commerce

April 29, 2005