Laws of the People's Republic of China

The State Administration of Foreign Exchange

Measures for Administration of Issue of Foreign Currency Debentures by Domestic Institutions

The State Administration of Foreign Exchange

September 24, 1997

(Approved by the People's Bank of China on September 8, 1997. Promulgated by the State Administration of Foreign Exchange on September 24, 1997)

Article 1

These Measures are formulated in accordance with the Regulations of the People's Republic of China on Foreign Exchange Control and other relevant provisions for the purposes of standardizing the issue of foreign currency debentures by domestic institutions.

Article 2

The term "domestic institutions" mentioned in these Measures refers to enterprises, institutions, State organs, associations, armed forces, etc. within Chinese territory, including Chinese-capital institutions (including financial institutions )and enterprises with foreign investment.

Article 3

The term "foreign currency debentures" mentioned in these Measures refers to negotiable securities which are expressed in foreign currency and form a credit-debt relationship. Foreign currency convertible debentures, large amount transferable deposit receipts and commercial bills shall be regarded and administered as foreign currency debentures.

"Convertible debentures" refer to debentures which are converted at the request of the creditor into corporate stocks or other debentures in accordance with the conditions stipulated at the time of issue.

"Large amount transferable deposit receipts" refer to bank deposit certificates with a fixed term issued by a bank which may be transferred and negotiated on financial markets.

"Commercial bills" refer to negotiable and transferable debt instruments issued by the issuing body for a period of between 2 days and 270 days to meet the demands of liquid assets.

Article 4

The People's Bank of China shall be the organ in charge of the examination and approval of the issue of foreign currency debentures by domestic institutions. The People's Bank of China shall authorize the State Administration of Foreign Exchange and its branch offices (hereinafter referred to as "foreign exchange bureaus") to be responsible for the examination, approval, supervision and administration of the issue of foreign currency debentures by domestic institutions.

Article 5

Foreign currency debentures shall be divided into short-term foreign currency debentures and medium-to-long-term foreign currency debentures.

"Short-term foreign currency debentures" refer to foreign currency debentures with a maximum term of one year (including one year).

"Medium-to-long-term foreign currency debentures" refer to foreign currency debentures with a term of more than one year (not including one year).

Article 6

Short-term foreign currency debentures issued overseas by a Chinese-capital institution shall use the balance control quota for short-term overseas loans.

Medium-to-long-term foreign currency debentures issued overseas by a Chinese-capital institution shall use the quota for medium-to-long-term plans for applying foreign capital.

Convertible debentures issued overseas by a domestic institution shall use the quota for the medium-to-long-term guidance-orientation plans for applying foreign capital.

Foreign currency debentures other than convertible debentures issued overseas by an enterprise with foreign investment shall not be subject to planned quotas.

Article 7

A domestic institution which is to issue foreign currency debentures overseas must obtain approval from the State Administration of Foreign Exchange. A debenture issue agreement which is signed without the approval of the State Administration of Foreign Exchange shall be invalid. The Foreign exchange bureaus shall not undertake foreign debt registration; the banks shall not open a foreign debt special account for it and the principals and interests shall not be remitted without authorization.

Article 8

A periodic creditworthiness appraisal system shall be exercised with respect to Chinese-capital institutions which issue medium-to-long-term foreign currency debentures, and only those Chinese-capital institutions which are found to meet the requirements upon appraisal may apply to issue foreign currency debentures.

Article 9

A domestic institution which is to issue foreign currency debentures (including the overseas branch of a Chinese-capital financial institution) must submit its plans for issuing foreign currency debentures for the current year to the State Administration of Foreign Exchange in accordance with the provisions.

Article 10

Where a domestic institution which issues foreign currency debentures needs to obtain a credit status grading from an overseas grading assessment company, it shall first report the matter to the State Administration of Foreign Exchange for examination and approval by presenting the name of the grading assessment agency, the reason for the grading, the grading procedures and other relevant data. Only after approval is obtained, may the grading application be lodged overseas. The grading results shall be reported to the State Administration of Foreign Exchange for the record within 15 days of obtaining the grading results.

Article 11

A domestic institution which is to issue foreign currency debentures shall make an application in writing form and, at the same time, submit all or some of the following documents to the State Administration of Foreign Exchange for examination and approval:

(1)

information on the achievements of business operations, financial statements and foreign exchange income and expenditure of the issuing unit over the previous consecutive three years;

(2)

information on the proposed debenture issue, such as the market, type, amount, currency denomination, term, interest rate and the various charges, as well as the quotation letter of intent;

(3)

information on the leading manager and leading commissioned bank;

(4)

the purpose of and administrative measures for the funds raised through the issue of debentures, and measures to guard against the risks in exchange rate and interest rate;

(5)

the project feasibility study report approved by the relevant department of the State and the official reply documents;

(6)

documents certifying the Chinese-capital institution's implementation of its quota for the plans for applying foreign capital;

(7)

the grading results issued by the grading assessment agency;

(8)

the capital resources and arrangements for the repayment of debentures;

(9)

in the case of the issue of convertible debentures, the official reply documents of the Securities Commission of the State Council which approve the transfer of stocks and a document certifying the ascertainment of the medium-to-long-term guidance-orientation plans for applying foreign capital shall be submitted;

(10)

other necessary documents required by the State Administration of Foreign Exchange.

Article 12

National domestic institutions resided in Beijing which are to issue foreign currency debentures or to apply overseas for a grading shall directly make reports to the State Administration of Foreign Exchange for examination and approval.

National domestic institutions not resided in Beijing and local domestic institutions which are to issue foreign currency debentures or to apply overseas for a grading shall, after the examination and verification by the foreign exchange bureaus of the places where they are located, make reports to the State Administration of Foreign Exchange for examination and approval.

Only after being authorized by their head offices (head companies), may the branch offices of national and local domestic institutions make reports for approval in accordance with the procedures stipulated in Paragraph 1 or Paragraph 2 of this Article.

Article 13

A domestic institution shall have foreign currency debentures issued in accordance with the official reply of the State Administration of Foreign Exchange. Where it is necessary to exceed the approved scope of issue due to market changes, the domestic institution shall reapply to the State Administration of Foreign Exchange for approval.

Article 14

After debentures have been issued, where a domestic institution is to list the issued debentures on financial markets outside the area where the debentures are issued, it shall make a report to the State Administration of Foreign Exchange for the record within 5 days of the listing.

Article 15

A domestic institution shall, within 15 days after the debentures are issued, submit the information on the issue of debentures, the debenture issue prospectus and other relevant documents to the State Administration of Foreign Exchange for the record.

Article 16

A domestic institution shall specially use the funds raised through a debenture issue for special purposes in accordance with the approved purposes, and shall report the information on the progress of the previous year's projects, the efficiency of fund using, etc. to the State Administration of Foreign Exchange for the record within the first 15 days of each year. Where the purposes of the funds needs to be altered, approval shall be obtained from the original department which approved the establishment of the project in advance.

Article 17

A domestic institution shall, within first 10 days of each quarter, report to the foreign exchange bureau the information on any price fluctuation of debentures after their listing.

Article 18

After issuing foreign currency debentures overseas, a domestic institution shall not deposit the funds raised through debenture issue overseas, or make direct payments overseas or convert the funds into Renminbi for use without the approval of the foreign exchange bureau.

Article 19

A foreign exchange bureau shall have the right to inspect matters in relation to the use and repayment of funds by an issuing unit of debentures. The issuing unit of debentures shall render cooperation and provide relevant documents and data.

Article 20

To guard against foreign debt risks, a Chinese-capital financial institution approved by the State Administration of Foreign Exchange to operate foreign exchange trading business on a self-operation or agency basis may preserve the value of foreign currency debenture debts for its own debts or on commissions accepted from other domestic institution.

Where other Chinese-capital financial institutions commission an overseas financial institution or a domestic foreign-capital financial institution to preserve the value of their debenture debts, this matter shall be subject to the approval of the foreign exchange bureau.

An enterprise with foreign investment may itself commission an overseas financial institution or a domestic foreign-capital financial institution to preserve the value of its debenture debts.

Article 21

Where an overseas branch of a Chinese-capital financial institution is authorized by its head office (head company) to issue foreign currency debentures in the name of its head office (head company), and where a Chinese-capital bank approved to handle offshore business is to issue offshore foreign currency debentures, the head office (head company) shall make reports to the State Administration of Foreign Exchange for approval in accordance with the provisions of the these Measures. The funds raised through the debenture issue shall only be used overseas and shall not use the quota for the plans for applying foreign capital.

Article 22

No local governments may apply for an assessment grading or debenture issue overseas.

Article 23

The provisions on the administration of foreign exchange accounts shall be applicable to the administration of foreign currency debenture accounts.

Article 24

A domestic institution issuing foreign currency debentures overseas shall undertake foreign debt registration in accordance with the provisions on the statistical monitoring of foreign debts. After a domestic institution has preserved the value of foreign currency debentures, it shall undertake the modification of foreign debt registration in accordance with the provisions on the statistical monitoring of foreign debts.

Article 25

Where a domestic institution arbitrarily issues foreign currency debentures without approval or fails to carry out value preservation in accordance with the provisions of Article 20 of these Measures, the foreign exchange bureau shall give a warning, circulate a notice of criticism and impose a fine of not less than RMB 100,000 yuan nor more than RMB 500,000 yuan; where a crime is constituted, criminal liability shall be investigated in accordance with the law.

Article 26

Where a domestic institution arbitrarily deposits overseas the funds raised through a foreign currency debenture issue or make a direct payment overseas without approval, or arbitrarily converts the funds raised through a foreign currency debenture issue into Renminbi without approval, the foreign exchange bureau shall order to make corrections, give a warning, circulate a notice of criticism and impose a fine in Renminbi of not less than 30 percent nor more than five times the amount of the illegally used funds; where a crime is constituted, criminal liability shall be investigated in accordance with the law;

Article 27

Where an overseas branch of a Chinese-capital financial institution or a Chinese-capital bank approved to handle offshore business, in violation of the provisions of Article 21 of these Measures, arbitrarily issues foreign currency debentures or arbitrarily transfer the funds raised overseas for use within China, the foreign exchange bureau shall order to make corrections, give the domestic Chinese-capital financial institution a warning, circulate a notice of criticism and impose a fine of not less than RMB100,000 yuan nor more than RMB500,000 yuan.

Article 28

Where a domestic institution submits false or invalid statements or data to the foreign exchange bureau for fraudulently obtaining approval from the foreign exchange bureau, the foreign exchange bureau shall recover the approval documents and impose penalties in accordance with the provisions of Article 25 of these Measures. Where a crime is constituted, criminal liability shall be investigated in accordance with the law.

Article 29

Where a domestic institution fails to submit statements or data in accordance with the provisions of these Measures, or refuses to accept inspection by the foreign exchange bureau and cooperate with it, the foreign exchange bureau shall give a warning, circulate a notice of criticism and impose a fine of not less than RMB 10,000 yuan nor more than RMB30,000 yuan.

Article 30

Where a project financing is carried out by means of debenture issue, the issue of debentures shall be governed in accordance with these Measures.

Article 31

These Measures are not applicable to the issue of foreign currency debentures by the Ministry of Finance on behalf of the State with the approval of the State Council.

Article 32

These Measures are not applicable to the issue of foreign currency debentures overseas by foreign-capital financial institutions.

Article 33

The State Administration of Foreign Exchange shall be responsible for the interpretation of these Measures.

Article 34

These Measures shall enter into force on January 1, 1998. The Provisions on Administration of Issue of Debentures Overseas by Domestic Institutions in China promulgated on September 28, 1987 by the People's Bank of China shall be annulled simultaneously.