Laws of the People's Republic of China

Measures for the Administration on the Loans and Grants by International Financial Organizations and Foreign Governments

Cai Zheng Bu Ling [2006] No. 38 July 3, 2006 Chapter I General Provisions

Article 1

With a view to further regulating and strengthening the administration on the loans and grants by international financial organizations and foreign governments and effectively utilizing the funds, the present Measures are formulated under the relevant provisions of the State Council.

Article 2

The administration on the loans and grants by international financial organizations and foreign governments shall be subject to the present Measures.

Article 3

The Ministry of Finance shall be in charge of the administration on the loans and grants. It is the central administrative department for foreign debts of the government.

Article 4

The utilization of the loans and grants shall be in line with the development strategies of the national economy and society, embody the functions of public finance and promote the harmonious development of the economic society and urban and rural regions.

Article 5

The raising, utilization, repayment of the loans shall accord with the principle of unifying the liabilities, rights and interests, achieve the sustainability and sound circulation of debts and can effectively prevent and eliminate the risks of debts.

Article 6

For the purpose of the present measures:

(1)

The term "loans" means the loans granted by international financial organizations and foreign governments.

(2)

The term "loans by international financial organizations" means the loans forming foreign debts of the government, which are uniformly raised by the Ministry of Finance on behalf of the state, upon the approval of the State Council, from the World Bank, Asian Development Bank, International Agriculture Development Fund, European Investment Bank and other international financial organizations, as well as the joint financing employed together with the aforesaid loans.

(3)

The term "loans by foreign governments" means the loans forming foreign debts of the government, which are uniformly raised by the Ministry of Finance on behalf of the state, upon approval of the State Council, from foreign governments and the Nordic Investment Bank, as well as the joint financing employed together with the aforesaid loans.

(4)

The term "grants" means the international grants which are accepted by the Ministry of Finance on behalf of the state and upon the approval of the State Council, which are not employed together with the loans.

Chapter II Administrative Institutions and the Functions Thereof

Article 7

The Ministry of Finance shall manage the loans and grants in a centralized manner, and shall fulfill the functions as follows:

(1)

determining the principle for the administration on the loans and grants and formulating basic rules and regulations thereon,

(2)

making plans on loaning together with the relevant departments of the State Council,

(3)

planning and carrying out the work related to the foreign loans and grants as a whole, and negotiating, talking and concluding legal documents with international financial organizations and foreign governments,

(4)

being responsible for the on-lending, sub-granting, utilization, repayment, counting and monitoring of the loans and grants, and

(5)

providing policy guidance, coordination and supervision on the activities in respect of loans and grants.

Article 8

A local department of finance is the representative of the creditor's rights and liabilities in respect of the loans of the government at the same level and is the administrative institution for loans and grants, and shall be in charge of the administration on the whole course of the loans and grants of its region.

Article 9

As regards a project directly on-lent or sub-granted by the Ministry of Finance to the relevant departments of the State Council, the relevant departments of the State Council shall determine the central project executive institutions, which shall be in charge of organizing the concrete execution of the project.

Article 10

As regards an association project across two or more provinces, autonomous regions and municipalities directly under the Central Government, directly sub-lent or sub-granted by the Ministry of Finance to the local governments, if it is necessary for the relevant departments of the State Council to organize or coordinate the work, the relevant departments of the State Council shall determine a central project coordination institution, which shall be in charge of providing guidance, organizing and coordinating the work in respect of the project.

Article 11

As regards a loan project which shall be repaid by a local government or a project under a grant accepted by a local government, the local government shall determine a local project executive institution, which shall be in charge of organizing and executing the project.

Article 12

The central project executive institution, central project coordination institution or local project executive institution shall be subject to the guidance and supervision of the finance departments at the same level, and shall submit their plans on operating fund disbursements to the finance departments at the same level for examination and approval or for archiving purpose.

Chapter III Loan Raising

Article 13

The raising of a loan includes the loan application, appraisal and evaluation, negotiating and talking with the foreign party, subscription and entry into force of the legal documents on the loan, determination of on-lending relationship as well as clarification of repayment liabilities.

Article 14

Where a region plans to use a loan by an international financial organization, the finance department of the province, autonomous region, municipality directly under the Central Government, city specially designated on the state plan, or the Finance Bureau of Xinjiang Production and Construction Corps (hereinafter referred to as the provincial finance department) shall, on behalf of the government at the same level, file an application for the loan with the Ministry of Finance.

Where a relevant department of the State Council or any other institution plans to use a loan by an international financial organization, it shall file an application for the loan with the Ministry of Finance. If the debts are repaid by the local government, a repayment commitment letter issued by the provincial finance department shall be provided together with the application.

The application for a loan shall include the following main contents:

(1)

the purpose and necessity of the loan,

(2)

the main contents of the loan project,

(3)

the sources of the loan and the supporting funds, and

(4)

the arrangement on the on-lending and debt repayment.

Article 15

The Ministry of Finance shall examine the application for a loan, and shall determine whether or not to list this loan application into the plan on loans by international financial organizations subject to the provisions in Articles 4 and 5 of the present Measures the requirements of the loan providers.

Article 16

The provincial finance department shall organize appraisals on projects listed into the plan on loans by international financial organizations and shall submit the appraisal opinions to the Ministry of Finance, which shall, in light of the appraisal opinions, determine whether or not to arrange negotiations and talks with the foreign party. The matters to be appraised mainly include:

(1)

the debt burden and financial capacity of the provincial government,

(2)

the financial, economic and social benefits of the loan project,

(3)

the financial status of the project entity and the executing condition on the supporting funds, and

(4)

the on-lending arrangement, repayment liabilities and source of the repayment fund.

Article 17

The loan projects granted by foreign governments shall be classified into 3 categories as follows in light of the different repayment liabilities:

(1)

projects with the provincial finance departments or the relevant departments of the State Council bearing the repayment liabilities as the debtors,

(2)

projects with the project entities bearing the repayment liabilities as the debtors and the provincial finance departments or the relevant departments of the State Council providing the repayment guarantees, and

(3)

projects with the project entities bearing the repayment liabilities as the debtors and the on-lending institutions as the final payers of the foreign debts, under which the provincial finance departments or the relevant departments of the State Council shall not act as the debtors or provide the repayment guarantees.

Article 18

The provincial finance departments shall organize an appraisal on the projects to use a loan granted by a foreign government. The appraisal items shall be determined under Article 16 of the present Measures.

Article 19

Where a project to use a loan by a foreign government meets the relevant requirements upon appraisal, the provincial finance department shall file an application with the Ministry of Finance, and shall submit the following materials:

(1)

the information on the debts to be paid by the relevant government of the debtor,

(2)

the application of the provincial finance department for using the loan by a foreign government. The loan application shall state the brief introduction of the project, source of the loan for the project, amount of the loan, the debtor, sub-lending institution, on-lending type, and source of the supporting fund, and

(3)

an evaluation report on the environmental impact and a feasibility research report on the project in English as required by the loan provider.

Article 20

After the Ministry of Finance examines and confirms the application materials submitted by the provincial finance departments for using a loan granted by a foreign government, it shall, in light of the development aid policies and the fund commitment of the loan provider, propose the candidate projects to the foreign government in a centralized manner.

Article 21

As for a loan project by foreign governments, which is required to change the country of the loan or increase the amount of the loan, the provincial finance department shall file a written application with the Ministry of Finance. The Ministry of Finance shall make a decision after taking into consideration the requirements of the loan provider, the actual needs of the project and other information as a whole.

Article 22

As to loan projects meeting the relevant requirements, the Ministry of Finance shall negotiate with the international financial organizations or foreign governments, organize the conclusion of legal documents on loans and handle the relevant matters concerning the entry into force of the these legal documents. And other departments shall offer assistance to the Ministry of Finance.

Article 23

The Ministry of Finance shall, in light of the type of the loan project by a foreign government, entrust or notify the on-lending institution to evaluate the project and go through other relevant on-lending formalities in a timely manner.

Article 24

The on-lending institution of a loan by a foreign government shall, according to the relevant provisions, conclude legal documents on the loan with the foreign financial institution and sign an on-lending agreement with the debtor so as to ensure the repayment of the principal and payment of interests thereof to the foreign party and the payment in advance of the fund.

Chapter IV Utilization of Loans

Article 25

The utilization of a loan shall mainly include the purchase for the loan project, payment of the loan fund, technical aid, training of personnel, monitoring and reporting on the execution progress of the project.

The project entity shall, pursuant to the laws and regulations of the state as well as the legal documents on the loan, organize the execution of the loan project.

Article 26

As for a project under a loan by an international financial organization with the local government bearing the debts, the oversea visit plan, purchase plan, selection of the purchasing agency and other matters related to this project shall not be carried out after they have been examined and confirmed by the provincial finance department.

The oversea visit plans related to other projects under loan granted by international financial organizations shall be carried out after the approval of the Ministry of Finance. The purchase plans and selections of the purchasing agencies shall be reported to the Ministry of Finance for archiving purpose.

As for a project under a loan by a foreign government, which has been examined and confirmed by the Ministry of Finance, the provincial finance department shall, pursuant to the relevant provisions of the Ministry of Finance, organize or guide and supervise the project entity's determination of a purchasing agency, and shall report the result to the Ministry of Finance for archiving purpose.

Article 27

The purchasing agency shall, in light of the entrustment agreement and the requirements of the loan provider, fulfill the procurement work for the project under the loan of foreign government.

Article 28

The utilization of a loan fund shall be in line with the provisions in the legal documents on the loan. No entity or individual may obtain any loan fund by making false report, obtaining it in the name of others or by other deceitful means. And no entity or individual may detain, hold back or misappropriate any loan fund, or change the uses of any loan fund without permission.

Article 29

The provincial finance departments shall intensify the management and supervision on the projects under loans by international financial institutions, focusing on the matters as follows:

(1)

organizing the formulation of regulations on the management of loan projects, guiding and supervising the fund, financial affairs and debt management related to the loan projects,

(2)

supervising the actual payment and utilization of the loan funds and supporting funds, being responsible for the payment and the administration of exclusive accounts of the loan funds according to the authorization of the Ministry of Finance, and being responsible for dividing the debts arisen from loan funds, as well as the repayment of loans and payment of interests and fees,

(3)

guiding and supervising the purchase task of the loan projects jointly with other relevant departments, and

(4)

other matters related to the supervision and management over the execution of the projects.

Article 30

The local or central project entities shall, in light of the legal documents on the loan, submit to the Ministry of Finance and the loan provider reports on the progress of the project, financial statements and audit reports via the provincial finance departments or directly.

Article 31

The finance departments at all levels shall supervise and inspect the execution of the projects. In case any of them finds a problem, it shall order the project entity to take effective measures to solve it and make corrections within a time limit.

Article 32

After the completion of a loan project, the project entity shall timely make accounts on the completion and evaluate and summarize the execution of the project in all aspects, and shall, according to the relevant provisions, formulate and submit a project completion report and go through the formalities for the transfer and register of the assets.

The finance departments at all levels shall guide and urge the project entity to well do the post-evaluation and summarization work for the projects.

Article 33

After the completion of a loan project, the project entity shall make a future operation plan on the project in a timely manner, and shall monitor the actual operation of the project.

Before a loan is paid off, the finance departments at all levels shall be responsible for the supervision and inspection over the execution of the operation plan on the project, and shall timely inquire about and analyze the information on the benefits of the project.

Article 34

During the execution of a loan project by an international financial organization, the project entity shall, in light of the financial accounting system of the state and the administrative provisions on accounting of the loan projects, conduct separate financial management and accounting calculation for the said project, and establish a sound internal financial accounting system.

Chapter V Repayment of Debts

Article 35

After the conclusion of the legal documents on a loan, the on-lending institution and the debtor shall, according to the relevant provisions on the management of foreign debts, go through the foreign debt register formalities.

Article 36

The debtor shall strictly abide by the on-lending agreement, formulate a plan on the repayment of the maturity principal, interests, commitment fees and other relevant fees, and shall guarantee the payment in full amount.

Article 37

The debtors of loan projects by international financial organizations shall, according to the relevant provisions of the Ministry of Finance, undertake accounting calculation and statistical work on the loan debts, and shall timely prepare complete and accurate reports on the credits and debts of this region or this entity and submit them to the superior competent institution as well as the local government at the same level.

The on-lending institutions of loan projects by foreign governments shall, in light of the requirements of the Ministry of Finance and the provincial finance department, provide the statistical information and materials related to the credits and debts in a timely manner.

Article 38

The debtors shall, according to the relevant provisions of the Ministry of Finance, establish loan repayment reserves, which are exclusively used for the payment in advance for the maturity loan debts owed to international financial organizations and foreign governments.

The loan repayment reserve of the government at each level shall be established and administered by the respective finance department at the same level.

Article 39

The finance department at each level shall establish statistical, monitoring and pre-warning systems for the foreign debts of the government so as to prevent and avoid the risks of debts.

Article 40

The debtors may, on the basis of abiding by the prudent principle and establishing a sound internal control system, avoiding the risks by utilizing the financial instruments according to the relevant laws and regulations.

To choose a transaction object, the debtors shall follow the competition principle, and shall avoid the losses of the principal in the transaction. After the end of a transaction, it shall submit the relevant documents on the transaction to the Ministry of Finance for archiving purpose.

Article 41

At the time of check and acceptance on the completion of a loan project, the relationship of property rights and the relationship between the creditor and the debtor shall be made clear so as to prevent the loss of state-owned assets and dodge of debts.

Article 42

When a debtor changes its property rights by assets reorganization or enterprise restructuring or when it goes bankrupt, it shall obtain the approval of the on-lending institution and the Ministry of Finance and the approval of the loan provider where necessary, and shall conclude an agreement on the debt repayment arrangement so as to ensure the priority to repay the foreign debts of the government.

Chapter VI Administration on the Grants

Article 43

The administration on the grants shall include the preliminary work of the grant projects, utilization of the funds, project completion evaluation and summarization, asset management and etc.

Article 44

The preliminary work of a grant project shall include the preparation of a grant application, formulation of a project proposal, negotiations and talks, conclusion of legal documents, determination of sub-granting relationship and etc.

The local finance department shall strengthen the coordination and management of the preliminary work related to the grants to this region.

Article 45

The project entity to apply for a grant shall prepare a grant application and attach an abstract of the project.

The central project entity shall directly submit to the Ministry of Finance the application and the abstract of the project. The local project entity shall submit to the Ministry of Finance the application and the abstract of the project via the provincial finance department. The project abstract shall mainly contain the following contents:

(1)

the project background,

(2)

the aim of the project,

(3)

the contents of the project,

(4)

the budget of the project,

(5)

the sustainability and demonstration role of the project, and

(6)

the risks of the project.

Article 46

After the Ministry of Finance examines and approves the grant application and the abstract of the project, the central project entity shall directly submit a project proposal to the Ministry of Finance, and the local project entity shall submit a project proposal to the Ministry of Finance via the provincial finance department.

The project proposal shall mainly contain the following items:

(1)

the aim of the project,

(2)

the necessity and feasibility of the project,

(3)

the activities related to the project,

(4)

the project execution plan and arrangement,

(5)

the budget of the project,

(6)

the project quality and risk control,

(7)

the application and popularization of the achievements of the project, and

(8)

the monitoring and evaluation.

Article 47

The Ministry of Finance shall, in light of the project proposals examined and approved by it, be responsible for negotiating with the international financial organizations or foreign governments, organizing the conclusion of legal documents on grants and handling the matters related to their entry into force. Other departments shall assist the Ministry of Finance to well do the relevant work.

Article 48

The Ministry of Finance may directly or entrust another institution to sign the on-lending agreement or execution agreement with the domestic grantee so as to regulate the rights and obligations of both parties, and may, according to the relevant provisions of the Ministry of Finance, charge a paid use fee at the rate of 1 % of the total amount of the grant.

The paid use fees of grants in joint financing used in combination with loans shall be charged according to the provisions of the preceding paragraph.

Article 49

The utilization of a grant fund shall be in line with the legal documents on the grant. No entity or individual may obtain any grant fund by making false report, in the name of others or by other deceitful means. No entity or individual may detain, hold back or impropriate any grant fund or change the uses of any grant fund without permission.

Article 50

The grant project entity shall establish a sound internal financial accounting supervision system, and shall conduct separate financial management and accounting calculation on the project in light of the provisions of the Ministry of Finance on financial and accounting management of grant projects, prepare a project execution plan in light of the requirements of the legal documents on the grant, organize the execution of the project, make final accounts upon the completion of a project, make and submit the project completion report and submit a project execution report and an audit report to the Ministry of Finance and the grant provider.

Article 51

Before the completion of a grant project, the Ministry of Finance shall, according to the relevant provisions of the State and the requirements of the legal documents on grants, make clear the ownership and the way of disposal of the assets formed by the grant.

If the assets formed by a grant are state-owned, the relevant entities shall prevent the loss of state-owned assets according to Article 41 of the present Measures and other relevant provisions of the State.

Chapter VII Legal Liabilities

Article 52

Where a project entity violates Article 31 of the present Measures by failing to solve or rectify the problems it finds during the process of supervision and inspection, the finance department may take measures such as suspending the payment of the loan fund, demanding refund of the amount already paid and suspending the examination and approval of the overseas visit plan.

Article 53

Where a project entity violates Article 34 or Article 50 of the present Measures, the finance department may order it to make corrections within a time limit, and may punish it according to the laws and regulations of the state on accounting management.

Article 54

Where a debtor violates Article 36 of the present Measures by failing to repay the due principal, interests, commitment fees and other relevant fees, the Ministry of Finance may take measures as follows:

(1)

charging the fund occupation fee or penalty for breach of contract,

(2)

suspending the preparation work for any new loan project,

(3)

suspending the examination, approval and execution of any oversea visit plan,

(4)

suspending the payment of the fund of a loan project,

(5)

accelerating the repayment of the undue debts of the loan project, and

(6)

taking back the loan fund by deducting the budget or by other means.

Article 55

Where any entity or individual obtains any loan fund by making false report, in the name of others or by other deceitful means, or utilizes any loan fund in violation of the relevant provisions such as detaining, holding back and impropriating any loan fund, or obtains any illegal benefits from the loans undertaken or guaranteed by the government, it (he) shall be punished according to the Regulations on Penalties and Sanctions against Illegal Fiscal Acts (Order No. 427 of the State Council) and other relevant laws and regulations.

Article 56

Where any entity or individual violates Article 49 of the present Measures, the Ministry of Finance shall order it (him) to make corrections within a time limit. If the circumstance is serious, it (he) shall be given warnings, and the Ministry of Finance may take measures such as suspending the payment of the grant fund and suspending the examination and approval of any oversea visit plan.

Article 57

Where any of the functionaries of a finance department or project competent institution embezzles any money, accepts any bribe, abuses his power, neglects his duties or seeks any private benefits during the course of the administration on any loan or grant or during the course of the utilization and repayment of any loan or grant fund, he shall be imposed upon an administrative punishment.

Chapter VIII Supplementary Provisions

Article 58

Where the relevant departments of the State Council, the enterprise group under separate planning and central management enterprises under separate planning plan to use the loan or grant projects by foreign governments, it shall be subject to the present Measures.

Article 59

The on-lending institutions may formulate detailed implementation measures according to the present Measures.

Article 60

The present Measures shall come into force as of September 1, 2006.