Laws of the People's Republic of China

Notice of the State Administration of Foreign Exchange on Relevant Issues concerning the Improvement of the Management of Foreign Exchange

Hui Fa [2005] No. 74 October 21, 2005

State Administration of Foreign Exchange branches and foreign exchange administration offices in all provinces, autonomous regions and municipalities under direct administration of the central government, State Administration of Foreign Exchange branches in Shenzhen, Dalian, Qingdao, Xiamen and Ningbo, and designated Chinese-funded foreign exchange banks:

Notice is hereby given on relevant issues for the purposes of promoting the reasonable and orderly utilization of foreign investment and improving the management of external debt pursuant to the Regulations on the Foreign Exchange System of the People's Republic of China, the Interim Provisions for Statistic and Supervision of External Debts, the Interim Measures on the Management of External Debts and other related laws, regulations and rules.

I.

Deferred Payments of above 180 (included) Days and Equivalent to 200 (included) Thousand U.S. Dollars of Domestic Institutions shall be under the External Debt Registration Management System

As for the import contracts newly concluded by domestic institutions as of December 1, 2005, in case that the unpaid foreign exchange thereof amounts to more than 200 (included) million U.S. Dollars, and the agreed or actual deferred payment time limit is of 180 (included) days, the import enterprises shall, within 15 work days after customs declaration, go to the local State Administration of Foreign Exchange branch bureaus (hereafter referred to as foreign exchange bureaus) to go through the registration of the deferred payments and to draw down the Form of External Debt Contract-signing Situations. With regard to such deferred payments as meet the aforesaid requirements, the banks shall handle the payment under import by dint of the Form of External Debt Contract-signing Situations and the related foreign exchange payment bill under import, and the foreign payments shall not exceed the principal and interest registered in the Form of External Debt Contract-signing Situations.

Where the foreign exchange bureaus handle for the applicant enterprises the deferred payment external debt registration, they shall examine and verify whether their balance of deferred payment exceeds the amount authorized by the foreign exchange bureaus. Unless otherwise provided for herein, the amount of enterprises' deferred payment shall be appraised and decided by the local foreign exchange bureaus with reference to 10% of the total amount of import payment of the enterprises concerned in the prior year. Large-scale complete set of equipment, long-term supply contract and other import trade credit where exists special requirement, and the deferred payment amount of the newly-established enterprises shall be separately appraised and decided by the local foreign exchange bureaus annually in accordance with the actual demand of the enterprises, and shall be filed with State Administration of Foreign Exchange for records.

Such deferred payments as have gone through external debt registration in accordance with the aforesaid provisions may not be required to go through the deferred payment of foreign exchange procedures in accordance with provisions in Notice on Relevant Issues concerning Strengthening the Management of Deferred Payment of Foreign Exchange in Imports (Hui Fa [2005] No.8).

The foreign exchange bureaus of where the enterprises are located shall be filed with the Specification Form of Repayment of Principal and Interest under Deferred Payment (please refer to Annex I) from the banks concerned within 10 work days in the beginning of every month.

II.

Regulating the Management of External Debts of Special Enterprises with Foreign Investment

1.

Where the ratio of investment of foreign investors accounts for less than 25% in enterprises with foreign investment, the contracting of external debts of the enterprises hereof shall be handled in accordance with related provisions applicable to their domestic Chinese-funded counterparts.

Such aforesaid enterprises as have gone through external debt registration in the foreign exchange bureaus before the effectuation of this notice may go to the foreign exchange bureaus to go through the authorization procedures for the repayment of principal and interest.

2.

With regard to the enterprises with foreign investment whose aggregate investment approved by authorities in charge equals to the registered capital or whose aggregate investment has not been clearly defined, they shall apply to the aforesaid authorities to reappraise the aggregate investment and registered capital, and the borrowing of external debts shall be conducted in accordance with the managing principle of "Investment Balance".

3.

The external debt scale of foreign-invested holding companies shall be managed in accordance with the principle as follows:

With regard to those whose registered capital is not less than 30 million U.S. Dollars, the short-term external debt balance plus the accumulative amount of mid-and-long-term external shall not exceed four times amount of the paid-up registered capital; with regard to those whose registered capital is not less than 100 million U.S. Dollars, the short-term external debt balance plus the accumulative amount of mid-and-long-term external shall not exceed six times amount of the paid-up registered capital.

4.

In accordance with Measures for the Administration of Foreign-funded Lease Industry promulgated by the Ministry of Commerce, the total risk assets of the foreign-funded lease companies (total risk assets=total assets-cash-bank deposit-national debt-entrusted lease capital) shall not exceed ten times amount of their total net assets. All the capitals arising from foreign-funded lease companies' borrowing external debts shall be regarded as risk assets.

Where the foreign exchange bureaus handle applications of registration and settlement of foreign exchange from the foreign-funded lease companies, they shall strictly examine and verify the statement of assets and liabilities and related data audited by accounting firms and provided by the companies hereof, and shall calculate the percentage of risk assets accounting for against the net assets. With regard to those going beyond the aforesaid provisions, both the registration and settlement of external debts shall be rejected.

Where the aforesaid enterprises raise loans under external guarantee, and if the performance of external guarantee occurs, the volume of performed guarantee shall be under the control scale of external debts.

III.

Where the domestically registered transnational corporations conduct concentrated operation of capital, and if the capitals they absorb from external affiliated companies are used within the territory of China, they shall be under the management of external debts.

IV.

Regulating the Management of External Guarantee under Domestic Loan

1.

In case of receiving external guarantee under domestic loans, the case-by-case registration by the debtors shall be changed to the periodical registration by the debtees. Where the domestic financial institutions grant domestic and foreign currency loans, if receiving guarantees form external institutions or individuals (including the undue or need-be-renewed guarantee when this notice is promulgated, hereinafter referred to as external guarantee), the domestic financial institutions hereof shall, within 10 work days in the beginning of every month, fill in and submit to the local foreign exchange bureaus the Registration Form of the Loans under External Guarantees and the Performance Situations (please referred to Annex Table 2). The guaranteed person may not refer to the case-by-case method henceforth.

2.

The external guarantee under domestic loans shall be under the management of external debts on the basis of the performed amount instead of the contracted amount. In case that the performance of external guarantee occurs while receiving the external guarantee, the debtors shall, within 15 days after the performance date, go to the local foreign exchange bureaus to go through the external debt registration procedures, and their external debt scale shall be managed in accordance with the principle as follows:

The enterprise's mid-long-term accumulative external debt amount plus the short-term external debt balance and plus the performed amount by the external institutional and individual guarantors (calculated on the basis of the balance of the debtor's exterior liabilities), shall not exceed the minus between the aggregate investment and the registered capital (hereinafter referred to as "Investment Balance").

3.

In case of such loans under external guarantee as contracted before the effectuation of this Notice, in conformity with the scope of parties and guaranteed objects prescribed in the Notice of the State Administration of Foreign Exchange on the Work of Authorization of Short-term External Debt Quotas of Foreign-invested Banks within the Territory of China in the Year of 2005 (Hui Fa [2005] No.4) and the Supplementary Notice of the State Administration of Foreign Exchange on Relevant Issues concerning the RMB Loans under Foreign Exchange Guarantee (Hui Fa [2005] No.26), the debtors may, after the performance of guarantee, go to the local foreign exchange bureaus to register the external debts, and this performed amount may be left out of the "Investment Balance" of the debtors hereof.

4.

Where the domestic Chinese-funded enterprises within the territory of China borrow money from the domestic financial institutions, they shall not accept the guarantees offered by external institutions or individuals without the approval of the State Administration of Foreign Exchange.

V.

All designated foreign exchange banks shall, in accordance with the related provisions in the Notice of the State Administration of Foreign Exchange on the Improvement of Works of Screening the Capital Item Structures of Enterprises with Foreign Investment and the External Debt Registration Management, carefully examine and verify and handle the statutory capital and the settlement of foreign exchange of the external debts. With regard to the one-time settlement of foreign exchange amount exceeding 200 (equivalent) thousand U.S. Dollars, the banks may, in accordance with the enterprise's Application for Settlement of Foreign Exchange and Written Payment Order (the Settlement of Foreign Exchange Authorization Certificate issued by the foreign exchange bureaus shall be examined in the settlement of foreign exchange of external debt), transfer the settled RMB capital to the RMB account of the enterprise hereof as a temporary transition, and pay it to the final receiver within 2 work days.

VI.

The foreign exchange bureaus of all levels shall carefully fulfill their management responsibilities, analyze in time the change of external debts with their jurisdictions, and pay attention to strengthening on-the-spot and non on-the-spot checks. Where such domestic enterprises as have not go through the registration of deferred payment external debts repay principal with interest to the exterior, they shall first go to the foreign exchange bureaus to go through the re-registration procedures, and they shall be punished after the foreign exchange bureaus re-register their external debts. In case of banks and enterprises' breach of the external debt provisions, they shall be punished in accordance with the Regulations on the Foreign Exchange System of the People's Republic of China and the Interim Measures on the Management of External Debts.

VII.

This Notice shall enter into force as of December 1, 2005. This Notice shall prevail in the event of any inconsistency between the previous documents and this Notice.

Annex Tables:

1.

Specification Form of Repayment of Principal and Interest under Deferred Payment

2.

Registration Form of the Loans and the Performance Situations under External Guarantees

¡¡

Annex Table 1

Specification Form of Repayment of Principal and Interest under Deferred Payment

¡¡

¡¡¡¡Name of Bank (Seal)£º                                             

¡¡¡¡Contact Person & Telephone£º                             

¡¡¡¡Operator£º¡¡¡¡¡¡¡¡¡¡¡¡¡¡ Examiner£º¡¡¡¡¡¡¡¡¡¡¡¡ Date of Submission£º               

¡¡¡¡N.B.: The Specification Form of Repayment of Principal and Interest under Deferred Payment as newly occurred in the prior month shall, within 10 work days in the beginning of every month, be submitted to the local Branch Bureau in paper and electronically.

¡¡

Annex Table 2

Registration Form of the Loans under External Guarantees and the Performance Situations             (m/y)

¡¡¡¡Name of Domestic Financial Institution:                                     

¡¡¡¡Contact Person & Telephone£º ¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡ ¡¡  

¡¡¡¡Registration Number£º                                                                

¡¡¡¡Operator£º¡¡¡¡¡¡¡¡¡¡¡¡ Examiner£º¡¡¡¡¡¡¡¡¡¡ ¡¡ Date of Submission£º              

¡¡¡¡N.B.: The Loans and the Performance Situations under External Guarantees as newly occurred in the prior month shall, within 10 work days in the beginning of every month, be submitted to the local Branch Bureau in paper and electronically.