Laws of the People's Republic of China

PROVISIONAL MEASURES OF THE PEOPLE'S BANK OF CHINA
GOVERNING THE ISSUE OF FOREIGN EXCHANGE GUARANTEE
BY RESIDENT INSTITUTIONS IN CHINA 

(Promulgated by the People's Bank of China on February 5, 1987)

 

 

 

SUBJECT: FOREIGN EXCHANGE

ISSUING-DEPT: PEOPLE'S BANK OF CHINA

ISSUE-DATE: 02/05/1987

IMPLEMENT-DATE: 02/05/1987

LENGTH: 821 words

TEXT:

[Article 1] These Provisional Rules are hereby formulated in order to promote foreign economic and technical cooperation, ensure the smooth expansion of financial activities and strengthen the regulation work of foreign exchange guarantee business.

[Article 2] Foreign exchange guarantee herein mentioned refers to the undertaking by which the guarantor possessing foreign exchange commits himself to the creditor that, when the debtor fails to honor his contractual debt service, the guarantor shall fulfill his obligation to repay.

[Article 3] The organs regulating foreign exchange guarantee business are the State Administration of Exchange Control and its branch offices (hereinafter referred to as exchange control authorities).

[Article 4] The issuance of foreign exchange guarantee is restricted to the following institutions:

(1) Financial institutions with legal authority to deal in foreign exchange guarantee business;

(2) Non-financial legal enterprises with sources of foreign exchange income;

The cumulative sum total of foreign exchange guarantee issued by and total foreign liabilities of a financial institution shall not exceed 20 times of its foreign exchange equity funds.

The total amount of foreign exchange guarantee issued by a non-financial institution shall not exceed its foreign exchange equity funds.

[Article 5] The scope of foreign exchange guarantee:

(1) Foreign exchange guarantee may be provided for a resident enterprise registered according to Chinese Law, but the guarantee must not be provided to cover the registered capital of the enterprise.

(2) Foreign exchange guarantee shall not be provided for Chinese enterprises residing abroad, unless otherwise approved by the exchange control authorities.

(3) Foreign exchange guarantee shall not be provided for foreign organizations or foreignowned enterprises, unless they put up the foreign exchange assets of equal value as collaterals.

[Article 6] The guarantor shall perform well the following work before issuing a foreign exchange guarantee:

(1) A feasibility study of the project under guarantee;

(2) A thorough investigation and knowledge of the credit standing of the debtor;

(3) Adoption of necessary measures for counterguarantee.

[Article 7] Where a foreign exchange guarantee is to be provided, the guarantor shall sign a contract each with the debtor and creditor, which must clearly define the respective rights and obligations of the guarantor shall sign a contract each with the debtor and creditor, which must clearly define the respective rights and obligations of the guarantor, creditor and debtor.

[Article 8] The creditor has the right to demand from the guarantor, when deemed necessary, his financial report and statement of foreign exchange revenue and expenditure.

[Article 9] The contract between the creditor and debtor guaranteed by the guarantor can be amended only with the consent of the guarantor.  Without his consent, the guarantor shall be automatically relieved from all his obligations under the guarantee.

[Article 10] After a guarantee is provided, the guarantor shall perform his obligations thereunder in case the debtor fails to fulfil his contractual obligations within the maturity of the contract.  The guarantor after having performed its obligations under the guarantee has the right to claim reimbursement from the debtor.

[Article 11] After a guarantee is provided, the guarantor shall be automatically relieved from his obligations in case the creditor fails to fulfill his contractual obligations.  The guarantor has the right to claim relevant compensation therefor from the creditor.

[Article 12] After a guarantee is issued, the guarantor has the right to supervise the position of funds and financial conditions of the debtor.  The specific method of supervision is to be clearly defined after mutual consultation between the guarantor and debtor.

[Article 13] As required by the exposure to actual risks, the guarantor has the right to demand the debtor to put up appropriate collaterals and collect from him a certain amount of guarantee fee.

[Article 14] A resident institution must, within 10 days after issuing a guarantee, present the guaranteed contract and other related documents to the local exchange control authorities for record.

[Article 15] Exchange control authorities shall, according the seriousness of the offense, take disciplinary action against institutions and units violating these Measures in the form, fine and/or revocation of warning of licenses for dealing in foreign exchange guarantee business.

[Article 16] The power of interpretation of these Measures is vested in the State Adiministration of Exchange Control.

[Article 17] These Measures shall come into force on the date of promulgation.