Laws of the People's Republic of China

The State Administration of Foreign Exchange

The Circular of the State Administration of Foreign Exchange on the Appraisal and Decision of Short-term External Debt Indicator of the Foreign-funded Bank within the Territory of 2005

Hui Fa [2005] No. 4

January 26, 2005

The branches and foreign exchange offices of the State Administration of Foreign Exchange of all provinces, autonomous regions, and municipalities directly under the Central Government, and the branches in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo:

In accordance with the Administrative Measures of External Debt of Foreign Banks within the Territory (hereinafter referred to as the Measures), now related issues of the Appraisal and Decision of Short-term External Debt Indicator of the Foreign-funded Bank within the Territory (hereinafter referred to as " the foreign-funded bank") of 2005 are notified as follows:

1.

The principles for the appraisal and decision of short-term external debt indicator of foreign-funded bank in 2005

(1)

On appraising and deciding short-term external debt indicator of foreign-funded bank in 2005, each branch concerned shall act subject to the principle of seeking truth from facts, appraising objectively the requirement of the short-term external debt indicator of all foreign-funded banks within its jurisdiction. The short-term external debt indicator of foreign-funded bank thus appraised and decided shall not only satisfy the demand of regular business development of foreign-funded bank, but also control effectively the scale of external debt of foreign-funded bank.

(2)

The appraisal and decision of short-term external debt indicator shall strictly abide by the related principles and requirements provided for in the Measures, and shall simultaneously take into account the following factors:

i.

The changes in every kind of foreign exchange loan balances of recent two years, especially the second half year of 2004, the changes in every kind of foreign exchange loan balances are important parts that shall be referred to in appraising and deciding the short-term external debt indicator.

ii.

The short-term external debt indicator of foreign-funded bank after adjustment made in November 2004, and the actual short-term external debt balance at the end of the year.

iii.

The business development plan of foreign-funded bank in 2005.

2.

The methods of the appraisal and decision and administration of the short-term debt indicator of foreign-funded bank in 2005

(1)

The State Administration of Foreign Exchange conducts aggregate control on the short-term external debt of foreign-funded bank within the jurisdiction of all concerned branches (exchange administration offices). Within the approved balance limit of short-term external debt, the branches (offices) may, according to the real circumstances of each foreign-funded bank within their jurisdiction and the changes of business, make proper adjustment.

(2)

Because of the management system of foreign-funded bank, the appraisal and decision of short-term external debt of foreign-funded bank in 2005 and subsequent years, shall in principle, refer to the appraisal and decision measures of 2005, i.e. the short-term external debt indicator of each local foreign-funded bank is appraised and decided by the branch (office) concerned, and reported to the State Administration of Foreign Exchange for approval.

(3)

Where the principal reporting bank of foreign-funded bank has the functions of fund management and supervision and is able to put forward a complete scheme to supervise the short-term external debt of other branch institutions, or all fund-borrowing activities of other branch institutions are conducted through the principal reporting bank, the application for the short-term external debt indicator may, with the authorization of its superior bank and the confirmation of the local foreign exchange branch where the principal reporting bank is situated, be made by the principal reporting bank to the local foreign exchange branch. The local foreign exchange branch shall, after preliminary examination, file the application to the State Administration of Foreign Exchange.

Within the scale of the external debt indicator appraised and decided by the State Administration of Foreign Exchange, the external debt indicator can be adjusted among the member banks of the principal reporting bank.

With respect to the foreign-funded bank to which the principal reporting bank system applies, the everyday actual external debt balance of all branches within the territory shall subject to the indicator scale that has been appraised and decided.

Every member bank within a principal reporting bank system shall, according to its own need, submit individually to the principal reporting bank the demand application for short-term external debt indicator, and following the materials requirements as needed in direct application to foreign exchange branch, report such materials to the local foreign exchange branch where the principal reporting bank is situated for recording. When the State Administration of Foreign Exchange gives approval reply with respect to the short-term external debt of a principal reporting bank, the State Administration of Foreign Exchange shall, while delivering the reply to the local foreign exchange branch where the principal reporting bank is situated, send a copy to the foreign exchange branch the local foreign exchange branch at the place where other member banks are situated.

(4)

With respect to the foreign-funded bank to which the principal reporting bank system applies, the local foreign exchange branch where the principal reporting bank is situated is responsible for the supervision over the short-term external debt of the principal bank, where the short-term external debt balances of member banks in different place are concerned, the balances are verified by the assistance of the local foreign exchange branches where these banks are situated.

(5)

The principal reporting bank shall report every day to the local foreign exchange branch where the principal reporting bank is situated the short-term external debt balances of the proceeding day of all local branches within the territory.

3.

The indicator application procedures and relevant work concerning examination and approval of 2005

(1)

All branches shall notify by proper methods the foreign-funded banks within their respective jurisdiction to submit the short-term debt indicator application of 2005. Where a foreign-funded bank submits no application within 10 days after the receipt of the notice from the branches, then the short-term external debt indicator of 2004 appraised and decided after adjustment shall be taken as the indicator of 2005 of the foreign-funded bank.

(2)

Where a foreign-funded bank submits to related branch an application for the short-term external debt indicator, it shall not provide only the materials required by the Measures; the solely foreign-owned bank and the Chinese and foreign equity joint venture bank shall submit the domestic consolidated balance sheet and profit and loss statement 2004 that has been submitted to the China Banking Regulatory Commission; the branch of foreign-funded bank shall submit the balance sheet and profit and loss statement 2004 of the branch that has been submitted to the China Banking Regulatory Commission and the consolidated balance sheet and the profit and loss statement of the operative branch within the territory of this year(if RMB business is involved, foreign exchange statements shall be submitted independently). The principal reporting bank applying to the local foreign exchange branch for short-term debt indicator shall submit the authorization document from its superior bank with the short-term external debt requirement plan of all member banks and the Table of the Short-term External Debt Indicator Applied for by Foreign-funded Bank within the Territory filled in by member banks and related foreign exchange statements.

(3)

All branches may accept the application for short-term external debt indicator 2005 made by foreign-funded banks since the arrival day of this document, and finish appraisal and decision of the foreign short-term debt indicator 2005 for the foreign-funded bank within their respective jurisdiction before March 15, 2005 and at the same time transfer the application report of the foreign-funded bank and the Summary Table of the Short-term External Debt Indicator Applied for by Foreign-funded Bank within the Territory (electronic document delivered via the internal electronic mail) to the State Administration of Foreign Exchange for verification and approval. The State Administration of Foreign Exchange will give the branches the short-term external debt indicator of the foreign-funded banks within their respective jurisdiction before March 31, 2005.

(4)

Where the foreign-funded bank within the territory borrows short-term external debt through other currencies rather than US dollar, in considering whether the balance of the short-term external debt conforms to regulations or not, the convert shall be conducted in accordance with the Conversion Rate of All Other Currencies to US Dollar issued by the State Administration of Foreign Exchange early each month.

(5)

The foreign-funded bank shall distinguish the residence account from non-residence account in its computer system and accounting system and establish and perfect the statistics system of the non-residence deposit (including institution and individual, home and foreign currency) before December 31, 2005.

4.

Issues concerning the foreign exchange guaranty of foreign-funded bank

(1)

In accordance with the provisions of the Circular of the State Administration of Foreign Exchange on Related Issues of Implementing the Administrative Measures of External Debt of Foreign Banks within the Territory (Hui Fa [2004] No.59), the foreign-funded bank within the territory shall not provide forex guaranty to the RMB loan of the enterprise within the territory.

The foreign-funded bank of the district where RMB business has not been released may continue to provide forex guaranty to the RMB loan of the foreign-funded enterprises in the provinces or cities. Where the debtor can not pay the RMB loan and the foreign-funded bank within the territory perform the payment in subrogation, the RMB lending bank shall apply to the local foreign exchange branch at the location of business registry, and may settle the exchange after the verification and approval of the foreign exchange branch.

(2)

The bank designated for foreign exchange business giving RMB loan to foreign-funded enterprise may accept the exchange of the debtor as pledge, but the exchange pledged can only come from capital account and the exchange account of the current account of the enterprise.

(3)

The bank designated for foreign exchange business within the territory (include Chinese banks and foreign-funded banks) giving loan to RMB loan to foreign-funded enterprise within the territory may accept the guaranty provided by overseas institutions. The foreign-funded enterprise applying for RMB loan under the guaranty of overseas institutions shall get from local foreign exchange branch the "Registration Table of the Contingent Debt of RMB Loan within the Territory" and go through related registration formalities.

After the examination and verification of the foreign exchange branch, where the balance of the short-term external debt, medium and long-term external debt and the RMB loan under the guaranty of overseas institutions does not exceed the difference of the total investment to the registered capital, the registration may be carried out, where the balance of the total investment to the registered capital is exceeded, the registration may not be carried out.

(4)

The bank designated for foreign exchange business, in concluding contract for RMB loan under guaranty of overseas institutions with foreign-funded enterprise, shall check the Registration Table of Contingent Debt got from foreign exchange branch by the debtor. Where the foreign-funded enterprise doesn't go through the formalities of registration of contingent debt under RMB loan, when the overseas institution performs its liabilities, the foreign exchange branch may not verify and approve the settlement of the foreign exchange by the bank designated for foreign exchange business that gives RMB loan to it.

(5)

Where the foreign-funded enterprise has gone through the registration formalities and the overseas institution performs liabilities, the RMB lending bank shall apply to the local foreign exchange branch upon the strength of the copy of the Registration Table of Contingent Debt and related documents and may settle the foreign exchange after the verification and approval of the local foreign exchange branch. After the overseas institution performs liabilities in subrogation, the external debt born by the foreign-funded enterprise shall be brought into the external debt management, i.e. the "investment & registration balance" management.

(6)

The above-mentioned provisions shall come into force as of April 1, 2005. The RMB loan business under foreign exchange guaranty that takes place before shall be dealt with pursuant to the document of Yin Fa [1999] NO.223, and it is not necessary to go through additionally the registration formalities.

(7)

Where the above provisions are in conflict with the relevant provisions of the documents of Yin Fa [1999] NO.223 and Hui Fa [2004] NO. 59, the present provisions shall prevail.

Please implement it accordingly. Please report the problems encountered in the enforcement to the Capital Account Department of the State Administration of Foreign Exchange.

Annexes:

1.

The Table of the Short-term External Debt Indicator Applied for by Foreign-funded Bank within the Territory (omitted)

2.

The Summary Table of the Short-term External Debt Indicator Applied for by Foreign-funded Bank within the Territory (omitted)

3.

Registration Table of the Contingent Debt of RMB Loan within the Territory (omitted)