19970908the People’s Bank of China
The State Administration of Foreign Exchange
Measures for Administration of Borrowing International Commercial Loans by Domestic Institutions
(Approved by the People’s Bank of China on September 8, 1997, promulgated by the State Administration of Foreign Exchange on September
24, 1997)
Chapter I General Provisions
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 of the State Council for the purpose of improving the administration of the borrowing international commercial
loans
Article 2
The term “international commercial loans” mentioned in these Measures refers to funds raised and borrowed by domestic institutions
from financial institutions, enterprises, individuals or other economic organizations outside the Chinese territory or from financial
institutions with foreign investment within the Chinese territory, which are subject to contractual obligations for repayment in
foreign currency. Export credits, international financial leases, compensation trade repaid in foreign exchange, foreign exchange
deposits of institutions and individuals out of the territory (excluding foreign exchange deposits in banks which are approved to
conduct offshore banking business), project financing, financing under trade with the minimum term of 90 days and other types of
foreign exchange loans shall be regarded and administered as international commercial loans.
Article 3
The People’s Bank of China shall be the examination and approval organ of borrowing international commercial loans by domestic institutions.
The People’s Bank of China shall authorize the State Administration of Foreign Exchange and its branches offices (hereinafter referred
to as the foreign exchange bureaus) to be responsible for the examination, approval, supervision and administration of borrowing
international commercial loans by domestic institutions.
Article 4
A domestic institution must obtain approval from the foreign exchange bureau for borrowing an international commercial loan. An international
commercial loan agreement signed without the approval from the foreign exchange bureau shall be invalid. The foreign exchange bureau
shall not undertake foreign debt registration. The bank shall not open a foreign debt special account for it and the loan principals
and interests shall not be remitted abroad without authorization.
Article 5
Domestic institutions borrowing international commercial loans from foreign parties shall be restricted to:
(1)
Chinese-funded financial institutions authorized by the State Administration of Foreign Exchange to engage in foreign exchange loan
business operations;
(2)
non-financial enterprise legal persons approved by the departments authorized by the State Council.
Article 6
A financial institution borrowing an international commercial loan shall conform to the provisions of the People’s Bank of China on
the administration of the ratio of foreign exchange equity-debt of financial institutions.
Article 7
A non-financial enterprise legal person directly borrowing an international commercial loan from a foreign party shall meet the following
requirements:
(1)
having successively made profits over the previous three years, possessing an import-export business licence and engaging in an industry
encouraged by the State;
(2)
possessing a sound and complete financial management system;
(3)
for a trade-type non-financial enterprise legal person, its net assets shall account for not less than 15 per cent of its total assets;
for a non-trade-type non-financial enterprise legal person, its net assets shall account for not less than 30 per cent of its total
assets;
(4)
the sum of the international commercial loan borrowed and the surplus of the guaranty provided to a foreign party shall not exceed
50 per cent of the equivalent foreign exchange of its net assets;
(5)
the sum of the foreign exchange loan and the surplus of foreign exchange guaranty shall not exceed the foreign exchange revenue created
in the last financial year.
Article 8
A domestic institution shall borrow an international commercial loan on the basis of its own creditworthiness, and shall bear repayment
responsibility of its own accord.
Article 9
In the borrowing of an international commercial loan from a foreign party, a domestic institution shall strengthen the control of
cost. The total cost of its loan shall not exceed the total cost of a loan at the same period from a loan institution of the same
credit grading on the international financial market.
The foreign exchange bureaus shall supervise and direct the cost control in the borrowing of international commercial loans by domestic
institutions.
Article 10
A domestic institution borrowing an international commercial loan from a foreign party shall, in accordance with the provisions of
the State Administration of Foreign Exchange, submit the foreign loan statement for the previous quarter and the annual report on
the use of the international commercial loan to the foreign exchange bureau within the first ten days of each quarter.
Article 11
Foreign Exchange bureaus shall have the right to inspect the situations of the raising, using and repayment of international commercial
loans by domestic institutions. Loan institutions shall provide cooperation and submit the relevant documents and data.
Article 12
Without the approval of a foreign exchange bureau, a domestic institution shall not have the international commercial loan it has
borrowed deposited or directly paid out of the territory or converted into Renminbi for use.
Chapter II Medium-and-long-term International Commercial Loans
Article 13
The term “a medium-and-long-term international commercial loan” mentioned in these Measures refers to an international commercial
loan with a term of more than one year (not including one year), including a usance letter of credit with a term of more than one
year.
Article 14
The borrowing of a medium-and-long-term international commercial loan by a domestic institution shall be listed into the State plan
for the use of foreign capital.
Article 15
When borrowing a medium-and-long-term international commercial loan, a domestic institution shall apply to the foreign exchange bureau
by submitting all or part of the following data:
(1)
documents certifying that the borrowing is listed into the State plan for the use of foreign capital;
(2)
a document of project establishment approval for the loan;
(3)
a letter of intent on loan conditions, which shall include the name of the creditor, currency of the loan, amount, term and grace
period, interest rate, charges, early repayment intents and other financial conditions;
(4)
the source of repayment funds, repayment plan and the foreign exchange guaranty;
(5)
balance sheets in foreign exchange or Renminbi for the previous three years and other financial statements which have been verified
by a public accounting firm;
(6)
other relevant data as required by the foreign exchange bureau.
In addition to the provisions of the preceding paragraph, a branch of a financial institution borrowing a medium-and-long-term international
commercial loan from a foreign party shall also submit the relevant document of authorization from its head office (head company).
Article 16
The borrowing of an international commercial loan by a national institution resided in Beijing from a foreign party shall be directly
submitted to the State Administration of Foreign Exchange for examination and approval;
The borrowing of a loan from a foreign party by a national institution not resided in Beijing or by a local institution shall, after
being verified by the local foreign exchange bureau of the place where it is located, be submitted to the State Administration of
Foreign Exchange for examination and approval.
The branches of national and local financial institutions may make an application for approval only after they have been authorized
by their head offices (head companies).
Chapter III Short-term International Commercial Loans
Article 17
The term “a short-term international commercial loan” mentioned in these Measures refers to an international commercial loan with
a maximum term of one year (including one year), including inter-bank foreign exchange call loans, outward documentary bills, packing
loans and usance letter of credit with a term of more than 90 days but less than 365 days, etc..
Article 18
A short-term international commercial loan shall not be used for investment into long-term projects, fixed assets loans or other inappropriate
purposes.
Article 19
The foreign exchange bureaus shall implement administration of balance in respect of short-term international commercial loans borrowed
by domestic institutions.
Article 20
The balance control quota applied to short-term international commercial loans of domestic institutions (hereinafter referred to as
“the short-term loan quota”) shall be verified by the foreign exchange bureaus annually.
The balance of a short-term international commercial loan borrowed by a domestic institution shall not exceed the verified quota.
Article 21
The short-term loan quota of national financial institutions and non-financial enterprise legal persons shall be verified and made
known to lower levels by the State Administration of Foreign Exchange.
The short-term loan quota of local financial institutions and non-financial enterprise legal persons shall be examined and approved
by the foreign exchange bureaus of the place where they are located within the short-term loan quota verified and made known to lower
levels by the State Administration of Foreign Exchange.
Article 22
A Chinese-funded financial institution approved by the State Administration of Foreign Exchange to engage in international account
settlement businesses shall formulate the measures for the administration of usance letter of credit which shall be submitted to
the foreign exchange bureau for verification.
A Chinese-funded financial institution shall open usance letter of credit in accordance with the measures for the administration of
usance letter of credit that have been verified by the foreign exchange bureau.
A usance letter of credit with a term of more than 90 days but less than 365 days opened by a Chinese-funded financial institution
shall not use its short-term loan quota.
Article 23
If a non-financial enterprise legal person applies to a domestic financial institution with foreign investment to open a usance letter
of credit with a term of more than 90 days but less than 365 days, it shall be use its short-term loan quota.
Article 24
When applying to the foreign exchange bureau for a short-term loan quota, a domestic institution shall submit all or part of the following
data:
(1)
an application (including such contents as fund demand, situations of its credit-worthiness, purposes of the funds, etc.);
(2)
the previous year’s balance sheets and profit and loss statements verified by a public accounting firm;
(3)
a loan commitment letter of intention issued by the credit agency;
(4)
the foreign exchange receipts and expenditures in the previous year;
(5)
other data required by the foreign exchange bureau to be submitted.
Article 25
When borrowing a short-term international commercial loan, a non-financial enterprise legal person which does not implement the administration
of short-term loan quota balance shall have it reported case by case to the foreign exchange bureau, and shall have it included in
the short-term loan quota of the place where it is located.
Chapter IV Project Financing
Article 26
The term “project financing” mentioned in these Measures refers to the method of raising foreign exchange funds out of the territory
in the name of a domestic construction project, with the debt prepayment obligation to the foreign party by the project’s own expected
income and assets. It shall possess the following natures:
(1)
The creditor has no right of recourse over any assets and income other than the construction project;
(2)
The domestic institution is not required to mortgage, pledge or pay debts by using any assets, rights and interests as well as income
other than the construction project;
(3)
The domestic institution is not required to provide any forms of financial guaranty.
Article 27
The scale of financing with a foreign party in respect of project financing shall be incorporated into the State guidelines for borrowing
international commercial loan.
Article 28
The conditions for project financing shall be competitive and shall be examined and approved or examined and verified by the State
Administration of Foreign Exchange. With regard to the conditions for financing of project financing submitted to higher levels by
local authorities, after being preliminarily examined by the local foreign exchange bureau of the places where they are located,
they shall be reported to the State Administration of Foreign Exchange for examination and approval or examination and verification.
Article 29
When reporting the conditions for project financing to the State Administration of Foreign Exchange for examination and approval or
examination and verification, the project company shall submit the following documents:
(1)
an application, which shall include the methods for project financing, amount of money, market, as well as the term and interest rate
of the loan, the various charges and other financing conditions;
(2)
the project feasibility study report or other documents approved by the State Planning Commission;
(3)
documents certifying the incorporation of this project financing into the State guidelines for international commercial loans borrowed;
(4)
a project financing agreement;
(5)
documents with a nature of guaranty related to the project financing;
(6)
other necessary documents.
Chapter V International Commercial Loans Borrowed by Oversea Braches of Domestic Institutions
Article 30
The term “an overseas branch of a Chinese-funded financial institution” (hereinafter referred to as “an overseas branch”) refers to
a non-independent legal person branch which is established overseas by a Chinese-funded financial institution in accordance with
the local laws.
Article 31
A Chinese-funded financial institution shall decide the total amount of overseas financing for each of its overseas branches in accordance
with its overseas branches’ working capital amount, equity-debt ratio, volume of business for the current year and other indexes,
and shall have them reported to the State Administration of Foreign Exchange for the record before the end of February of each year.
If an overseas branch is to raise an international commercial loan equivalent to the value of more than US $ 50 million (including
US $ 50 million) on a one-off basis, its head office (head company) shall in advance report the matter to the State Administration
of Foreign Exchange for approval.
Article 32
Any financing which an overseas branch carries out overseas shall be incorporated into the equity-debt ratio administration of its
head office (head company).
Funds raised overseas by an overseas branch shall be only used for the development of overseas business. These funds must not be repatriated
for use into China without the approval of the State Administration of Foreign Exchange.
Article 33
A non-operating working office or representative office or other institutions established overseas by a Chinese-founded enterprise
shall not undertake financing overseas.
Article 34
Where a branch or other operating institution established overseas by a Chinese-funded enterprise borrows funds overseas in the name
of its head (parent) company with the authorization of its head (parent) company, the funds shall be regarded as the overseas loans
of the head (parent) company, and the head (parent) company shall undergo the relevant application and approval procedures in the
territory in accordance with the provisions of these Measures.
Chapter VI Legal Liability
Article 35
Where a domestic institution borrows an international commercial loan without authorization or fails to carry out inflation proof
work in accordance with the provisions of Article 42 of these Measures, the foreign exchange bureau shall give a warning, circulate
a notice of criticism and impose a fine of not less than RMB100,000 yuan nor more than RMB500,000 yuan. Where a crime is constituted,
criminal liability shall be investigated in accordance with the law.
Article 36
Where a domestic institution has the international commercial loan it has borrowed deposited or directly paid out of the territory
without authorization, or has it converted into Renminbi for use without authorization and without approval, the foreign exchange
bureau shall order it to make corrections, give a waning, circulate a notice of criticism and impose a fine in Renminbi of not less
than 30 per cent 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 37
Where the overseas branch of a domestic institution, in violation of the provisions of Articles 31, 33 or 34 of these Measures, undertake
overseas financing without authorization, the foreign exchange bureau shall give the domestic 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 38
Where, in violation of the provisions of Article 32 of these Measures, the overseas branch of a Chinese-funded financial institution
repatriates the funds raised overseas for use in China without authorization, the foreign exchange bureau shall order it to make
corrections and shall give the domestic Chinese-funded financial institution a warning, circulate a notice of criticism and impose
a fine of not less than RMB 100,000 yuan nor more than RMB500.000 yuan.
Article 39
Where a domestic institution submits false or invalid documents or other data to the foreign exchange bureau in order to fraudulently
obtain approval from the foreign exchange bureau, the foreign exchange bureau shall recover the documents of approval and impose
a punishment in accordance with the provisions of Article 35 of these Measures. Where a crime is constituted, criminal liability
shall be investigated in accordance with the law.
Article 40
Where a domestic institution fails to submit statements or data in accordance with the provision of these Measures, or refuses to
accept an inspection by and to cooperate with the foreign exchange bureau, the foreign exchange bureau shall give a warning, circulate
a notice of criticism and impose a fine of not less than RMB10,000 yuan nor more than RMB30,000 yuan.
Chapter VII Supplementary Provisions
Article 41
After signing an international commercial loan agreement, a domestic institution shall undertake foreign debt registration with the
foreign exchange bureau in accordance with the provisions on statistical monitoring of foreign debts and shall undertake repayment
procedures in accordance with relevant provisions.
Article 42
A domestic institution borrowing an international commercial loan must comply with the following principles based on the fluctuations
in international market exchange rates and interest rates and on the premise of not expanding the scale of foreign debts and not
extending the debt term in order to conscientiously minimize the foreign debt risks:
(1)
The matter shall be reported to the State Administration of Foreign Exchange for examination and approval where the amount to be borrowed
is low while the repayments are high;
(2)
A Chinese-funded financial institution that is approval to operate a foreign exchange trading business on a self-operation or agency
basis may carry out the business of preserving the value of international commercial loans in respect of its own debt or on commissions
accepted from other domestic institutions;
(3)
Where any other Chinese-funded financial institution commissions an overseas financial institution or a domestic financial institution
with foreign investment to carry out the business of preserving the value of its international commercial loan borrowed, the matter
shall be approved by the foreign exchange bureau;
(4)
An enterprise with foreign investment may itself commission an overseas financial institution or a domestic financial institution
with foreign investment to carry out the business of preserving the value of its international commercial loan borrowed.
Article 43
After a domestic institution has carried out the business of preserving the value of international commercial loan borrowed, the modification
of foreign debt registration procedures shall be undertaken in accordance with the provisions on statistical monitoring of foreign
debts.
Article 44
Provisions on the administration of foreign exchange accounts shall apply to the administration of account of international commercial
loans borrowed.
Article 45
These Measures shall apply to the borrowing of international commercial loans from the overseas branches of Chinese-funded financial
institutions by domestic institutions.
Article 46
These Measures shall apply to aircraft financial lease and international commercial loan funds which are borrowed for advance payment
on aircraft financial lease.
Article 47
The provisions of these Measures on project financing shall apply to domestic institutions which transfer overseas at fixed costs
the operating rights or rights to earnings of already established projects.
Article 48
The international commercial loans borrowed by Chinese-funded banks to engage in offshore banking operations shall be handled in accordance
with the provisions of these Measure on the administration of overseas branches.
Article 49
Foreign exchange loans which domestic institutions borrow from the offshore banking departments of Chinese-funded banks shall be regarded
and administered as international commercial loans.
Article 50
The provisions of Articles 1,2,3,8,9,10,11,12,13,17,18,35,36,37,39,40,41, 42(4), 43,44,45,46,47,49,51,52 and Chapter IV of these Measures
shall apply to enterprises with foreign investment. Other articles shall not apply to enterprises with foreign investment.
Article 51
The State Administration of Foreign Exchange shall be responsible for the interpretation of these Measures.
Article 52
These Measures shall enter into force as of January 1, 1998. The Measures for Administration of Borrowing International Commercial
Loans by Domestic Institutions, approved on September 26, 1991 by the people’s Bank of China and promulgated by the State Administration
of Foreign Exchange, the Circular on Matters Relating to Project Financing by Domestic Institutions, promulgated on July 14, 1995
by the People’s Bank of China, the Provisions on Administration of Overseas Financing by Overseas Branches of Chinese-funded Banks
Conducting Foreign Exchange Business, promulgated on April 17, 1996 by the State Administration of Foreign Exchange, and the Circular
on Strengthening the Administration of Financing Conducted by Overseas Institutions of Chinese-funded Enterprises, promulgated on
January 16, 1997 by the State Administration of Foreign Exchange, shall be repealed simultaneously.
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