People's Bank of China, Foreign Exchange On-lending Business of Policy Banks and Commercial Banks Guidelines

Issued: November 20 2000
Effective: as of date of issue
Interpreting authority: People's Bank of China
Applicability: For the purposes of the Guidelines, "on-lending business" refers to foreign government loans, government mixed loans, international financial organization loans, foreign export credit, discount loans and other foreign preferential loans authoirzed by the Ministry of Finance, including local currency funding of such loans (Article 2). An "on-lending institution" means a policy bank, wholly State-owned commercial bank or share system commercial bank (Article 3).

Main contents: The Guidelines classify on-lending projects into three categories. Where a provincial level finance department or a central government department is the borrower, it is a Category One on-lending project. Where such a department provides security for repayment, it is a Category Two on-lending project. Those that do not fall into Category One or Category Two are Category Three projects (Article 5). Where the borrower or security provider of a Category One or Two project is not a finance department, the on-lending institution shall not proceed with the on-lending until all corresponding commercial conditions are satisfied. With respect to Category Three projects, on-lending institutions are required to make an independent evaluation and act strictly on commercial principles (Article 7). If any recipient of on-lent loans defaults on repayment, on-lending institutions shall refuse to carry out any new on-lending business with it (Article 8).
Related legislation: PRC, Commercial Banking Law, May 10 1995, CLP 1995 No.5 p32; Lending General Provisions, Aug 1 1996, CLP 1996 No.8 p4 and State Council, Approval and Transmission of the«Ministry of Finance and State Develpoment Planning Commission, Further Strengthening the Administration of Foreign Government Loans Several Opinions» Circular, 2000