Circular on Issues Relevant to Improving the Administration of Foreign Debt

(Issued by the State Administration of Foreign Exchange on October 21 2005 and effective as of December 1 2005.)

Hui Fa [2005] No.74

Branches and offices of the State Administration of Foreign Exchange of each province, autonomous region and municipality directly under the central government and the Shenzhen, Dalian, Qingdao, Xiamen and Ningbo municipal branches of the State Administration of Foreign Exchange; Chinese-invested designated foreign exchange banks:

With a view to promoting the rational and orderly use of foreign funds by domestic enterprises and improving the administration of foreign debt, pursuant to the PRC Foreign Exchange Control Regulations, the Tentative Provisions for Statistical Monitoring of Foreign Debt, the Tentative Measures for the Administration of Foreign Debt and other relevant laws, we hereby notify you on relevant issues as follows:

1. Delayed payments of at least 180 days and of a value of at least US$200,000 of domestic organizations will be subject to administration through foreign debt registration

If the amount of a delayed payment of unpaid foreign exchange under an import contract executed after December 1 2005 by a domestic organization is equivalent to at least US$200,000 and if the agreed upon or actual payment term is at least 180 days, the import enterprise shall carry out the procedures for the registration of delayed payment of foreign debt with the branch or sub-branch of the State Administration of Foreign Exchange of the place where it is located (the Foreign Exchange Bureau) and collect a Form for Signed Contracts Involving Foreign Debt within 15 working days of carrying out import customs declaration. Banks shall, on the strength of the Form for Signed Contracts Involving Foreign Debt and relevant import-related foreign exchange payment documents, carry out the import-related payment procedures for delayed payments that comply with the foregoing conditions. The amount of the foreign payment of such banks may not exceed the principal and interest recorded on the Form for Signed Contracts Involving Foreign Debt.

When the Foreign Exchange Bureau carries out the procedures for the registration of delayed payment of foreign debt subsequent to an application by an enterprise, it shall examine whether the delayed payment balance exceeds the delayed payment limit determined by the Foreign Exchange Bureau. Unless otherwise specified, an enterprise's delayed payment limit shall be set by the Foreign Exchange Bureau of the place where it is located at 10% of the enterprise's total import foreign exchange payment amount during the previous year. The delayed payment limits of contracts for large sets of equipment, contracts for the long-term supply of goods, etc. with special requirements in respect of import trade credits and the delayed payment limits of newly established enterprises shall be separately determined by the local Foreign Exchange Bureau by year based on the actual requirements of the enterprise and shall be reported to the State Administration of Foreign Exchange for the record.

The carrying out of the procedures for the registration of the delayed payment of foreign exchange pursuant to the Circular on Issues Relevant to Strengthening the Administration of Delayed Payments and Forward Payments of Foreign Exchange for Imports (ref. Hui Fa [2005] No.8) shall no longer be required for delayed payments for which foreign debt registration has been carried out in accordance with the foregoing.

Within 10 working days of the beginning of each month, banks shall submit to the Foreign Exchange Bureaux of the places where the enterprises are located Detailed Lists of the Payment of Interest on Delayed Payments (see Schedule One).

2. Regulation of the administration of the foreign debt of special types of foreign-invested enterprises

(1) The foreign debt of foreign-invested enterprises in which the capital contribution percentage of the foreign investor(s) is less than 25% shall be handled in accordance with the provisions on the foreign debt of domestic Chinese-invested enterprises.

Such enterprises that incurred a foreign debt and carried out the procedures for the registration thereof with the Foreign Exchange Bureau prior to the implementation of this Circular may carry out the procedures for the verification of the repayment of principal and payment of interest with the Foreign Exchange Bureau in accordance with relevant provisions on the administration of foreign debt.

(2) Foreign-invested enterprises whose total investment as approved by the competent government department and registered capital are equivalent, or whose total investment has not been specified, shall apply to their original examination and approval department for verification of their total investment and registered capital anew after which they can take on foreign debt in accordance with the "difference between total investment and registered capital" administration principle.

(3) The size of the foreign debt of foreign-invested investment holding companies shall be administered in accordance with the following principles: in the case of those with registered capital of not less than US$30 million, the total of their short-term foreign debt balance and aggregate medium and long-term foreign debt amount may not exceed four times their paid-in registered capital; in the case of those with registered capital of not less than US$100 million, the total of their short-term foreign debt balance and aggregate medium and long-term foreign debt amount may not exceed six times their paid-in registered capital.

(4) Pursuant to the Measures for the Administration of Foreign Investment in the Leasing Industry issued by the Ministry of Commerce, the total risk assets (total risk assets = total asses