State Administration of Foreign Exchange, Circular on Foreign Exchange Control Issues Relevant to Overseas Loans Extended by Enterprises in China
国家外汇管理局关于境内企业境外放款外汇管理有关问题的通知
July 29, 2009 | BY
clpstaff &clp articles &Safe allows companies in China to extend loans to their overseas subsidiaries.
Issued: June 9 2009
Effective: August 1 2009
Interpreting authority: State Administration of Foreign Exchange
Applicability: For the purposes of this Circular, the term “overseas loan” means the financing method whereby an enterprise in China (other than a financial institution; Lender) directly extends to a wholly-owned subsidiary or an enterprise in which it has an equity interest that it lawfully established overseas (Borrower) a loan in an amount, at an interest rate and for a term specified in a contract, and falling within its approved limit.
An overseas loan may also be extended in the form of an entrusted loan provided through a designated foreign exchange bank or through a finance company for an enterprise group with foreign exchange business qualifications that has been established with official approval (Article 1).
In the event of a discrepancy between the provisions on foreign exchange control in respect of overseas loans of the State Administration of Foreign Exchange, Issues Relevant to the Administration of Internal Operation of Foreign Exchange Funds of Multinational Corporations (Hui Fa [2004] No.104) and this Circular, this Circular shall prevail (Article 23).
Main contents: The balance of overseas loans extended by a Lender may not exceed 30% of its shareholders' equity or the Chinese party's agreed upon investment amount for which the Borrower has duly carried out the relevant registration procedures (Article 5).
The Lender and the Borrower shall satisfy the following conditions:
(1) both the Lender and the Borrower shall have been registered and established in accordance with the law and their registered capital shall be fully paid in;
(2) both the Lender and Borrower shall have a record of continuous and good business operations, a sound financial system and sound internal control systems and, during the most recent three years, neither shall have been found to have committed a violation of foreign exchange control provisions;
(3) all of the foreign direct investment projects of the Lender over the years shall have been approved by the competent domestic department for outbound investment and foreign exchange registration procedures shall have been carried out therefor with the Foreign Exchange Control Authority; furthermore, the Lender shall have a rating of second grade or better in the most recent joint annual inspection of outbound investment (unless it has been established for less than one year); and
(4) if it has already extended an overseas loan since approval, the operation of the preceding overseas loan is normal without any default having arisen (Article 7).
Related legislation: PRC Regulations for the Control of Foreign Exchange (2nd Revision), Aug 5 2008, CLP 2008 No.8 p.8; and Issues Relevant to the Administration of Internal Operation of Foreign Exchange Funds of Multinational Corporations, Oct 18 2004
clp reference:3800/09.06.09prc reference:汇发 [2009] 24号promulgated:2009-06-09effective:2009-08-01This premium content is reserved for
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