China Releases Administrative Measures on Foreign Debt Registration

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May 21 – China’s State Administration of Foreign Exchange (SAFE) released the “Circular on Administrative Measures for Foreign Debt Registration (huifa [2013] No.19, hereinafter referred to as ‘Circular’)” on April 28, which came into effect on May 13, 2013. Five distinct features of the Circular can be found below.

Optimizing the administration process of foreign debt registration

According to the Circular, if a debtor in China takes out a loan from abroad, the relevant loan agreement shall be registered with the local foreign exchange bureau. Moreover, different methods for foreign debt registration shall be implemented for different types of debtors.

In addition to the registration of the foreign loan agreement, the Circular also stipulates the following:

  • Where the foreign loan agreement has been amended, an alteration registration shall be filed with the competent foreign exchange bureau.
  • Where there is no unpaid foreign debt and the debtor will not withdraw any funds under the loan agreement any more, the debtor shall complete foreign debt cancellation formalities with the competent foreign exchange bureau.

Improving the statistical monitoring of foreign debts

In order to obtain the most accurate and updated foreign debts statistics, the Circular provides that the SAFE and its branches shall be responsible for the administration, supervision and inspection of foreign debt registration, as well as carry out the statistical reporting and monitoring of foreign debt.

Simplifying the administration process for foreign debt registration

The Circular cancels several examination and approval items for foreign debts. Except for the foreign loan agreement registration, the opening of a foreign debt account, settlement of foreign exchange and repayment of principal and payment of interest shall be directly examined and verified by a designated foreign exchange bank.

Managing foreign exchange on overseas guarantees for domestic loans

According to the Circular, qualified debtors can accept guarantees provided by foreign entities and individuals when borrowing money from domestic financial institutions. Foreign-invested enterprises may enter into a guarantee contract directly with overseas guarantors and creditors, while domestic companies shall apply to the local foreign exchange bureau in advance for the approval of guarantee quota.

Managing foreign exchange on the transfer of non-performing assets

The Circular stipulates that the transfer of non-performing assets by domestic entities to an external party needs to be approved by the SAFE, and that the foreign investor or its agent shall complete the filing formalities with the foreign exchange bureau after obtaining approval.

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