Month: Agosto 2009
Foreign Exchange Administrative Measures Governing Overseas Direct Investment by Domestic Institutions
In order to encourage and regulate the overseas investment by domestic institutions, the State Administration of Foreign Exchange (SAFE) has issued the provisions, which will be effective on August 1st, 2009.
The main points of the provisions are as follows?
- The provisions expand the sources of foreign exchange by means of adding foreign exchange obtained in PRC, currency loans, payments in kind, intangible assets and others approved by SAFE for overseas investment.
- Institutions can keep the profits obtained from investments abroad for further direct investment or remit them back to China. For the latter way, institutions have an option to keep them in currency accounts or convert into RMB.
- Domestic transfer of shares in overseas investments should be operated in RMB.
Provisions will allow foreign exchange management for foreign direct investment in a more standardized and systematic manner, in favor of domestic institutions grasping the opportunity to improve the efficiency of foreign direct investment. At the same time, these new regulations are also conducive to improve the statistical monitoring and promoting China's basic balance of international payments.
CBRC New Rules on Fixed Assets Loan & Project Finance
1) Guidelines for Project Finance Business, [2009] No.71
2) Provisional Measures on the Administration of Fixed Assets Loans, CBRC Order [2009] No.2
In order to regulate the fixed assets loans and project finance business of the commercial banks, China Banking Regulatory Commission (“CBRC”) released the Guidelines for Project Finance Business on July 18, 2009, and the Provisional Measures on the Administration of Fixed Assets Loans on July 23, 2009. Both of the regulations apply to all banking institutions and will come into force three months after the date of its promulgation.
As a conclusion, the Provisional Measures and the Guidelines reflect the efforts by the regulator to enhance supervision of large amount loans. Banks thus need to make more detailed risk control internal policies in terms of loan documentation and disbursement procedures. At the same time, banks also need to consider how to implement some of the requirements in the Provisional Measures and the Guidelines, such as ensuring the truthfulness and completeness of due diligence reports and how to accommodate the “pay on trust of the borrower” rule with the various funding demands of borrowers.