CIRCULAR OF THE STATE COUNCIL ON STRENGTHENING THE ADMINISTRATIONOF THE OBTAINING OF INTERNATIONAL COMMERCIAL LOANS
CIRCULAR OF THE STATE COUNCIL ON STRENGTHENING THE ADMINISTRATIONOF THE OBTAINING OF INTERNATIONAL COMMERCIAL LOANS
Important Notice:
This English document is coming from the "LAWS AND REGULATIONS OF THE
PEOPLE'S REPUBLIC OF CHINA GOVERNING FOREIGN-RELATED MATTERS" (1991.7)
which is compiled by the Brueau of Legislative Affairs of the State
Council of the People's Republic of China, and is published by the China
Legal System Publishing House.
In case of discrepancy, the original version in Chinese shall prevail.
Whole Document
CIRCULAR OF THE STATE COUNCIL ON STRENGTHENING THE ADMINISTRATION
OF THE OBTAINING OF INTERNATIONAL COMMERCIAL LOANS
(January 12, 1989)
The following Circular is issued, in accordance with the requirements of
the Central Authorities concerning the improvement of the economic
environment, the straightening out of the economic order and the deepening
of the reform, for the purpose of strengthening the administration over
the obtaining of international commercial loans.
1. It is imperative to control the scale of borrowing from abroad. The
various localities and departments shall act in strict accordance with the
State plan for the use of foreign funds. No departments or units may,
without authorization, obtain from abroad any kind of international
commercial loans or borrow money from the Chinese institutions and banks
operating abroad, if such obtaining or borrowing is not included in the
State plan for the use of foreign funds and is not approved by the head
office of the People's Bank of China. Without the approval of the
department for control of foreign exchange, no loans may be deposited
abroad. If any party contracts a loan without authorization, the contract
therefor shall not go into effect, the department for control of foreign
exchange, shall not handle the registration for the foreign loan obtained,
the bank shall not open a foreign exchange account for the loan, and the
principal of the loan and the interest thereon may not be remitted abroad.
2. It is imperative to exercise administration over the balance of
short-term international commercial loans obtained and, without the
approval of the State, no quota of balance that has been verified and
approved may be exceeded. Any part that exceeds the amount of the balance
shall, within half a year as of the date of the promulgation of this
Circular, be readjusted so that the balance shall be within the quota
verified and approved, failing which the local department for control of
foreign exchange shall deduct a corresponding amount from the foreign
exchange the party concerned is entitled to retain or shall compulsorily
make use of the party's quota of medium-term and long-term international
commercial loans for the repayment of the loan. A short-term loan obtained
from abroad may only be used for the turnover of the circulating funds and
may not be used for investment projects in fixed assets.
3. The issuance abroad of bonds shall, within the framework of the State
plan for the use of foreign funds, be handled by a financial institution
that has been authorized by the People's Bank of China to issue bonds. All
bond-issuing units must, prior to the issuance, apply to the People's Bank
of China for approval in strict accordance with the Provisions Concerning
the Administration of the Issuance of Bonds Abroad by Domestic Chinese
Institutions promulgated by the People's Bank of China. Any government
departments that are to issue bonds in the international market shall
apply to the State Council of the People's Republic of China for approval.
Without the approval, no negotiations with the foreign parties concerned
shall be conducted. The People's Bank of China shall do a good job of co-
ordination for the domestic bond-issuing institutions to enter the
international market for the issuance of bonds and examine carefully their
credentials for issuing bonds abroad.
4. It is imperative to strengthen the administration of guarantee of
foreign exchange. Guarantee of foreign exchange not only concerns China's
international prestige but also involves the commitments to repay foreign
debts. It is imperative to strictly implement the Interim Measures for the
Administration of Guarantee of Foreign Exchange Provided by Domestic
Institutions promulgated by the People's Bank of China. An enterprise that
is to provide such guarantee shall have a sufficient amount of foreign
exchange of its own as a guarantee and the total amount guaranteed may not
exceed the amount of funds of its own in foreign exchange. The sum of the
total amount of the guarantee of foreign exchange provided by a non-
financial institution and its total amount of foreign liabilities may not
exceed the ceiling prescribed by the People's Bank of China. Without the
approval of the State Administration of Foreign Exchange Control, no
domestic institutions may provide guarantee of foreign exchange for
institutions abroad. No government departments or institutions may provide
guarantee of foreign exchange for parties abroad.
5. It is imperative to examine the projects of loans strictly. With
respect to a project which requires a medium- or long-term international
commercial loan, the borrower unit shall, prior to the borrowing, conduct
careful feasibility studies as to the capability to repay and the economic
returns of the project and make sure that the obligations to repay are
undertaken and that the project is subject to strict evaluation by a
financial institution. No international commercial loans may be obtained
for a project which has not been established as an item for processing and
approved by the State planning department and for which the supporting
funds in Renminbi are not yet available and the conditions such as energy
supply and communication facilities are not yet present. No international
commercial loans may be obtained for projects of construction which are
not included in the State plan. With respect to a loan obtained from
abroad by a domestic unit, the foreign exchange thus obtained may in
general not be used as mortgage for loans in Renminbi and may not enter
the market for regulating foreign exchange. Where special need arises,
the case shall be submitted to the State Administration of Foreign
Exchange Control for approval.
6. It is imperative to place a strict control on the number of windows for
external borrowing. Apart from the ten existing windows designated by the
State, i.e. the Bank of China, the Communications Bank, China
International Trust and Investment Corporation, the Investment Bank of
China, the Guangdong International Trust and Investment Corporation, the
Fujian Investment Enterprise Corporation, the Hainan International Trust
and Investment Corporation, the Investment and Trust Corporation of the
Shanghai Municipality, the International Trust and Investment Corporation
of the Tianjin Municipality and the Dalian International Trust and
Investment Corporation, no other windows for borrowing from abroad shall
be approved. Other localities, departments or units that intend to obtain
international commercial loans shall apply to the People's Bank of China
on the basis of one application for one loan or a special application for
a special loan. The People's Bank of China shall conduct conscientiously
the work of clearing up and rectification in the units that have borrowed
from abroad. The various windows for borrowing from abroad and the units
that have been permitted by the People's Bank of China to obtain
international commercial loans shall handle the borrowing procedures in
accordance with the relevant provisions of the People's Bank of China.
7. It is imperative to further improve the registration of foreign loans
and the statistical monitoring system. All foreign loans, whether procured
directly from abroad or obtained indirectly at home, shall be incorporated
into the statistical monitoring system of the State for foreign loans and
registered as such so as to ensure that the State maintains macro-
supervision and control over the scale and structure of foreign loans. The
State Administration of Foreign Exchange Control shall expedite the
formulation of procedures governing the registration and statistical
monitoring with respect to foreign loans obtained indirectly at home. Any
parties that fail to go through the procedures of registration or delay
doing so shall be penalized in strict accordance with the relevant
provisions.
8. It is imperative to arrange the structure of foreign loans rationally.
The State Administration of Foreign Exchange Control and other departments
concerned shall make a timely study of such problems involved in a loan as
the kind of currency, the interest rate, the term, the mode of borrowing,
the country of origin, and the market situation and submit proposals to
the State Council of the People's Republic of China. The People's Bank of
China shall expedite the formulation of Procedures for the Administration
of International Commercial Loans so as to strengthen the work of
examination and approval and the work of administration.
People's governments at various levels and the various departments shall
strictly implement the provisions of this Circular, earnestly place on
their agenda the work of administration in their own localities and
departments with respect to foreign loans, see to it that loans, obtained
from abroad are used properly and efficiently, and ensure that the loans
are repaid within the prescribed time so as to maintain the international
prestige of our country. Departments for control of foreign exchange at
various levels shall strengthen supervision, inspection and guidance with
respect to the obtaining of foreign loans and shall report on the
situation in good time. The State Council of the People's Republic of
China hereby authorizes the departments for control of foreign exchange to
deal severely with those that violate the State provisions concerning the
administration of foreign loans in accordance with the relevant provisions
and investigate the liability of persons directly responsible and of the
leaders concerned. This Circular shall not apply to enterprises with
foreign investment.
|
