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a Mortgage Rates o Rates e Mortgage oasearchh Homeloanhomefinancing m Category fsearchn Mortgage ni Home C Category a Rates t Mortgage esearchgsearcho Category r Best y Homeloanhomefinancing searchgs Category e Category a Rates rsearchcsearchhsearcher Rates tsearchr Homeloanhomefinancing asearchIn brief: The State Administration of Foreign Exchange of the People's Republic of China recently streamlined the administration of foreign exchange for overseas investment by PRC-incorporated entities. Partner Stuart Mengler and Senior Associate Frank Fan look at the key changes, their impact on offshore investment by PRC entities and the potential impact on foreign invested enterprises operating in the PRC.
It is well documented that PRC companies, and State-owned enterprises in particular, are increasingly active in offshore investment.
As part of this trend, the PRC Government recently issued a number of new regulations and rules for the purpose of simplifying the approval procedures for PRC companies investing overseas. These steps are part of an overall policy to encourage such investment.
In particular, MOC issued the Administrative Measures regarding Outbound Investment ('境外投资管理办法'), which took effect on 1 May 2009. These measures outline the streamlined process for review and approval of overseas investment applications by PRC incorporated entities.
SAFE has also been active in streamlining and loosening control over the approval process for outbound investment. The Outbound Regulations and the Lending Notice (both effective 1 August 2009) are the most recent examples of this trend from SAFE and supersede the original Measures for the Administration of Foreign Exchange in the Offshore Investment ('境外投资外汇管理办法') published by SAFE in 1989 and its implementation rules of 1990 ('境外投资外汇管理办法细则') (the Original Rules).
In accordance with the Outbound Regulations, PRC entities – after obtaining the offshore investment approvals from MOC and (if applicable) NDRC (the investment approvals) – are permitted to invest offshore using foreign exchange.
According to SAFE, the two key types of offshore investment are 'offshore equity' and 'offshore creditor' investments. Offshore creditor investment includes offshore lending. Both types of foreign investment have been subject to a decreased level of control by SAFE with the Outbound Regulations focused on equity investment and the Lending Notice focused on financing.
The Outbound Regulations comprise a significant change for FIEs and PRC financial institutions.
The Outbound Regulations:
FIEs and PRC financial institutions were not included within the scope of the Original Rules.
Under the Original Rules, the sources of offshore investment were limited to foreign exchange currency owned by PRC entities.
Over the past decade however, SAFE broadened the type of investment sources via a number of subsequent rules and notices.
The Outbound Regulations now make it clear that PRC entities are permitted to use not only self-owned funds (including foreign exchange held or purchased using RMB) and other non-cash assets, but also to borrow foreign exchange loans to conduct offshore investment.
By way of summary, the Outbound Regulations provide that the following funds may be used by PRC-incorporated entities in offshore direct investment:
Other changes include:
SAFE previously verified the source of foreign exchange itself (外汇资金来源审核). This was actually a less stringent version of the prior position whereby a foreign exchange risk assessment (外汇风险审查) was required. The foreign exchange risk assessment requirement was discontinued in 2003.
PRC entities seeking to invest offshore now only need – as part of the application documents for a foreign Exchange Registration Certificate for Outbound Investment (the FX Certificate uHomeloanhomefinancing Category Best Mortgage Rates Home Loan Home Financing Allens Homeloanhomefinancing Arthur Robinson: Publication: Focus: Making PRC outbound investment easiers q Trade Loan High zHomeloanhomefinancing Category Best Mortgage Rates Home Loan Home Financing Allens Homeloanhomefinancing Arthur Robinson: Publication: Focus: Making PRC outbound investment easiert i Home e Home Loan Home Financing Home Loan Home Financing Home