Contributed By Fangda Partners
The PRC economy has now entered into a deleveraging period, alongside a gradual decline in the proportion of social leverage, leading to a slowdown in the overall growth rate of China's social financing, and various financial institutions, shadow banks, government departments and enterprises beginning to be affected. More specifically, banking financial institutions and shadow banks have begun to reduce the amount of facilities granted to corporate borrowers, bond issuance is facing various difficulties, bond subscribers are more inclined to accept high-rated bonds, and corporate defaults and bankruptcies have increased.
As a result of this, there has been a rise in non-performing loans in commercial banks, and a number of banks, including state-owned establishments, are transferring non-performing loans to asset management companies. There has been increased interest among foreign investors in the non-performing loans market. In addition, as the reliability of collateral is tested in the new economic cycle, banks have stricter control over risks and collateral requirements.
There have been some significant developments in the foreign debt regulation system, which are mainly designed to enlarge the borrowing capacity of PRC borrowers to incur foreign debts. Following a couple of pilot programmes launched in China's Free Trade Zones, the People’s Bank of China (the “PBOC”) expanded the new regulatory regime to nationwide in January 2017, by issuing the PBOC Circular on Matters relating to the Full-bore Macroprudential Administration of Cross-Border Financings (中国人民银行关于全口径跨境融资宏观审慎管理有关事宜的通知 – “Circular No. 9”). Circular No. 9 provides a new formula for calculation of the foreign debt quota and balance for both foreign invested enterprises (“FIE”) and domestic-funded enterprises (“DFE”). Under the new regime, FIEs can choose to borrow from overseas based on risk-weighted assets rather than debt-equity ratios (the formula under the old regime), and DFEs can borrow more freely from overseas, where previously they had been allowed to incur foreign debts only on a case-by-case-approval basis.
In early 2018, PBOC, the China Banking and Insurance Regulatory Commission (“CBIRC”), the China Securities Regulatory Commission and the State Administration of Foreign Exchange (“SAFE”) promulgated the Guiding Opinions on Regulating Asset Management Business of Financial Institutions (关于规范金融机构资产管理业务的指导意见 – the “2018 Guiding Opinions”), which aim to supervise the operation of the current shadow banking regime (including but not limited to bank wealth management, equity in the nature of debt, and trust plans). The 2018 Guiding Opinions have profoundly affected the rules and operations of China's financing market and capital market, with their final impact yet to be seen.
There is currently no mature high-yield market in the PRC.
The lending business is highly regulated in China. Only banks, trust companies and microcredit companies can be approved to conduct lending business, although occasional lending transactions may be permitted from a lender without a permit for lending business, so long as the lender does not perform such occasional lending transactions as its business.
There has been a boost in the peer-to-peer lending industry in China during the past few years, but this industry has been subject to increasingly stringent regulations. It has been reinstated by the regulatory bodies that all lending businesses must have a licence in order to operate, and peer-to-peer lending platforms are only “information intermediaries” and shall not engage in any financing activities themselves. Approval for incorporating new internet micro-lender companies has also been suspended.
Shadow banks have experienced rapid growth in the unregulated environment of the past few years. With the introduction of the 2018 Guiding Opinions, it is foreseeable that the shadow banks will operate at a more compliant level in order to control financial risks, which have become more and more prominent.
The development of financial technology has brought some changes to the financial market. Traditional banks and other financial institutions have begun to embrace new technologies in order to provide their customers with better services. For example, HSBC used blockchain techniques to complete a trade finance transaction, which helps to enhance deal efficiency and reduce fraud risks. Bank of China's new digital banking was built with the assistance of new financial technologies. Additionally, the development of financial technologies has brought a new financial form (ie, Internet finance) that provides customers with a fast and convenient financial service that is different from the service provided by traditional banks. Ant Financial and WeChat are typical representatives of Internet finance.
Please see above.
Only banks, trust companies and microcredit companies can run a lending business as their main business, although occasional lending transactions from a lender without a permit for lending business are allowed, so long as the lender does not perform such occasional lending transactions as its business. In addition, entities established outside of the PRC can provide loans (ie, foreign debt) to PRC companies, but the foreign debt quota of the borrower is subject to Circular No.9 and other relevant PRC laws.
The following requirements, among others, must be met when establishing a bank:
The following requirements, among others, must be met in establishing a trust company:
Before banks and trust companies can provide loans to borrowers, they need to complete due diligence procedures in accordance with the relevant PRC laws and regulations, complete internal credit approval procedures, and sign a facility agreement with borrowers in compliance with PRC laws and regulations; the relevant condition requirements specified in the facility agreement shall be satisfied by borrowers in advance.
Before offshore lenders can provide loans to onshore borrowers, they need to sign the facility agreement with the borrower, and the borrower needs to complete the foreign debt registration with SAFE.
The amount of loans that can be provided by a foreign lender to an onshore borrower is subject to the foreign debt quota of the onshore borrower.
If a security or guarantee constitutes a Nei Bao Wai Dai Transaction (ie, the provider of the security or guarantee is incorporated in the PRC or is a PRC resident, while both the debtor and the creditor – ie, the beneficiary of the security/guarantee – are incorporated outside the PRC or are foreign residents), it shall be filed with SAFE by the onshore security provider or guarantor within 15 working days after the relevant security or guarantee document is signed.
In addition, the SAFE rules impose certain restrictions on the purpose, repayment, etc, of the underlying facility.
A security or guarantee in favour of foreign lenders that does not constitute a Nei Bao Wai Dai Transaction does not need to be registered with SAFE, but shall comply with PRC laws in general.
Foreign currency exchange and payments under the capital account (资本项目) are still subject to approval, registration or filing (depending on the various purpose and types of the foreign currency exchange and payments).
Foreign exchange and payments under the current account (经常项目) are free. Parties to a trading can exchange and pay foreign exchange if the trading is genuine.
For individuals, the rules on foreign currency exchange are not the same.
According to PRC laws and regulations and relevant regulatory requirements, the use of proceeds from loans should comply with the requirements of the relevant laws and regulations and the provisions of the facility agreement. The borrower must not use the loan beyond the relevant purpose provisions and, in particular, the loan should not be used for areas or purposes where production or operation has been expressly prohibited by the laws or regulations.
In general, loans in the PRC market (excluding interbank markets and personal loans) can be classified into working capital loans, fixed asset loans and M&A loans, according to their purposes:
In a PRC law-governed syndicated loan, syndicate banks will normally authorise a bank to deal with the perfection of security and other administrative matters as an agent bank. The agent bank does not conduct business on its own account but will be appointed by other syndicate banks on a case-by-case basis consistent with an agency entrustment relationship, which is distinct from a trust business. The security trust concept is not often used and it is uncertain how the judicial practice would recognise such concept.
According to the Notice of the China Banking Regulatory Commission on Matters Regarding Standardising the Transfer of Credit Assets and the Financial Services Related to Credit Assets (中国银监会关于规范信贷资产转让及信贷资产类理财业务有关事项的通知), the Notice of the China Banking Regulatory Commission on Further Regulating the Credit Asset Transfer Business of Banking Financial Institutions (中国银行业监督管理委员会关于进一步规范银行业金融机构信贷资产转让业务的通知) and other relevant PRC laws and regulation, the following requirements must be satisfied before a lender can transfer its credit assets:
If a banking financial institution wants to transfer its credit assets to another party, the transferee must also be a banking financial institution, and when the transferee and transferor enter into a credit asset transfer agreement, such transfer agreement shall specify the rights and obligations of both parties. The transferor shall provide the transferee with the legal papers and other materials related to the asset transfer, while the transferee shall perform the routine post-loan management duties for the credit assets.
After the competition of the transfer, the transferor shall notify the borrower in accordance with the relevant PRC law.
If there is any collateral for the credit asset to be transferred, the modification registration of the collateral shall be conducted, or the pledged property shall be delivered for possession by the transferee or delivered to the transferee to ensure the valid transfer of the security interest.
There is no buy-back in the PRC loan market. Usually, only the borrower or sponsor can prepay the facilities.
“Certain funds” is still a commercial issue and requirement in the PRC loan market. Lenders are required to issue a commitment letter (in Chinese 贷款承诺函) to meet the requirement of “certain funds” in acquisition finance. The terms and length of such commitment letter may vary for different transactions or parties.
No withholding tax is required if the lender is an onshore financial institution or an onshore branch of an offshore financial institution. If the lenders are located outside of the PRC, the payment of interest or other fees (other than the principal) to lenders is subject to withholding tax.
Apart from the VAT in respect of the amount (other than the principal amount of the loan) paid by the borrower to the lender, no other taxes, duties, charges or tax considerations shall be paid by the lender for a separate financing transaction.
It is generally understood that there is no rule limiting the amount of interest that can be charged by a bank, but some PRC courts hold the opinion that the interest limitation stipulated in the Provisions of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Private Lending Cases (最高人民法院关于审理民间借贷案件适用法律若干问题的规定) shall also be applicable to financial institutions, as follows:
The followings are typical types of collateral and the forms of security taken over them:
Generally, security cannot be created over land that is state or collectively owned, nor over real estate that is (i) used for education, medical care or civil planning, (ii) protected as culture relics or for its important memorial significance, (iii) legally confiscated, seized or controlled, or (iv) disputable in its title.
In general, the courts in China do not recognise any security created over future collaterals, except for buildings, ships and aircrafts under construction and account receivables, nor any security created over a floating pool of assets, except for future production equipment, raw materials and semi-finished products.
The perfection requirements of the security are as follows:
Costs and timing
The costs and timing in taking security are decided on a case-by-case basis, depending on the type of security, the place where the security is created, and the perfection requirement applicable to the security.
The costs are usually nominal compared with the amount secured by the security, and are either subject to a capped amount or proportionate to certain factors, such as the amount of secured liabilities or the value of the collateral.
Generally speaking, there is no mandatory timeline for the completion of perfection by the governmental authorities. If all the application documents are in good shape, the perfection of security could generally be completed within one month. Certain security can be perfected quite quickly – ie, a pledge over account receivables can be registered with the online registration system of the PBOC on the date of submission of the application. Certain securities may take a couple of months to be perfected – ie, a pledge granted by a foreign shareholder over its equity interests in its PRC subsidiaries.
Under PRC law, there is no concept of “Debenture” or the equivalent that permits universal security interests over all present and future assets of a company.
PRC law allows for the provision of downstream, upstream and cross-stream guarantees that comply with the articles of association of the guarantors. In particular, if the amount of the guaranteed obligations is limited by the articles of association, such limitation shall not be exceeded.
In terms of upstream guarantees, shareholder approval is required for the guarantor to provide the same, and the direct shareholder(s) concerned shall be excluded from the vote.
There is no clear definition of financial assistance under PRC law, and the concept of financial assistance applies if the target being acquired is a listed company or a state-owned enterprise. There is no particular prohibition on private companies providing financial assistance.
A foreign lender is not prohibited by PRC law to hold security over real estate; however, as a practical matter, the relevant real estate registrars in quite a few localities may refuse to register a real estate mortgage in favour of a foreign entity (regardless of whether it is a bank, a non-bank financial institution, or another types of entity), which leads to the mortgage not being effective.
Regarding security that requires registration in order to be perfected (ie, real estate mortgage, equity pledge), the release of the same would involve a release agreement or a confirmation on the release by the beneficiary, and de-registration of the security interests from the relevant registrar.
Regarding security that requires delivery of the collateral in order to be perfected (ie, commercial instruments), the release of the same would involve a release agreement or a confirmation on the release by the beneficiary, and return of the collateral to the security provider/owner of the collateral.
The release of any other type of security would simply need a release agreement or a confirmation on the release by the beneficiary.
Under PRC law, the priority among competing security interests over the same collateral is determined according to the following rules:
Contractual subordination is a common method of subordination under PRC law. However, the priority rules mentioned above cannot be varied contractually. Another method of subordination is structural subordination, with a typical example being the senior/mezzanine arrangement in acquisition financing.
As the insolvency procedure has its own statutory rules in terms of the distribution of realisation proceeds of the insolvency assets, a contractual subordination provision cannot usually survive the insolvency of a borrower incorporated in the PRC. However, as a practical matter, it is still possible for the insolvency administrator to be co-operative if the subordinated creditor expressly consents to the subordination arrangement and agrees to take all the responsibility arising from it.
PRC law provides that a security interest or guarantee would become enforceable when an obligor fails to perform the secured or guaranteed obligation, or upon the occurrence of other triggering events as agreed between the parties. In line with this principle, security documents or guarantees in a financing transaction would usually be drafted in a way that the security or the guarantee will become enforceable upon the occurrence and continuation of events of default specified in finance documents (subject to agreed grace period, if any).
Enforcement of security
If the lender intends to enforce its security interests, it may firstly negotiate with the security provider with a view to agreeing on the realisation of security by a conversion into value/title transfer, auction or sale (the “out-of-court approaches”). If an agreement cannot be reached or if the consent or authorisation from the security provider cannot be obtained, the lender may file a lawsuit before the PRC court or submit the dispute to an arbitration tribunal, as provided in the relevant security documents, to enforce its security interest (the “court approaches”).
For the purpose of security enforcement, a creditor may file a lawsuit before the PRC courts to obtain a court judgment/order to have security interests recognised and enforced, without prior negotiation with the security provider. In general, as the PRC judicial system adopts a two-instance approach for court trial proceedings (ie, a first instance hearing and an appeal), the lender may obtain a final judgment or order in respect of its claim regarding security enforcement after the two-instance trial.
In addition to the traditional approach of “suing and enforcement”, PRC law also provides for a special procedure for security enforcement, which is a single-instance process that aims to achieve a prompt realisation of security. It is available only when parties are not able to reach consensus regarding the “approach” of security enforcement but do not dispute the existence and amount of the secured obligations, the validity and enforceability of security, etc. Consequently, the courts are not supposed to review the merits of the case before granting order to enforce security.
If the creditor obtains a court judgment/order in its favour (either through the general trial proceeding or the special procedure) but the security provider does not perform its liabilities accordingly, the creditor may apply for a court-assisted enforcement procedure to force the sale or auction of the collateral. The proceeds of such sale and auction will be ordered to repay the secured obligations.
In certain cases, secured creditors may find that the collateral has been attached by other creditors. When a first ranking attachment exists, no title transfer of – or creation of encumbrance over – the collateral will be allowed. If the first ranking attachment court announces an auction or initiates the private sale against the attached collateral within 60 days of the date of the first ranking attachment and the collateral is successfully disposed, the secured creditor would be subject to such disposal, though any proceeds realised from the auction or private sale would be applied first to discharge the secured debt and then to the beneficiary of the first ranking attachment. If no auction or private sale is initiated within 60 days of the attachment, any enforcement court with a prior ranking claim may request to take over the attached collateral to facilitate enforcement.
Enforcement of guarantee
The above enforcement approach is also applicable to the enforcement of guarantees in general.
As enshrined in the nature of guarantees, a lender is an unsecured creditor against the guarantor by holding guarantee, and accordingly would be subordinated to any other creditors who have taken security interests over assets of the guarantor. When the guarantee is enforced, the lender may only be repaid from the amounts that are left after the satisfaction of secured creditors from proceeds obtained from the disposal of the relevant assets subject to security interests in favour of a third party creditor.
During the enforcement proceedings, if the PRC court finds that the guarantor does not have any assets against which any judgment can be enforced, it will suspend the enforcement proceedings. If the enforcement process is suspended, the claimant is entitled to apply to the PRC court for re-initiation of the enforcement proceeding by providing evidence relating to the assets of the guarantor against which the guarantee can be enforced.
Under PRC law, parties to foreign-related transactions are generally free to select the governing law and dispute resolution forum for the relevant contracts, provided that such choice is consistent with PRC law.
A transaction is foreign-related if any one or more of the following elements is present:
Choice of law
Parties to a foreign-related contract are free to choose PRC law or any foreign law to govern the contract, except for the following contracts (the “Mandatory PRC Law Contracts”), which must be governed by PRC law:
Submission to foreign jurisdiction
Parties to a foreign-related transaction are generally free to agree to submit their disputes to a PRC or foreign court, provided their choice is consistent with PRC law.
Under PRC law, parties may choose a court at any of the following locations. If one of the places below is located outside of China, the parties may select a foreign court to resolve their disputes:
Mandatory PRC Law Contracts are subject to the exclusive jurisdiction of PRC courts if parties choose to submit related disputes to court.
Parties to a foreign-related contract may apply to a PRC arbitration institution or another arbitration institution for arbitration, provided that they have a valid arbitration agreement.
Waiver of immunity
China adopts the “absolute immunity” principle, which provides complete immunity to the sovereign state. A PRC governmental authority’s waiver of sovereign immunity will not be upheld. State-owned enterprises are considered separate legal entities from governmental authorities, and therefore sovereign immunity does not apply to them.
PRC law provides for the enforcement of foreign judgments in accordance with the international treaties concluded or acceded to by China, or with the principle of reciprocity, provided that they do not violate basic principles of PRC law, state sovereignty and security, or public interest. The application of such statutory provisions is not very common, but foreign judgements are increasingly recognised and enforced in China, especially after the launch of the “Belt and Road Initiative”.
China is a member of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958 – the “New York Convention”). PRC courts’ recognition and enforcement of foreign arbitral awards in accordance with the New York Convention is not rare.
In the context of a cross-border transaction, it is important for foreign lenders to consider and plan the approach of channelling the enforcement proceeds of the loan and the security offshore.
A loan from a foreign lender to an onshore borrower constitutes “foreign debt” under PRC law. The relevant loan agreement for such foreign debt is required to be registered with SAFE after signing. Failure to complete such registration would affect the enforceability of the loan agreement.
A security/guarantee provided by an onshore security provider/guarantor in favour of a foreign lender to secure a debt incurred by a foreign borrower constitutes “Nei Bao Wai Dai” under PRC law. The onshore security provider/guarantor is required to register such Nei Bao Wai Dai with SAFE after the signing of the relevant security/guarantee agreement. Failure to do so may lead to the proceeds of enforcement of Nei Bao Wai Dai not being remitted offshore.
Outside of insolvency proceedings, the company or a creditor of the company may apply to the court for restructuring, without initiating an insolvency proceeding.
During the restructuring period, upon application by the company and after approval by the court, the company can manage and operate its assets and business operations by itself under the supervision of the administrator. The enforcement of any security against the company’s assets shall be suspended, provided that a secured creditor may apply to the court to resume the enforcement if the collateral is likely to suffer damage or substantial depreciation in value that will impair the interest of the secured creditors.
The court will take actions to notify (or, in practice, authorise the administrator it appoints to notify) the creditors, make public announcements and verify the schedule of creditors’ claims at creditors’ meeting, etc. Additionally, the company or the administrator, as the case may be, shall submit a draft restructuring plan to both the court and the creditors’ meeting, within six months of the date of the court ruling on restructuring (which may be extended for another three months with the approval of the court).
Within 30 days of receiving the draft restructuring plan, the court shall convene a creditors’ meeting to vote on the plan. Creditors of the company shall be divided into different voting groups by the nature, and sometimes the amount, of their claims (ie, secured debts, employees’ claims, unpaid taxes, unsecured debts and, if applicable, small amount claims). If, within a voting group, one-half or more of the creditors that attend the creditors’ meeting approve the draft restructuring plan, and such creditors represent two thirds or more of the total value of all creditors’ claims within the group, the draft restructuring plan shall be deemed to be adopted by the group. The draft restructuring plan is adopted if it is adopted by all of the voting groups. If a voting group does not approve the draft restructuring plan, the company or the administrator may meet with such voting group and such voting group may vote again, provided that the results of any negotiation among such parties do not harm the interest of any other voting groups.
Within ten days of the adoption of the restructuring plan, the company or the administrator shall apply to the court for approval of the plan. Within 30 days of the date when the application is received, the court shall approve the plan, terminate the restructuring process and make a public announcement if the court, after examination, believes that the application complies with the law. Where any of the voting groups did not approve the restructuring plan at the first voting and failed again to approve it at the second voting, the company or the administrator may apply to the court for approval of the un-adopted plan, if the draft restructuring plan meets the requirements specified by law. If the court, after examination, concludes that the draft restructuring plan satisfies the requirements of law, it shall, within 30 days of receiving the application, rule to approve the application, terminate the restructuring proceeding and make a public announcement. Otherwise, the court shall terminate the restructuring process and declare the insolvency of the company.
The company shall be responsible for implementing the restructuring plan, and the administrator shall supervise the implementation. If the company is unable or refuses to implement the plan as approved, the court shall, at the request of the administrator or other interested persons (ie, a creditor of the company), rule to terminate the implementation of the restructuring plan and declare the insolvency of the company.
After the court accepts the application for insolvency, the insolvency procedure will commence, and all existing assets of the company (including any secured assets) would form part of the insolvency assets. Consequently, any assets preservation measures attaching the assets of the company shall be released, and court enforcement proceedings shall be suspended. Any civil litigation or arbitration involving the company which has been initiated but not yet completed shall be suspended; such litigation or arbitration may resume when the administrator has taken over the company’s assets.
The administrator shall prepare a plan to realise the insolvency assets and submit it to the creditors’ meeting for discussion and approval. If the creditors’ meeting fails to adopt a resolution to approve such plan, the court shall make a ruling to decide. The administrator shall follow the asset realisation plan as adopted at the creditors’ meeting or ruled by the court, and timely sell or otherwise realise the insolvency assets.
The administrator shall also prepare a plan to distribute the realised assets and submit it to the creditors’ meeting for review and approval. After the distribution plan is adopted at the creditors’ meeting, the administrator shall submit it to the court for confirmation. The administrator shall implement the distribution plan as confirmed by the court. If the creditors’ meeting fails to adopt a resolution to approve such plan after two rounds of voting, the court shall make a ruling to decide.
Secured creditors enjoy priority rights to the proceeds realised from secured assets. If a secured creditor has not been fully repaid after exercising the priority rights, the un-repaid portion shall become unsecured debt. It is worth noting that, if a secured creditor does not waive its priority rights, it will not be entitled to vote at the creditors’ meeting on the distribution plan or any reconciliation agreement, though it will have the right to vote on these two issues to the extent of the debt that is not fully repaid by the proceeds realised from the secured asset.
In a company’s insolvency, the proceeds realised from the company’s assets will be distributed in the following order:
Insolvency expenses consist of the following, incurred after the court’s acceptance of the insolvency application:
Debts for common benefit consist of the following, incurred after the court’s acceptance of the insolvency application:
Under PRC law, there is no concept that allows bankruptcy courts to lower the priority of a claim if the creditor holding it is guilty of inequitable or wrongful conduct (ie, fraud, illegality, breach of fiduciary duties), and delay the claim’s payment until other creditors are paid. If a bankruptcy court determines that the creditor is indeed guilty of inequitable or wrongful conduct, it will invalidate the claim, as opposed to subordinating it.
If a company goes into insolvency, any of its transactions that conceal or remove assets for the purpose of avoiding debts, fabricating debts or acknowledging untrue debts will be declared void, regardless of when they occurred. In addition, the insolvency administrator may petition the court to set aside selective payment by the company to some but not all of its creditors, if such payment is made within six months prior to the court’s acceptance of the insolvency application and the company meets insolvency tests at the time of the payment, unless a selective payment benefits the company’s assets as a whole. Moreover, the administrator may petition the court to set aside certain transactions that occurred within one year prior to the court’s acceptance of the insolvency application, namely the gratuitous transfer of assets, any transactions at an obviously unreasonable price, the creation of security for an unsecured debt, advance payment of a debt that is not yet due, and waiver of the company’s rights as a creditor.
Project financing was introduced to the PRC in the mid-1980s and has developed rapidly since the 1900s, with various project financing models (eg, BOT, banking project loans) being widely used and promoted.
After more than 30 years of development, the model of project financing transactions with Chinese banks involved has changed a lot. Project financing in the PRC has the following characteristics:
There is also a tendency for Chinese banks to become active in project financing transactions outside of the PRC.
According to PRC law, "PPP" refers to the benefits sharing, risk sharing and long-term co-operative relationship established by the government with social capital through franchising, purchasing services and equity co-operation.
In the PRC, the operation mode of PPP projects mainly includes entrusted operation, management contract, construction-operation-transfer, construction-ownership-operation, transfer-operation-transfer and alteration-operation-transfer. The application of the PPP model is wide and the project scope includes the following:
The main legal instruments in respect of PPP under PRC law include:
Under the above legal instruments, the following items shall not adopt the PPP model:
The following requirements need to be met before the lender can provide project financing to a borrower:
PPP projects need to enter the PPP project library, but banking project financing transaction documents do not need to be filed or registered with government agencies.
The responsible government bodies include the following:
The primary laws and regulations are as follows:
The following issues need to be considered when structuring a project financing, among others:
Foreign investors investing in projects in the PRC are subject to relevant PRC laws and regulations on foreign investment, including but not limited to the Special Management Measures (Negative List) for the Access of Foreign Investment (2018) (外商投资准入特别管理措施(负面清单)(2018年版)).
For a project financing provided by a Chinese bank, the basic structure is as follows:
For the issuance of corporate bonds in China, the basic transaction process is as follows:
For foreign investors, the acquisition of natural resources in the PRC will usually be approved by the relevant authority in advance, subject to the relevant regulations. For example, according to the Special Management Measures (Negative List) for the Access of Foreign Investment (2018) (外商投资准入特别管理措施(负面清单)(2018年版)), foreign investors can only explore oil and gas by setting up joint ventures or co-operative companies with Chinese companies, and are not allowed to conduct exploration, mining and mineral processing of rare earth minerals.
For the export of natural resources, according to the Regulation of the People's Republic of China on the Administration of the Import and Export of Goods (中华人民共和国货物进出口管理条例), if a natural resource is included in the list of prohibited exports or restricted exports, its exports will be subject to customs restrictions. In addition, according to the PRC customs regulations, the export of any goods requires formalities such as customs declarations, inspections and tax filings.
There are plenty of environmental, health and safety (EHS) laws, including the following:
According to the Plan of Deepening Party and State Institution Reform issued on March 21, 2018, the primary regulatory bodies that oversee environmental, health and safety issues at the state level are as follows:
In addition to the laws at state level, each province or self-governed unit has specific regulatory authorities for different environmental, health and safety issues, which need to be identified when the content of the project is provided.
There is no Islamic finance in the PRC.