FAQ-New Regulations Regarding Cross Border RMB Loans in Shen Zheng
1. Q: What are the new regulations generally about?
A: People Bank of China (“PBOC”) Shenzhen City Sub-branch promulgated the Temporary Measures regarding Cross Border RMB Loans in Qianhai on 27 December 2012, and on 7 January 2013, the implementing rules relating to the Measures were issued by PBOC Shenzhen, which came into force on the same day. The new regulations set forth the legal framework and requirements applicable to cross border RMB Loans from banks conducting RMB business in Hong Kong to enterprises in Qianhai, Shenzhen, according to the new regulations the qualified HK Banks may now lend Cross Border RMB Loans to relevant enterprises in Qianhai District1, Shenzhen City.
2. Q: What are the key changes introduces by the new regulations?
A: According to the old regime, only enterprise which has sufficient borrowing gap available and has completed the foreign debt registration of such offshore RMB loans with SAFE may borrow RMB loans from an offshore entity. While according to the new rules, the principal amount of a Cross Border RMB Loan to a Qianhai borrower is not counted towards the borrower’s borrowing gap and is not subject to foreign debt registration. The borrower is just required to complete filing of the loan with PBOC Shenzhen (and obtain a Filing Table of Qianhai Cross Border RMB Loans issued by PBOC Shenzhen before the borrower makes a credit application with the lender.
3. Q: Are there any requirements to the borrower and the lender?
A: Yes, according to the new regulations the borrower must be an enterprise established in Qianhai and engaged in actual business in Qianhai or making actual investments in Qianhai, while the lender must be a commercial bank which conducts RMB business in Hong Kong. So, the newly established enterprise which has not yet commenced business or has not made any investment in Qianhai can not enjoy this new policy.
4. Q: What are the requirements for the usage of the loan?
A: According to the new rules, the loan is prohibited form the following purpose:
a) making investments in securities or derivative products, which means purchase of shares or other securities listed on the Shenzhen or Shanghai stock exchanges is prohibited.
b) onward lending by the borrower in the form of an entrustment loan;
c) purchase of financial products;
d) purchase of real estate which is not for the borrower’s own occupation/ use