FAQ on the New Rules of Foreign Debt Registration for Foreign Invested Enterprise
1. Q: What are the new rules and when will them come into effect?
A: On April 28th 2013, the State Administration of Foreign Exchange(“SAFE”) issued a Circular also known as Hui Fa  No.19 which released the Administrative Measures on Foreign Debt Registration and The operational Directions on Foreign Debt Registrations (collectively referred as “the new rules”). To optimize the foreign debt registration, the new rules had come into effect on May 13th 2013. With the implement of the new rules, the administrative approval procedures on foreign debt registration will be simplified.
2. Q: What are the formalities for foreign invested enterprise to register its foreign debt?
A: According to the new rules, for the foreign invested enterprise which is classified into the Non-Banking Debtor, shall go to the SAFE to go through the registration formalities for each transaction within 15 days after the foreign debt contract is executed. In the case that the foreign invested enterprise draw funds or repays principal and pay interest which constitutes a non-transfer fund business, it shall go to the local SAFE to go through filing formalities for the transactions within 5 days after the transfer.
3. Q: Is the formalities of opening a Foreign Debt Account still need to be approve by the SAFE?
A: No, according to the new rules no approvals shall be required for opening and closing a foreign debt account. The bank designated by the SAFE can directly handle the business related to FX sale and purchase of foreign debt funds and repayment of principal and payment of interest upon the request of the foreign invested enterprise after necessary review procedures by the Bank.
4. Q: Does the foreign debt can be used after FX sale and purchase for foreign invested enterprise?
A: Yes, it does. According to the new rules, the foreign debt which is borrowed by a foreign invested enterprise can be used directly after FX sale and purchase. However the purpose of foreign debt stipulated in the loan contract should be comply with the administrative provisions on foreign exchange and when the debtor purchase foreign exchange with RMB to repay the foreign debt, the principle of actual need should be follow.
5. Q: What are the new rules for a foreign invested enterprise to conclude contract for onshore loan with foreign security?
A: The foreign invested enterprise may directly enter into a security contract with the oblige and offshore security provider to borrow money and accept offshore security, however the amount shall be subject to the “borrowing gap” and foreign debt quota, and the contracts also need to be registered.