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Onshore Institutions Issuing RMB Bonds in Hong Kong

Q: When the onshore financial institutions were allowed to issue RMB bonds in Hong Kong?


A: The “Interim Measures for the Administration of the Issuance of RMB Bonds in Hong Kong by Onshore Financial Institutions” published by the NDRC in June 2007 which regulate the issuance of RMB bonds in Hong Kong by onshore financial institutions.


Q: When the onshore non-financial institutions were allowed to issue RMB bonds in Hong Kong?


A: the National Development and Reform Commission (“NDRC”) published the “Circular on the Matters relating to the Issuance of RMB Bonds in Hong Kong by Onshore Non-financial institutions” (the “NDRC Circular”) on 2 May 2012.


Prior to the publication of the NDRC Circular, approvals for onshore PRC non-financial institutions to issue RMB Bonds in Hong Kong have been granted on a discretionary basis. The significance of the NDRC Circular is that it formalizes the approval process and stipulates the regulatory framework for onshore PRC non-financial institutions to issue RMB bonds in Hong Kong.


Q: What is the scope of application


A: The NDRC Circular applies to the issuance of RMB bonds in Hong Kong by non-financial institutions incorporated in the PRC (“non-financial institutions”). The RMB bonds should have a tenor of no less than one year.


Q: Who will be most likely approved for non-financial institutions to issue RMB bonds.


A: Although the NDRC Circular technically applies to all non-financial institutions, it remains to be seen how many and which type of institutions will be granted the approval. Therefore, it is likely that state-owned enterprises will be the first batch of companies to be granted the approval, as smaller private companies may struggle to meet all of the requirements set out by the NDRC.


Q: How about the approval process and durations

A: The specific approval process varies depending on the type of non-financial institution.


An enterprise which is supervised by the Central Government can submit the application directly to the NDRC for approval.


A local enterprise is required to submit the application for examination and approval by the provincial branch of the NDRC, which will in turn submit the application to the NDRC for final approval.


The NDRC will decide whether it will grant the approval to a non-financial institution within 60 working days of accepting the application. Once the approval is granted, the non-financial institution is required to initiate the bond issuance process within 60 working days from the date of the approval. The NDRC approval will be valid for one year during which the RMB bond issuance must be completed.


Q: What is the requirements for applicaiton


A: An applicant seeking to issue RMB bonds in Hong Kong must fulfill the following criteria:


1.       it must have good corporate governance and creditability;

2.       it must have relatively strong profitability;

3.       the proceeds obtained from the RMB bond issuance must be mainly used for fixed asset investment projects which comply with the PRC’s national macroeconomic policies, industrial policies, foreign investment and outbound investment policies and fixed asset investment administrative rules;

4.       none of its outstanding corporate bonds or other debt is in default and there has been no deferral of any payment of interest or principal; and

5.       it has maintained a three-year compliance track record, with no material violation of any laws or regulations.


Q: Reporting and registration requirements


A: The issuer is required to report details of the status of the RMB bond issuance to the NDRC within 10 working days after completion of the bond issuance.


Any RMB bond issuance in Hong Kong by an issuer pursuant to the NDRC Circular will be classified as “foreign debt” and hence all related regulations, such as the usual registration requirements with the State Administration of Foreign Exchange (“SAFE”), will need to be complied with.


In the case of a RMB bond issuance in Hong Kong by an offshore branch or subsidiary of a non-financial institution and guaranteed by an onshore entity, such non-financial institution is required to report details of the issue size, tenor and use of proceeds of the proposed bond issue to the NDRC 20 working days before the issuance of the RMB bonds.


Q: Who will be affected by the new rules for the EB-2 Immigrant Visa Category?

A: The EB-2 Immigrant Visa Category (Employment-Based Second Preference Immigrant Visa Category) is reserved for members of the professions holding advanced degrees or their equivalent, and individuals who because of their exceptional ability in the sciences, arts, or business will substantially benefit prospectively the national economy, cultural or educational interests, or welfare of the United States, and whose services in the sciences, arts, professions, or business are sought by an employer in the United States. The new rules will definitely affect these applicants and specifically affect mainland-China born and Indian nationals.


Q: What’s the substantive influence on the EB-2 Immigrant Visa Category applicants by the new rules?

A: According to the new rules, the priority date cutoff for the EB-2 immigrant visa category for mainland-China born and Indian nationals will return to August 15, 2007.Which means any cases with a priority date that is current in the April 2012 Visa Bulletin can still file their final application (I-485) until May 1, and, if already pending at USCIS, can continue to be approved. However, any Indian and Chinese (mainland-China born) EB-2 cases pending on May 1, with a priority date after August 15, 2007, cannot be adjudicated until the priority date becomes current again.


Q: What the significance of the new rules?

A: There exist a quota/limited number of qualified individuals for permanent residence (the so-called "green card") in employment-based categories. The new rules is an attempt by the State Department to calibrate the flow of applications, to make sure the quota for this fiscal year is fully utilized.

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