Leveraging Offshore RMB Transaction

Regulations on cross-border loans

The incorporated foreign sponsored bank in Mainland China must acquire a “funding limit” when launching a cross-border loan from outside Mainland China.
According to PBOC announcement on Oct-2011, the aggregated amount of the RMB cross-border loan and FCC cross-border loan should not exceed the “Investment Gap”

What is "Investment Gap"

Investment Gap = total investment  -  registered capital
1) Definitions of total investment and registered capital
・Total investment: Total amount of necessary funds for company setup (construction fund + working capital)
・Registered capital: Amount of total paid-in capital

2) Relationship between total investment and registered capital
・The minimum ratio of registered capitals to total investment is fixed

Items subject to administration of "Investment Gap"

・Shareholder loan (loan from parent company and group company)
・Offshore loan (loan from overseas bank, financial institution, non-group company, individual)
・Finance lease
・Performance of borrowing guarantee (domestic foreign currency loan / RMB loan with foreign guarantee)
In addition to Investment Gap, Macro-prodential Operational Rules, which enables foreign funding up to twice the debtor's amount of net assets, has been started in some regions.

The regulations are different for RMB-Loan and FCC-Loan (concept of the balance etc.).
If there are any inquiries, please contact our office in your area.