Leveraging Offshore RMB Transaction

Regulations related to Foreign Debts

A Foreign Debt Quota is a loan facility for enterprises to borrow funds from outside of the Greater China Region (including Hong Kong, Macau and Taiwan).
There are two types of Foreign Debt Quotas for foreign invested enterprises (FIE): 1) Investment Gap Model, and 2) Macro-prudential Management Model.
At present, FIEs may adopt either of them. There are some exceptions for Foreign Debt Quota for FIEs in certain sectors including leasing, holding company and real estate.

Items subject to foreign debts registration*

・Inter-company loans (loans from parent companies or affiliated companies outside of the region)
・Offshore loans (loans from banks, financial institutions, non-affiliated companies, or individuals outside of the region)
・Finance leases
・Fulfilled offshore guarantee amounts (foreign currency/RMB denominated onshore loans with offshore collateral)

Investment Gap Model

Gap = Total investment amount - Registered capital
1) Definition of the total investment amount and registered capital
・Total investment amount is the sum of funds required to establish a corporation (basic funds for construction + working capital)
・Registered capital is the paid-in capital, as China does not have an authorized capital system.

2) Relationship between the total investment amount and registered capital
・There is a minimum required ratio of registered capital to total investment amount.

Macro-prudential Management Model

The quota is set based on the net asset of the borrower (currently 2 times of the net asset).
Please note that the loan balance is not equal to the foreign debts balance, as each loan is assigned a risk factor determined based on the term and currency of the loan.

※Please contact your local branch for details.
※ As of October 2017