China Finance Bulletin - August 2013: New PBOC Regulation Suggests Possible Liberalization of Outbound Security Provided by PRC Companies


On 5 July 2013, the People’s Bank of China (“PBOC”) issued the “Circular on Simplifying the Cross-Border RMB Business Procedures and Improving Relevant Policies”, the “Circular”). The Circular simplifies the regulatory procedures and provides greater flexibility for almost all types of cross-border RMB business, including current account cross-border RMB settlement, cross-border RMB loans and the issuance of offshore RMB bonds by domestic non-financial institutions. The Circular cites: (i) increased efficiency of RMB business, and (ii) acceleration of the internationalization of RMB, as its objectives.

This note focuses on clause 5 of the Circular (“Clause 5”), which from its literal reading could potentially have a significant impact on the offshore PRC financing market. Clause 5 provides that “a domestic non-financial institution may grant a guarantee or security denominated in RMB in favour of a foreign entity (in this note referred to as “Outbound RMB Security”) provided that it complies with the Property Law, the Security Law and all applicable PRC laws”. It is important to note that Clause 5 does not refer to the regulations and implementation rules issued by the State Administration of Foreign Exchange (“SAFE”) in respect of the guarantees or security provided by domestic non financial institutions in favor of foreign entities (in this note referred to as “Outbound Security”).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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