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In order to normalize the activity of issuing bond abroad by domestic institutions, to improve the efficiency of the utilization of funds raised through bond issuance, and to provide cover for risks associated with China's foreign debt, comments on further strengthening the supervision over bond issued abroad are brought forward in accordance with the guidance set up by the State Council: I. DEFINITION OF BOND ISSUED ABROAD Bond issued abroad refers to securities issued by domestic institutions, including state organs, financial institutions, domestic enterprises and facilities and foreign-funded enterprises, in overseas financial markets, denominated in foreign currencies, and constituting financial claims and debts. Convertible bonds, negotiable certificates of deposit and commercial paper issued by domestic institutions abroad are deemed as bond issued abroad. Convertible bonds refer to securities that are issued in line with requirements of creditors and can be converted to stocks or other debentures in accordance with terms fixed on upon issuance. Negotiable certificates of deposit refer to certificates of bank deposits that are issued by banks with certain maturities and can be transferred or circulated in financial markets. Commercial paper refers to certificates of debt that are issued by domestic institutions to complement working capital with maturities from 2 days to 270 days and can be transferred or circulated. II. EXAMINATION AND APPROVAL OF BOND ISSUED ABROAD (1). Determination of qualification for issuing bond abroad Examination and approval of qualification are employed for issuing bond abroad. Qualifications of domestic institutions, excluding Ministry of Finance (MOF), for issuing bond abroad are examined by SDPC, together with PBC and other organs in charge, by referring to international practices, and are approved by the State Council. The qualifications are reevaluated every two years. Detailed rules will be formulated separately. (2). Examination and approval of bond issued abroad 1. Application for issuing bond abroad by domestic institutions, excluding MOF, shall be examined by SDPC, cosigned by State Administration of Foreign Exchange (SAFE), and then submitted to the State Council for approval. Upon the approval of the State Council, SAFE will supervise the choice and timing of entrance into markets and other issues. Local governments are not allowed to borrow from abroad. 2. Issuance of commercial paper by domestic institutions shall be examined and approved by SAFE and takes up the short-term foreign debt quota of the issuing institutions, as appraised and decided by SAFE. Before the issuance, the commercial paper shall be confirmed rolling and continual, and approved by SAFE after cosigned by SDPC. 3. Approval by SAFE is required in order to retain overseas the funds raised through issuing bond abroad by overseas branches of domestic institutions and guaranteed by the domestic institutions. Transferring funds into China needs to be examined and approved with the same procedures as issuing bond abroad by domestic institutions. 4. Convertible bonds issued in overseas markets by listed foreign-funded enterprises are exempt from qualification examination. Scope for annual issuance of convertible bonds in overseas markets is decided by SDPC and the China Securities Regulatory Commission (CSRC) in accordance with the needs of foreign-funded enterprises to seek overseas financing and conditions in markets, and shall be brought in line with annual planning of utilization of foreign funds. Specification of bond issuance shall be handled with the same procedures as issuing bond abroad by domestic institutions within their annual quota, and shall be reported to CSRC for files. 5. Domestic institutions issuing bond abroad need to register foreign debt with SAFE after the issuance. (3). Documents needed for applying to issue bond abroad Followings are the documents that should be presented by domestic institutions to apply for issuing debt abroad: 1. Operational performance, financial situations and relevant financial statements within the latest 3 years; 2. Usage of the funds raised through issuing bond abroad; 3. Feasibility study report or plan for making use of the foreign funds approved by the relevant organ, or other documents that are in line with the national planning of the utilization of foreign funds; and 4. Other documents required by national organs in charge. III. FURTHER STRENGTHENING THE SUPERVISION OVER BOND ISSUED ABROAD In order to grasp good timing of raising funds abroad, domestic institutions are allowed to decide underwriters and issuing costs within a certain time limit, provided that the overseas bond issuance has been approved by relevant national organs. Domestic institutions issuing bond abroad shall report to SDPC and SAFE for filing issuing conditions and overseas ranking of the issuance. Institutions issuing bond abroad shall employ strict self-discipline and comply with the usage of the funds raised through bond issuance as approved by the State. Commercial papers can only be used to finance trade and shall not be used for long-term purposes. At the same time, measures shall be taken to protect against foreign debt risks, to ensure the repayment of the funds and reputation overseas. This Guideline takes effect from the day it is approved by the State Council. This Guideline shall prevail if any divergence arises between this Guideline and previous regulations on overseas bond issuance. |
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