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New Regime on Cross Border Financing in China

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19 May 2016

The People’s Bank of China (PBOC) issued the Notice on Nationwide Implementation of Macro Prudential Management of Cross Border Financing (the Notice) which took effect on 3 May 2016 and fundamentally changes the regulation on the incurrence of cross border debt by PRC Enterprises. The Notice introduces a new regime (the New Regime) to determine the amount of foreign debt a PRC incorporated entity may borrow based on its net asset value / capital and outstanding borrowings, in each case on a risk weighted basis. The New Regime is fundamentally different from the previous regime where different methods administered by different authorities apply to determine the amount of foreign debt a domestic company or a foreign investment enterprise may borrow.

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