Two Departments Unify Management of Domestic and Foreign Currency Overseas Loans to Facilitate Cross-Border Financing for Enterprises

Securities Times Reporter He Jueyuan

To enhance the level of capital account openness and meet the reasonable needs of enterprises for cross-border operational funds, the People’s Bank of China and the State Administration of Foreign Exchange jointly issued the “Notice on Printing and Distributing the Measures for the Administration of Outbound Loans by Domestic Enterprises” (hereinafter referred to as the “Notice”) on March 20, which will be implemented starting April 20. The Notice incorporates domestic enterprises’ RMB and foreign currency outbound loans into unified management, includes outbound loans into macroprudential management, and overall raises the cap on outbound loan balances to further support and regulate domestic enterprises’ outbound lending activities.

The current policies on RMB and foreign currency outbound loans were introduced earlier and differ in management requirements regarding sources of funds, loan terms, and extensions. To better meet the genuine and reasonable financing needs of “going global” enterprises, the two departments have unified and improved policies for outbound loans in both local currency and foreign currency, creating a stable and predictable policy environment for cross-border financing.

Following the principle of “same business, same rules,” the Notice consolidates the management of RMB and foreign currency outbound loans by domestic enterprises, facilitating enterprises to reasonably conduct outbound loans based on their production and operational financing needs, and reducing financing and management costs.

The Notice incorporates outbound loans by domestic enterprises into the macroprudential management framework, clarifies that the outbound loan balance cap is linked to the enterprise’s equity, and supports enterprises in applying for outbound loans within the cap.

To prioritize the domestic currency, the Notice specifies a currency conversion factor and encourages the preferential use of RMB for outbound loans. To better meet enterprises’ cross-border operational fund needs, the macroprudential adjustment factor for outbound loans by domestic enterprises has been raised from 0.5 to 0.6, and the overall cap on outbound loan balances has been increased. The Notice also states that the two departments may adjust the macroprudential adjustment factor and currency conversion factor in a timely manner based on the international balance of payments and macroeconomic regulation requirements to maintain orderly cross-border capital flows.

A transition period is reserved for the implementation of the Notice to facilitate banks and enterprises in managing existing and new business activities. The two departments will respond promptly to market concerns through policy Q&A and guidance on business expansion, making it easier for banks and enterprises to handle related transactions.

(Edited by: Wang Zhiqiang HF013)

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