On June 9, the State Administration of Foreign Exchange (the “SAFE”) promulgated the Circular on Issues Concerning the Foreign Exchange Administration of Overseas Loans of Domestic Enterprises (No.24[2009]) (the “Circular”), which will become effective on August 1, 2009. As the Circular takes into effect, in case of any conflicts between the Circular and the terms of current Circular of the State Administration of Foreign Exchange on Issues Concerning the Management of Internal Operation of Foreign Exchange Funds of Transnational Companies (No. 104 [2004]) concerning the foreign exchange administration of overseas loans, the Circular will prevail. Pursuant to the Circular, a qualified domestic enterprise (the “Lender”) may directly provide a loan within the approved limit as well as in accordance with the amount, interest rate and term as agreed on in contract to its wholly-owned subsidiary enterprises which are legally established abroad or overseas enterprises in which it holds shares (the “Borrower”). The branch of foreign exchange department of the SAFE of the place where a Lender is located (the “Foreign Exchange Bureau”) will be responsible for the supervision and administration of such matters concerning an overseas loan as approval of limit, registration, special account, settlement of foreign exchange and funds transfer. The Circular increases the types of entities which are qualified to provide overseas loans, and broadens the range of overseas loan sources. Meanwhile, it simplifies the procedures for approval and settlement of foreign exchange for overseas loans, improves the system of statistical monitoring and risk prevention and provides substantial convenience to domestic enterprises for their “going out” strategies.
