On 26 August 2022, the PRC National Development and Reform Commission ("NDRC") issued the Administrative Measures for the Review and Registration of Mid- to Long-Term Foreign Debt of Enterprises (Draft for Comments) (企业中长期外债审核登记管理方法(征求意见稿)) ("Draft Measures").
The Draft Measures expressly provide that they will apply to the issuance of offshore bonds by an enterprise operating in Mainland China, in the name of an enterprise registered outside China, based on the equity, assets, income or other similar rights and interests of the domestic enterprise. This is generally in line with the previous notices and interpretation issued by NDRC.
Compared to the current foreign debt filing and registration system, the Draft Measures bring about certain major changes, including the following:
- The current "filing" system is changed to a "review" system, implying that a more substantive review may take place to tighten the scrutiny of foreign debt, and a prior approval may be required for mid- to long-term foreign debt (which refers to foreign debt with a term of more than one year (exclusive)).
- The time limit for NDRC's review of a foreign debt application and issuance of a foreign debt approval registration certificate is extended from seven business days to three months from the acceptance of the application. Enterprises can only commence foreign exchange registration, account opening and withdrawal of fund procedures after obtaining the foreign debt approval registration certificate.
- The Draft Measures expressly provide a list of prohibited uses of foreign debt funds (negative list), such as using the same to (i) increase the hidden debt of local governments, (ii) make up for losses or speculation, and (iii) lend to any third party (except banking institutions).
The Draft Measures show NDRC's stricter stance on the review and registration of foreign debt of enterprises. Once the Draft Measures are promulgated, Chinese foreign debt issuers must allocate more time to prepare for bond issuance deals.
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