China Expands Cross-border Financing Facilitation Pilot
On 31 May 2022, the State Administration of Foreign Exchange of the PRC released a circular on supporting high-tech enterprises and specialized, sophisticated, distinctive and innovative enterprises to carry out cross-border financing facilitation pilot on its website.
According to the circular, eligible high-tech enterprises and "specialized, sophisticated, distinctive and innovative" enterprises located in Shanghai, Jiangsu Province, Hubei Province, Guangdong Province, Beijing, Chongqing, Hainan Province, Shenzhen and Ningbo, that have carried out pilot program in the early stage, can borrow foreign debt within the amount of no more than USD10 million, which will not be restricted by the scale of their net assets.
In addition to the above nine pilot areas, the pilot program has been expanded to another eight areas, i.e., Tianjin, Shandong Province, Sichuan Province, Shaanxi Province, Zhejiang Province, Anhui Province, Hunan Province and Qingdao. Eligible high-tech enterprises and “specialized, sophisticated, distinctive and innovative?enterprises located in those eight pilot areas can borrow foreign debt within the amount of no more than USD5million, which will not be restricted by the scale of their net assets.
The circular also issued a trial guidance for cross-border financing facilitation of high-tech and “specialized, sophisticated, distinctive and innovative?enterprises, which made it clear that high-tech enterprises refer to innovative enterprises with intellectual property rights, advanced technologies or processes, good market prospects and small net assets that have been certified by relevant national or local authorities; while “specialized, sophisticated, distinctive and innovative?enterprises refer to enterprises with the characteristics of "specialization, refinement, characteristics and novelty" that have been certified by relevant national or local authorities.
Eligible enterprises may apply to local foreign exchange bureaus for foreign debt signing registration with an application form, a copy of a business license and other materials, and then carry out cross-border financing business at financial organizations.
The expansion of the pilot program will improve the flexibility and convenience of high-tech enterprises with small net assets at the initial stage of growth and “specialized, sophisticated, distinctive and innovative?enterprises to borrow foreign debt, and help them to broaden financing channels, reduce financing costs, increase R&D investment and promote technological progress.
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