Notice of the National Development and Reform Commission and
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Notice of the National Development and Reform Commission and the State Administration of Foreign Exchange on Regulating the Archival Filing Administration of Transferring Bad Claims to Foreign Parties by Financial Institutions (No.254 [2007] of National Development and Reform Commission) The development and reform commissions, economy and trade commissions and the branch bureaus of foreign exchange control of all provinces, autonomous regions, municipalities directly under the Central Government, cities under separate state planning and Sinkiang Production and Construction Corps.: In order to regulate the administration of foreign debts concerned in the transfer of bad claims to overseas investors by domestic financial institutions, effectively protect the legitimate rights and interests of investors, improve the efficiency of disposing non-performing assets, actively prevent and eliminate the foreign debts risks emerged in the disposal process and promote the sound and orderly development of China's non-performing assets disposal market, we hereby notify the relevant issues as follows: |
| 1. Where a domestic financial institution bears foreign debts from its transfer of bad claims to an overseas investor, the domestic financial institution shall report the situation to the National Development and Reform Commission and the State Administration of Foreign Exchange and make it subject to the administration of foreign debts by referring to the provisions of the Interim Measures for the Administration of Foreign Debts (Order No.28 of the National Development Planning Commission, the Ministry of Finance and the State Administration of Foreign Exchange). |
| 2. The National Development and Reform Commission shall, together with the State Administration of Foreign Exchange, manage the foreign debts formed from the transfer of bad claims to foreign parties by domestic financial institutions in light of China's foreign debt structure, balance of payment position, scale of bad claims and the development of the disposal market. |
| 3. A domestic financial institution engaging in the transfer of bad claims to foreign parties shall file the plan of transferring bad claims to foreign parties of the next year with the National Development and Reform Commission before November 30th of each year, which shall include the basic information on the existing bad claims, the bad claims it plans to transfer to foreign parties in the next year and the forecasting on the recovery of the bad claims it plans to transfer. |
| 4. In accordance with the Regulation on Financial Asset Management Companies (Order No.297 of the State Council) and the relevant provisions of the Ministry of Finance and China Banking Regulatory Commission, etc, a domestic financial institution shall follow the principles of openness, impartiality and fairness in transferring bad claims to foreign parties. Before an act of transferring bad claims to foreign parties is conducted, a domestic financial institution shall publish explicit disposal announcement at a news media of economic or comprehensive category at or above the provincial level. In principle, all transfers shall be made in such public ways as bidding, auction and public price competition, etc, and the transfer price shall be paid off by the overseas investors concerned once and for all. |
| 5. The bad claims to be transferred to foreign parties may not include any claim with the Chinese government of any level or the administrative department governing it as the debtor or guaranteed by it, any claim of any enterprise that falls within the prohibited category of the Catalogue of Industries for Guiding Foreign Investment or involves any industry of national security, or any other claim prohibited by laws and regulations from being transferred to foreign parties. |
| 6. No overseas investor participating in the transfer of bad claims may maliciously disclose information to the outside or commit any behavior that damages China's foreign debt service credibility, or recover debts from the Chinese government of any level or the administrative department governing it by any means. |
| 7. A domestic financial institution shall, within 20 workdays after an agreement on transferring bad claims to foreign parties is concluded, file the relevant situation (in triplicate) on the transfer of bad claims with the National Development and Reform Commission for record and send copies to the Ministry of Commerce and China Banking Regulatory Commission at the same time. The archival materials shall include the following contents: |
| (1) situation on the bad claims to be transferred to foreign parties (paper principal, total amount of interest, regional distribution); |
| (2) agreement on the transfer to foreign parties; |
| (3) photocopy of the disposal announcement published in news media; |
| (4) certified certificate of incorporation of the overseas investor, the relevant written commitment of the overseas investor and the documentary evidences on the credit standing and performance of the overseas investor. Where any bad claim is purchased by an overseas investor in the form of foreign special-purpose company and it is impossible to sufficiently prove the credit and performance status of the overseas investor, the documentary evidences on the holding parent company shall be provided; |
| (5) notarial deed on the transfer process produced by the notary organ (brief description on the bad claims, mode of transfer, major domestic and overseas investors that participate in the transfer, the relevant quotations); |
| (6) legal letter produced by law firm; and |
| (7) other materials required by the National Development and Reform Commission. |
| 8. Where the National Development and Reform Commission believes that the archival filing materials are incomplete or fail to satisfy the relevant requirements, it shall notify the relevant domestic financial institution that transfers bad claims to foreign parties once and for all within 5 workdays after it receives the materials and ask it to clarify and supplement the relevant explanations and documents or adjust the relevant content. Where a domestic financial institution still fails to provide complete archival filing materials within 20 workdays since it is notified or transfers bad claims by violating the provisions of this Notice, the National Development and Reform Commission shall issue a notice of refusing to archive to the domestic financial institution that transfers bad claims to foreign parties and explain the reasons. The National Development and Reform Commission shall, within 20 workdays after receiving the complete archival filing materials, produce an archival filing confirmation letter to the domestic financial institution that transfers bad claims to foreign parties. |
| 9. A domestic financial institution that transfers bad claims to foreign parties shall, within 15 workdays after receiving the archival filing confirmation letter issued by the National Development and Reform Commission, file the relevant documents on the exchange issues concerned in the transfer and the archival filing confirmation letter issued by the National Development and Reform Commission with the State Administration of Foreign Exchange. After the State Administration of Foreign Exchange examines and approves the exchange, the domestic financial institution that transfers bad claims shall handle exchange settlement formalities at the appointed branch bureau of foreign exchange control, while the overseas investor who accepts the bad claims or its agency shall handle the formalities for the archival filing registration of the transfer of bad claims. |
| 10. Where a bad claim is handled by way of overseas investment, it shall be handled in accordance with the Interim Measures for the Examination and Approval of Overseas Investment Projects (Order No.21 of the National Development and Reform Commission) and the relevant provisions on the administration of foreign exchange. |
| 11. Where an overseas investor or a domestic financial institution that transfers bad claims to foreign parties obtains archival filing confirmation letter or handles archival filing registration of debts transfer by such illegal means as providing false materials, the National Development and Reform Commission and the State Administration of Foreign Exchange shall cancel the archival filing confirmation or archival filing registration of transferring bad claims to foreign parties. |
| 12. Where any overseas investor maliciously discloses information to the outside, commits any behavior that damages China's foreign debt service credibility, engages in such illegal criminal activities as money laundering through transactions of bad claims or engages in any other activity that severely violates this Notice, once it is ascertained, the National Development and Reform Commission shall, together with the State Administration of Foreign Exchange, forbid the overseas investor from purchasing any domestic bad claim. Where a crime is constituted, the overseas investor shall be transferred to and punished by the judicial organ. |
| 13. Where an investor from Hong Kong Special Administrative Region, Macao Special Administrative Region or Taiwan Region participates in the disposal of bad claims of the inland, it shall be governed by this Notice by analogy. |
| 14. The power to interpret this Notice shall remain with the National Development and Reform Commission and the State Administration of Foreign Exchange. Where any previous provision conflicts with this Notice, this Notice shall prevail. |
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15. The above-mentioned provisions shall come into force as of April 1st, 2007. National Development and Reform Commission State Administration of Foreign Exchange February 1st, 2007 |
