State Administration of Foreign Exchange: further improve the relevant matters of foreign exchange management for domestic and foreign exchange loans.

On January 16, the State Administration of Foreign Exchange issued the "Notice on Further Improving the Management of Domestic and Foreign Exchange Loans (Draft for Soliciting Comments)", which mentioned that the scope of income and expenditure of domestic and foreign exchange loan accounts should comply with the following regulations: (1) Income includes: the principal and interest generated by domestic and foreign exchange loans; funds transferred into the same borrower's other domestic and foreign exchange loan accounts; repayment funds and interest from foreign exchange purchases or transfers. (2) Expenditure includes: repaying the principal and interest of domestic and foreign exchange loans; complying with the regulations for domestic and foreign exchange loan settlements; transferring funds to the same borrower's other domestic and foreign exchange loan accounts; foreign exchange expenditures for current and capital projects that comply with regulations. The original text is as follows: "In order to further support and regulate the development of domestic and foreign exchange loan business, facilitate trade and investment financing, and enhance the quality and effectiveness of services for the real economy, the following matters related to the improvement of the management of domestic and foreign exchange loans are notified as follows: 1. This notice refers to domestic and foreign exchange loans as loans denominated in foreign currencies issued by domestic financial institutions (hereinafter referred to as lenders) to domestic non-financial institutions (hereinafter referred to as borrowers) within approved business scope, excluding cross-border intra-company foreign exchange fund lending and foreign debt refinancing through entrusted loans. 2. Lenders engaging in domestic and foreign exchange loan business should comply with relevant requirements of industry regulatory authorities. 3. Domestic and foreign exchange loans with self-liquidating qualities and with a background of goods or services export can be directly transferred to the borrower's current account for foreign exchange settlement if they meet the following conditions: (1) Self-liquidating, with proceeds from goods or services exports as the primary source of repayment funds; (2) Can be matched one-to-one with a single goods export, service export, or letter of credit. Lenders processing the above domestic and foreign exchange loan business should strengthen the review of trade backgrounds to confirm the authenticity and reasonability of transactions. Except for the provisions of the first paragraph of this article, domestic and foreign exchange loans are managed through designated accounts. Borrowers should open domestic and foreign exchange loan accounts to deposit funds and repayment funds from domestic and foreign exchange loans in accordance with relevant foreign exchange regulations, based on domestic and foreign exchange loan contracts or related documents. One domestic and foreign exchange loan can be deposited into multiple domestic and foreign exchange loan accounts, and multiple domestic and foreign exchange loans can also be deposited into a single domestic and foreign exchange loan account. For a lender that is a bank, the borrower should open a domestic and foreign exchange loan account at a bank within the jurisdiction of the province-level Foreign Exchange Administration or the lender's bank; for non-bank financial institutions as lenders, the borrower should open a domestic and foreign exchange loan account at a bank within the jurisdiction of the province-level Foreign Exchange Administration or the bank handling the loan funds transfer. 4. The scope of income and expenditure of domestic and foreign exchange loan accounts should comply with the following regulations: (1) Income includes: the principal and interest of domestic and foreign exchange loans; funds transferred into the borrower's other domestic and foreign exchange loan accounts; repayment funds and interest from foreign exchange purchases or transfers. (2) Expenditure includes: repaying the principal and interest of domestic and foreign exchange loans; complying with regulations for domestic and foreign exchange loan settlements; transferring funds to the borrower's other domestic and foreign exchange loan accounts; foreign exchange expenditures for current and capital projects that comply with regulations. 5. The following conditions should be met for domestic and foreign exchange loan funds to be used for settlement: (1) Domestic and foreign exchange loans with a background of goods or services exports; (2) Other domestic and foreign exchange loans allowed for settlement according to relevant regulations. Banks should perform authenticity and compliance audits when handling settlement of domestic and foreign exchange loans for relevant institutions. 6. Unless otherwise specified, domestic and foreign exchange loans and their settlement funds can be used within the scope of the loan agreement and comply with relevant laws and regulations. Domestic and foreign exchange loans should not be disbursed by overdrawing foreign exchange accounts. 7. Borrowers should prioritize using funds from goods or services export proceeds or their own foreign exchange to repay domestic and foreign exchange loans. If the borrower is genuinely unable to receive proceeds on time and does not have other foreign exchange funds, they can purchase foreign exchange for repayment. When borrowers purchase foreign exchange for repayment of domestic and foreign exchange loans, they can directly handle the purchase procedures at the bank with relevant authenticity proof documents. The bank handling the foreign exchange transaction should strictly adhere to relevant rules for authenticity and compliance audits. 8. Lenders should promptly and accurately submit all data related to domestic and foreign exchange loan business in accordance with the requirements of financial institution foreign exchange business data collection. 9. Domestic financial leasing companies (including project companies) and financial leasing companies (hereinafter referred to as lessors) established with approval from relevant departments, when conducting financial leasing business and utilizing over 50% of funds for purchasing leased assets from domestic or foreign currency debt funds, may agree to settle the rights and obligations under the financial leasing contract in foreign currency between the lessor and the domestic lessee. The lessor can receive foreign currency rental income through a designated capital project account, and the excess amount not required for repaying the foreign currency debt can be directly settled at the bank. Domestic lessees should follow the provisions of this notice and, with relevant authenticity proof documents, handle foreign exchange purchases for repayment at the bank. In the aforementioned financial leasing business, lessors may accept guarantees from foreign institutions. In the event of a guarantee performance, domestic lessees should handle relevant registration and information filing according to current regulations on foreign guarantees and domestic loans. 10. Non-financial institutions in China can use their foreign currency funds as collateral to apply for RMB loans from domestic financial institutions, with the collateral foreign exchange limited to funds from their current account for foreign exchange settlement and capital projects settlement. The bank where the debtor's foreign exchange account is opened should handle relevant foreign exchange transfers with the collateral loan contract according to regulations. After the collateral loan contract expires, if the debtor defaults, the creditor can directly use the collateral foreign exchange for repaying the related RMB loan principal, interest, and fees. 11. The State Administration of Foreign Exchange and its branches (hereinafter referred to as the foreign exchange administration) are responsible for managing, supervising, and inspecting foreign exchange accounts, settlements, and related foreign exchange transactions involved in domestic and foreign exchange loans. Violations of this notice will be punished by the foreign exchange administration according to the Foreign Exchange Administration Regulations of the People's Republic of China. 12. This notice is interpreted by the State Administration of Foreign Exchange. 13. This notice will be implemented from X date, 2026. The "Notice on Implementing Reforms in the Management of Domestic and Foreign Exchange Loans" (Huifa [2002] No. 125), the "Notice on the Policy of Using Foreign Exchange as Collateral for RMB Loans for Domestic Residents" (Huifa [2003] No. 2), the "Notice on Issues Related to the Policy of Using Foreign Exchange as Collateral for RMB Loans for Domestic Enterprises" (Huifa [2011] No. 46), the "Reply from the Department of Comprehensive Affairs of the State Administration of Foreign Exchange Regarding the Foreign Exchange Business of China National Nuclear Corporation" (Huizongfu [2012] No. 61), and the "Notice on Foreign Exchange Management Issues in Financial Leasing Business" (Huifa [2017] No. 21) are simultaneously abolished. In case of any inconsistency with previous regulations, this notice shall prevail. After receiving this notice, the provincial, autonomous region, municipality directly under the Central Government, and planned single-city branches of the State Administration of Foreign Exchange should promptly forward it to their subordinate branches, city commercial banks, rural commercial banks, foreign banks, rural cooperative banks; and national Chinese banks should promptly forward it to their branch institutions. In case of any implementation issues, please provide feedback to the State Administration of Foreign Exchange in a timely manner. This notice is sourced from the official website of the State Administration of Foreign Exchange, edited by GMTEight: Xu Wenqiang."