On 12 January 2017, the People's Bank of China (PBOC), the central bank of the PRC, further revised the macroprudential administrative regime ("2017 Regime") in relation to inbound financing on a nationwide basis, which came into effect on the same date.

An entity incorporated in the PRC (whether a PRC domestic enterprise or a foreign-invested enterprise (FIE), i.e., a company that is not wholly owned by PRC nationals or entities) may obtain inbound financing from offshore lenders without any prior approval from the PBOC or the State Administration of Foreign Exchange (SAFE), the PRC exchange control authority.

Under the 2017 Regime, a borrower may obtain inbound financing provided that the "outstanding" may not exceed the "ceiling".

"Outstanding" means, in respect of the borrower, the sum of the amount drawn but not yet repaid under each of its inbound financings (loans, trade finance, certain contingent liabilities, etc.) with risks pertaining to the tenor, type and exchange rate of each inbound financing taken into account.

"Ceiling" means the maximum amount of "outstanding" permitted under the 2017 Regime, which is calculated based on the borrower's net asset value (if the borrower is not a financial institution), or tier one capital (if the borrower is a banking financial institution) or paid-up capital plus capital reserve (if the borrower is a nonbanking financial institution) multiplied by the leverage ratio and the macroprudential adjustment multiplier, each as determined by the PBOC.

The PBOC may adjust the relevant multipliers and calculation methods from time to time, either generally or with respect to a particular enterprise or industry.

Under the 2017 Regime, where the borrower is not a financial institution, the borrower should perform the following:

For any change to its audited net assets value or certain terms of the financing agreement (such as an offshore creditor, the tenor of the loan, amount and interest rate), the borrower should promptly update the SAFE.

If the borrower is a FIE, it may elect to continue to follow the rules applicable to the existing foreign debt regime by relying on the borrowing gap available (in the case of a FIE borrower) in calculating the amount of foreign debt that it may incur ("Foreign Debt Regime") or the 2017 Regime.

Under the Foreign Debt Regime, the borrower must effect a "foreign debt registration" with the local branch/sub-branch of the SAFE. As long as the borrower has registered its foreign debts with the SAFE and the aggregate amount of its foreign debts does not exceed its so-called borrowing gap, it may freely borrow from non-Chinese lenders.

The borrower must obtain a Certificate of Approval and Registration (in Chinese, 审核登记证明) from the National Development and Reform Commission (NDRC) before incurring any foreign debt with a tenor of over one year.

Different local regulations apply to some specific regions, such as the free trade zones. This guide does not cover the different regulatory registration, filing or reporting requirements under those local regulations.