PRC Legal Updater (Issue 21)

Publication | 10 May 2012

NDRC releases new rules to regulate the issuance of RMB bonds in Hong Kong by domestic non-financial institutions

On 8 May 2012, the National Development and Reform Commission (NDRC) published on its website the Notice of Relevant Matters regarding the Issuance of RMB-denominated Bonds in Hong Kong by Domestic Non-financial Institutions (Notice). The Notice sets out the requirements and application procedures for the issuance of RMB bonds with a term of at least one year in Hong Kong by Chinese non-financial institutions (which are defined to mean “non-bank institutions” in the Notice).

By way of background leading up to this development:

  • In June 2007, NDRC promulgated the rules for the issuance of RMB-denominated bonds in Hong Kong by Chinese banks.
  • In November 2010, NDRC gave its approval for Bao Steel to issue RMB-denominated bonds in Hong Kong. This was the first offshore issuance of RMB bonds by a Chinese non-financial institution.
  • As at the end of April 2012, NDRC had given its approval to four other State-owned enterprises to issue RMB bonds in Hong Kong.

Before the promulgation of the Notice, there had been no legislative basis for offshore issuance of RMB-denominated bonds by Chinese non-financial institutions. Following the five cases referred to above where approval was successfully obtained from the NDRC on an ad-hoc basis, the Notice sets out a set of rules with the intention of regulating the practice and preventing foreign debt risk.

We summarise some significant provisions of the Notice as follows:

  • Successful applicant institutions must satisfy various requirements, e.g. having sound corporate governance, a good credit and compliance track record, and strong profit-making capability.
  • All applications must be submitted to central NDRC (either directly or through the provincial counterparts of NDRC) for approval. It will take up to 60 working days for NDRC to review and determine whether or not to grant an approval.
  • The use of the proceeds raised through the issuance of the RMB bonds must be stated in the application materials for NDRC approval, and must be complied with once so approved. According to the Notice, the funds should be used primarily for fixed-assets project investment, and could either be brought back to China or invested offshore, as long as such purposes have been approved by NDRC in the first place.
  • The NDRC approval will be valid for one year, within which the bond issuance must be completed. Meanwhile, all Hong Kong rules governing bond issuance should also be observed.
  • The debts of the Chinese institution resulting from the bond issuance as stipulated in the Notice will be subject to the current rules governing foreign debts (including registration with SAFE).
  • Applications can be made by reference to the Notice for the issuance of RMB-denominated bonds in other foreign jurisdictions or regions.

The Notice now allows non-bank institutions in China to access offshore RMB funds and provides an additional channel for offshore investors to access the Chinese market.

For further information, please contact Sun Hong.


Justin Wilson

Justin Wilson

Sun Hong

Sun Hong