Professional Interpretation

Guidelines on Debt Financing Instruments of Overseas Non-financial Enterprises (for Trial Implementation) (the "Guidelines") on January 17, 2019.  The Guidelines provides specific rules and operational requirements for overseas non-financial enterprises to issue debt financing instruments in the China Interbank Bond Market.

The “Guidelines” clarify the core institutional arrangements in the following areas.

First, in terms of disclosure requirements, the “Guidelines” clarify the requirements for registration of overseas enterprises, information disclosure documents for issuance, information disclosure documents for duration, major issues, time of disclosure, and language of disclosure. Taking full account of the general practices of the international market and the actual situation of the domestic market, the balance between investor protection and the enthusiasm of foreign institutions for issuing bonds has been better achieved.

Second, in terms of the requirements for the use of raised funds, the “Guidelines” have clearly defined the use of funds raised by non-financial companies for Panda debt. The funds raised by Panda bonds can be used in China or abroad according to relevant laws, regulations and regulatory requirements. Account opening, cross-border remittance and information reporting shall comply with the relevant provisions of the People's Bank of China and the State Administration of Foreign Exchange.

Third, in terms of intermediaries' requirements, the “Guidelines” follow the concept that “investors are at their own risk” and “intermediaries are responsible for their due diligence”. Investors should independently judge the value of investment and bear the risk of investment. The intermediary agencies and personnel providing the service shall be diligent and conscientious, strictly abide by the practice norms and professional ethics, perform their duties in accordance with the provisions and agreements, and assume corresponding legal responsibilities.

Forth, further Requirements for Financial Statements of Overseas Non-financial Enterprises, Guidelines also require them to: 1. submit and disclose the standalone financial statements of the parent company; or, 2. disclose the content in the standalone financial statements of the parent company that may have a material impact on investors' decision-making, and make such information prominent in the issuance documents to draw investors' attention. For overseas non-financial companies that prepare consolidated financial statements, investors can better understand the issuer's financial position by reviewing the parent company's financial statements or major financial matters.

Please note that the Guidelines is currently only in the trial phase, leaving room for further adjustments in the future. There are some differences in overseas non-financial companies due to different corporate governance laws and regulations in different jurisdictions, and establishment, registration and charter documents of domestic and offshore enterprises (especially common law jurisdictions). We will continue to pay attention to the newly issued regulations of the People's Bank of China or regulatory agencies.