China's forex pitfalls

Beware of using up the foreign exchange debt quota from borrowing foreign loans with a term of more than one year says Baker & McKenzie partner.

According to Article 18 of the Provisional Measures on Administration of Foreign Debts the Measures jointly promulgated by the State Development Planning Commission SDPC, the Ministry of Finance MOF and the State Administration of Foreign Exchange SAFE on January 8, 2003, which became effective from March 1, 2003, the sum of cumulative amount of medium and long-term, and balance of short term, foreign exchange debts borrowed by a given Foreign Investment Enterprise FIE is subject to, and cannot exceed, the difference between the amount of total investment and registered capital of the FIE. This difference is often referred to as the foreign debt quota.

If the...

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