China imposes new foreign debt requirements in its ongoing quest to stem systemic risks

On 11 May 2018, China’s National Development and Reform Commission (“NDRC”) and Ministry of Finance issued a joint notice (the “Notice”) aimed primarily at preventing foreign creditors having recourse to local government resources, in a further bid to de-risk local authorities. The Notice also imposes higher standards on enterprises engaging in foreign debt financings generally, to ensure such enterprises, and their financing plans, are sufficiently robust and viable. Whilst previous notices have covered some similar ground in relation to corporate bonds, this Notice is drafted more broadly to apply to all types of medium to long term foreign debt incurred by Chinese enterprises (i.e. including loans). In common with previous notices, this Notice is also expected to apply to offshore debt structures – both bonds and loans.

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