Announces The Chinese Regulator has Relaxed Rules for Debt Funds

The Chinese regulator has “opened the floodgates” for Chinese debt funds after a major relaxation of its credit licensing laws

Online PR News – 13-October-2015 – Hong Kong – Today Public Finance Update, released this week, allows for Chinese funds to originate loans and restructure existing loans without obtaining a credit license.

Previously any loan restructure required a credit license under the Banking Act. It is a major relaxation of rules that lawyers say will benefit private debt funds operating in China.

In most cases the investments are made in US loans and debt, so lawyers say it could benefit US asset managers that manage portions of Chinese debt funds as delegated managers or would like to enter the Chinese market.

Lawyers say the previous rule had "significantly restricted” the development of the debt funds market in China. “This new rule has opened the floodgates for Chinese debt funds,” said one lawyer who did not wish to be named.

The regulator says it is now possible to grant loans for accounts for which the Chinese Investment Code specifies only a few or no product requirements at all.

“In view of the Asian legal situation, as well as in consideration of current discussions, Public Finance has changed its administrative practice to the effect that the granting of loans as well as loan restructuring is to be seen as part of collective investment management and is therefore permissible."

Public Finance says management companies should comply with certain minimum requirements for the granting of loans, the acquisition and restructuring/prolongation of unsecuritised loan receivables and the granting of shareholder loans. Restrictions include only lending to non-consumer borrowers, lending through closed-ended, having appropriate underwriting and risk management policies, a limitation on leverage and minimisation of asset liability mismatches.

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