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Bailey McCann, Opalesque New York: The State Administration of Foreign Exchange (SAFE) in China put Circulars 29 and 37 ('Provisions on Foreign Exchange Administration of Cross-Border Guarantee and Security’ and 'Issues Relating to the Administration of Foreign Exchange in Respect of Offshore Investments, Financings and Return Investments by Domestic Residents through Special Purpose Vehicles’) into effect over the summer. The effort was designed to relax some of the cross-border lending rules keeping credit markets relatively tight in the region. Since then, the ripples of this decision have made their way through financial markets, edging China ever closer to becoming a global financier.
Readers in the US may already think of China as a global financier - at least in the geopolitical sense. However, for credit specialists the rules were a welcome change. The rules make it easier for alternatives firms to provide financing to the offshore affiliates of PRC-domiciled companies. Under the old regime, SAFE had to give its stamp of approval to each individual transaction which led to, not surprisingly, fewer transactions. The previous regime fell in-line with the historic conservative approach within the Asian markets, yet new concerns over sustaining economic growth seem to have pushed SAFE to relaxing those rules.
Essentially, the tight credit markets were threatening the country's 7.5% GDP growth objective for 2015. Pent up demand for this type of lend...................... To view our full article Click here
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