The internationalization of the RMB began with the launch of the cross-border trade RMB settlement pilot in 2009. After expanding the pilot scope, diversifying functions and global layout, it has gradually extended from trade settlement to direct investment, securities investment, foreign exchange transactions, official reserves and other scenarios. A solid support system has taken shape, featuring bilateral currency swaps, RMB clearing banks and the Cross-border Interbank Payment System (\u201cCIPS\u201d). By the end of June 2025, the People\u2019s Bank of China (\u201cPBOC\u201d) had signed currency swap agreements with 43 countries and regions, with 32 active agreements exceeding RMB 4.5 trillion; 35 RMB clearing banks had been established in 33 countries and regions; and as of September 2025, CIPS covered 189 countries and regions, forming a robust institutional and network foundation.1<\/p>\n
According to the RMB Internationalization Report (2025) released by the PBOC 2, from 2023 to the first half of 2025, RMB internationalization recorded remarkable growth in scale and status, with strengthened financing functions including loans. Cross-border RMB receipts and payments for clients hit RMB 64.1 trillion in 2024, up 22.6% year on year, and reached RMB 34.9 trillion in the first half of 2025, up 14.0% year on year. The RMB has solidified its position as the world\u2019s second-largest trade financing currency, third-largest payment currency and third-largest currency in the SDR basket. In the loan market, outstanding overseas RMB loans exceeded RMB 2 trillion by the end of 2024, accounting for 45% of total foreign currency-denominated overseas loans, 14 percentage points higher year on year. By June 2025, overseas entities held RMB 1.15 trillion in onshore RMB loans, and the local currency share in cross-border financing rose to 47.8%.<\/p>\n
The accelerated RMB internationalization and expanded loan usage in recent years were driven by policy facilitation, financial market opening, improved infrastructure and rising market demand. Policies streamlined cross-border procedures, optimized fund pools and Panda Bond rules, and expanded local currency settlement cooperation. Financial market opening via Bond Connect, Stock Connect and Swap Connect enhanced allocation and financing incentives. Infrastructure such as CIPS and Cross-border Payment Link improved clearing efficiency and reduced costs. Meanwhile, corporate overseas expansion, new trade formats, global de-dollarization, stable RMB valuation and competitive financing costs jointly boosted RMB usage in cross-border settlement and lending. From a micro-level perspective, the direct reason is the significant cost advantage of RMB financing over USD and EUR. From mid-2023 to the first half of 2025, the Federal Reserve maintained the federal funds rate above 5% before initiating rate cuts in Q4 2024, then held at a restrictive 4.25%\u20134.5% range through the first half of 20253. In contrast, the PBOC continued to release significant RMB liquidity through measures such as reducing deposit reserve ratio and lowering the LPR to stabilize market confidence. RMB loans and Panda bond interest rates remained persistently low. pursued more proactive counter-cyclical adjustments during this period. Although the Federal Reserve initiated three consecutive 25-basis-point cuts in September, October, and December 2025 (totaling 75 basis points) thereafter4, due to PBOC\u2019s prudent yet progressive approach to deposit reserve ratio and LPR cut5, interest rates of USD denominated loans and bonds remain somewhat higher than interest rates on RMB denominated ones. This persistent interest rate gap strongly incentivized foreign borrowers to choose RMB to cut funding costs.<\/p>\n
<\/p>\n
(1) Notice of the People’s Bank of China and the State Administration of Foreign Exchange on Overseas Lending by Banking Institutions (\u201cNotice I\u201d) and Notice of the People\u2019s Bank of China and the State Administration of Foreign Exchange on Adjusting Matters Related to Overseas Lending of Banking Institutions (\u201cNotice II\u201d)<\/em><\/p>\n Notice I was published in 2022. It establishes a unified RMB and foreign currency macro-prudential framework, standardizes cross-border lending rules, repeals conflicting provisions, supports enterprises\u2019 \u201cgoing global\u201d and advances RMB internationalization. To encourage RMB loans, Notice I incorporate a term \u201cCurrency Conversion Factor\u201d, under which RMB loans consume less overseas lending quota than foreign currency loans.<\/p>\n Notice II was published on 15 April 2026. Notice II raises the leverage ratios for foreign-funded banks from 0.5 to 1.5, i.e. overseas lending quotas tripled, and raises the leverage ratios for China Export-Import Bank from 3 to 3.5. Furthermore, it provides that where domestic banks grant loans with a maturity exceeding one year to foreign enterprises by on-lending, the on-lending banks may comply with the laws and regulations of their respective jurisdictions. Such adjustment may reduce cross-border regulatory frictions (e.g., customer information protection) and compliance burdens, aligning China\u2019s cross-border financing rules more closely with international market practices.<\/p>\n According to the official statements of PBOC and the State Administration of Foreign Exchange (\u201cSAFE\u201d), the issuance of Notice II responds to the steady growth of banks\u2019 overseas lending, the rising share of RMB loans, and the fact that the outstanding balance of overseas loans of some banks is approaching the upper limit. At the same time, the balance of overseas loans of some banks is gradually approaching the upper limit. In addition, market analysts also believe this adjustment is set against profound changes in the global financial landscape and is influenced by multiple external factors, including: addressing the U.S.\u2013China interest rate differential and RMB exchange-rate volatility, and addressing the new EU branch requirements for non-EU banks conducting cross-border banking business under CRD VI. In any case, given the lower interest rates of RMB loans, RMB financing remains highly attractive to enterprises.<\/p>\n For borrowers, they may consider applying for RMB loans if: (i) they have stable RMB revenue from exports to China or RMB-settled transactions; (ii) they seek to avoid USD\/EUR interest rate volatility and FX risks, especially for long-term projects; (iii) their trade chain and sales end are highly related to China, RMB financing can hedge currency mismatches and reduce hedging costs; (iv) they plan long-term investment in China, to align their funding structure with future cross-border operations and reduce repeated FX conversion costs etc.<\/p>\n However, foreign borrowers shall pay attention to such special restriction on the purpose of the overseas loan, including: loan proceeds shall be used to cover relevant expenditures within the business scope of the borrowers in principle, and should not be used for repayment of debts to foreign creditors which is guaranteed or secured by any Chinese person, or be repatriated to and used in China in any manner including lending to or equity investment in any Chinese company.<\/p>\n However, if a foreign entity is unable to get RMB loans from a Chinese bank, is there any alternative to get RMB loans with similar terms? One approach is getting such loan through its affiliate in China, i.e. getting an intercompany loan from its Chinese affiliate, which borrows such money from a Chinese bank. The relevant regulation has also been updated recently.<\/p>\n (2) Administrative Measures for Overseas Lending by Domestic Enterprises (\u201cMeasures\u201d)<\/em><\/p>\n The Measures was publish by PBOC and SAFE together on 13 March 2026 and effective from 20 April 2026. The Measures apply to loans granted by a PRC non-financial enterprise to a foreign enterprise, that has a direct or indirect shareholding relationship with the lender, or whose shares are directly or indirectly held by the same parent company. The Measures aim to establish a unified framework for both RMB and foreign currencies overseas lending by Chinese non-financial enterprises, eliminate existing institutional frictions to improve corporate efficiency and cost-effectiveness, and further consolidate the RMB\u2019s status as a global credit currency.<\/p>\n The core change introduced by the Measures is that both RMB and foreign currency overseas lending by domestic enterprises are integrated into a unified regulatory framework. Historically, China\u2019s overseas lending was supervised under a dual-track system: foreign currency lending was mainly regulated by SAFE under Notice by the State Administration of Foreign Exchange of Issues concerning the Foreign Exchange Administration of Overseas Loans Granted by Domestic Enterprises (\u201cNotice No. 24\u201d) and other relevant regulations, focusing on quota approval and account management; while RMB lending was regulated by the PBOC pursuant to the Notice by the People\u2019s Bank of China of Further Specifying Matters concerning the RMB Loans Granted Overseas by Domestic Enterprises (\u201cNotice No. 306\u201d).<\/p>\n This dual-track system led to fragmented rules, repetitive compliance requirements and higher operational costs for enterprises. For instance, foreign currency lending offered relatively flexible terms and funding sources, while RMB lending was subject to stricter constraints (e.g., debt-based funding was not allowed), resulting in significant regulatory inconsistency. By consolidating these two sets of rules, the Measures establish a unified integrated management model. Notably, within this framework, foreign currency lending is converted using a Currency Conversion Factor of 0.5. This means that under the same maximum quota, RMB loans consume less quota than foreign currency loans.<\/p>\n Based on the unified regulatory framework, the Measures adjust the core calculation parameters. The maximum overseas lending quota of a domestic enterprise is determined by the following formula:<\/p>\n Overseas Lending Quota = Most Recent Audited Net Assets \u00d7 Macro – prudential Adjustment Parameter<\/p>\n The Measures increase the Macro-prudential Adjustment Parameter in the above formula from 0.5 (provided by the Notice No. 24) to 0.6. This means that without any increase in its net assets, an enterprise\u2019s overseas lending quota is increased by 20% compared with the previous quota.<\/p>\n The Measures clarify the procedures for converting overseas lending to overseas direct investment (\u201cODI\u201d), mainly covering two scenarios: conversion of existing debt into equity and contribution with creditor\u2019s rights.<\/p>\n Regarding the conversion of existing debt into equity, the Measures establish a clear logic: the lender\/investor must first obtain the requisite ODI approval or filing from the competent ODI authorities (the NDRC and\/or the Ministry of Commerce), then complete the amendment or cancellation of the overseas lending registration with SAFE. Please note even if no cross-border remittance is involved, you must complete ODI registration with your bank (authorized by SAFE) as the final step.<\/p>\n Regarding the contribution with creditor\u2019s rights: such transactions are mainly subject to the ODI management. The investor shall also first obtain the requisite ODI approval or filing from the competent ODI authorities (the NDRC and\/or the Ministry of Commerce), then complete the SAFE\u2019s ODI registration directly at the bank. If the creditor\u2019s right involves existing overseas lending, the investor shall also follow the procedures of amending\/canceling the overseas lending registration with SAFE.<\/p>\n The Measures unify the previously fragmented account rules and establish a standardized integrated account for both RMB and foreign currencies. Previously, domestic enterprises were required to open separate accounts under different rules: a Special Account for Foreign Exchange Overseas Lending as required by Notice No. 24 for foreign currency loans, and an RMB Special Deposit Account as required by Notice No. 306 for RMB loans. This division forced enterprises to open separate accounts under different regulatory systems for different currencies.<\/p>\n The Measures now unify these accounts into a single Special Account for Overseas Lending, which can be an RMB account, a foreign exchange account, or a consolidated multi-currency account. Enterprises may share one special account for multiple overseas lending transactions as needed. Enterprises with existing compliant accounts may reuse them for new transactions, eliminating repetitive account opening.<\/p>\n The closed-loop management of cross-border funds remains mandatory. All loan funds must be remitted abroad through the Special Account, and all principal and interest repayments must be fully remitted back to the same Special Account.<\/p>\n The progress of RMB internationalization in the lending market reflects China\u2019s deep integration into the global financial system. Supported by currency swaps, RMB clearing banks, CIPS, the rapid growth of cross-border RMB settlement and the large scale of overseas RMB loans, the RMB has formed a full-scenario and wide-coverage cross-border usage ecosystem and secured an increasingly important position in the global monetary system.<\/p>\n The upgraded regulatory system lays a solid foundation for the internationalization of RMB loans. The unified regulatory framework, expanded quota space and streamlined procedures have stimulated the cross-border lending vitality of banks and enterprises, and provided you with a more stable, efficient and cost-effective financing channel. We recommend that lenders, borrowers, and other parties involved in financing transactions consider making such deals in RMB, provided it meets their business needs; in particular, financial institutions may consider establishing their presence in relevant business sectors as early as possible.<\/p>\n <\/p>\n Since the implementation of the Civil Code of the People\u2019s Republic of China (the \u201cCivil Code\u201d) and the Interpretation of the Supreme People\u2019s Court on the Application of the Relevant Security Interest System of the Civil Code of the People\u2019s Republic of China (the \u201cInterpretation\u201d), notable trends have emerged in Chinese judicial practice concerning security interest. In many instances, the focus of judicial scrutiny has shifted from a formalistic review toward a substantive functional review of security instruments.<\/p>\n This article summarizes three typical scenarios in real estate finance, asset-based lending and capital markets. These cases do not define absolute legal boundaries but reflect recent judicial trends.<\/p>\n In financing transactions involving properties under construction or pre-sale properties, lenders frequently encounter a risk gap during the period before the properties to be mortgaged are structurally topped out or their title certificates are issued. To mitigate this risk, Chinese law established the pre-notice registration system (\u201cPre-notice Registration\u201d), enabling creditors to secure a prospective priority right over the mortgage. Meanwhile, banks usually require developers to provide an interim guarantee or security, which will remain in effect until the banks obtain the mortgage right certificate. According to Article 52 of the Interpretation, when Pre-notice Registration meets specific conditions (such as the initial ownership registration of the building\u2019s ownership having been completed and the Pre-notice Registration remains valid), a legal fiction is applied, whereby the mortgage is deemed created as of the date of the Pre-notice Registration.<\/p>\n However, judicial practice is split on whether such statutory fiction of the Interpretation above may discharge the developer\u2019s interim guarantee\/security interest:<\/p>\n Conservative view (Jilin High People\u2019s Court, retrial case6):<\/span><\/p>\n In this case, a borrower purchased a property with loans granted by a bank, for securing which the bank processed a Pre-notice Registration of mortgage over such property. Simultaneously, the developer provided an account deposit as security to the bank, stipulating that the security would be discharged until the bank obtains the mortgage right certificate. The developer argued before the court that since the bank had completed the Pre-notice Registration, the mortgage right shall be deemed to be created on the date of Pre-notice Registration, so its security shall be deemed as discharged.<\/p>\n The court emphasized strict adherence to contractual arrangements, and held that as long as the bank has not obtained the mortgage right certificates, the security provided by the developer should not be discharged. The court said that although Pre-notice Registration of mortgage possesses certain in rem exclusive effects under specific conditions, it does not automatically trigger the legal effect of the mortgage being created as of the date of the Pre-notice Registration, and the risk of failure to get mortgage right had not been fully eliminated. Discharge of the account deposit at this stage would frustrate the contractual purpose of ensuring an orderly transition from the interim security arrangement to the mortgage.<\/p>\n Substantive view (Shenzhen Intermediate People\u2019s Court, 2025 typical case7):<\/span><\/p>\n In such very similar case, Shenzhen Intermediate People\u2019s Court held that the developer\u2019s guarantee arrangement should not be interpreted solely based on the literal wording. Although the bank had not yet obtained the mortgage right certificate, the court held that the essence of an interim guarantee is to cover the risk between loan disbursement and the creation of the mortgage. In this case, since the Pre-notice Registration has been completed and remained valid, the Interpretation has applied a legal fiction that the mortgage was created as of the date of Pre-notice Registration. This implies the bank has substantively secured its priority right, and the legal risk gap has effectively evaporated. Accordingly, the court dismissed the bank\u2019s claims for the developer to assume guarantee liability.<\/p>\n These conflicting judgments show that judicial practice has not yet formed a unified standard on formal review vs. substantive review of security interests. As a creditor, you should adopt prudent arrangements and prepare backup risk-mitigation measures for such transactions.<\/p>\n In recent years, courts have adopted a look-through approach in reviewing the validity of security interests in many cases. A typical case published by the Zhejiang High People\u2019s Court8 precisely outlines the legal red line for implicit credit enhancement in the public debt sector.<\/p>\n In this case, a company issued medium-term notes in an aggregate amount of RMB 500 million to 1 billion, in the National Interbank Bond Market, explicitly stating in the official prospectus that the issuance was unsecured. A bank subscribed RMB 300 million of the notes. Before the subscription, one of the bank\u2019s branches entered into a separate facility agreement with the issuer stipulating the purpose of loan is subscription of those notes. And the affiliate company provides guarantee and certain security in favor of the bank. After the issuer defaulted under the notes in 2023, the bank applied to enforce the security provided by the affiliate company and demanded the same company to assume guarantee liability.<\/p>\n The court dismissed such claims of the bank. The court held that the security and guarantee were provided for the debts under the facility agreement, not the notes. Since no debt has been proved as occurred under the facility agreement, no security or guarantee liability really exists. Other than the direct reason above, the court further elaborated on the in-depth considerations. The court said that the prospectus possesses a public notice attribute and had committed to the market that the notes were unsecured. If a side-agreement guarantee (drawer guarantee) was set up for a specific investor (the bank), it would constitute a misrepresentation to other investors. Such implicit credit enhancement would allow the bank to obtain protections superior to those of other investors, severely undermining the order of fair competition.<\/p>\n Based on the statements of the court, it may imply that even if a third party directly provides guarantee or security for securing the debts under the notes, such arrangement may be ruled invalid by the court on the grounds of harming public interests or disrupting financial order. This case also serves as a reminder to creditors that, they should obtain the guarantee and security interest in a proper way without harming other creditors\u2019 rights to the extent of their knowledge.<\/p>\n Against the backdrop of volatility in the traditional automotive market and tightening financial regulations, some auto sellers are facing severe liquidity difficulties due to financing pressures. For getting finance from banks, some sellers create maximum pledge over their cars\u2019 inventory by way of delivering the ancillary documents of the cars to the possession of the banks. This has led to frequent infringements on consumer rights, where vehicles are sold but they cannot be registered for a vehicle license due to the lack of ancillary documents which are under control of the banks. In practice, financial institutions commonly adopt a model of possessing ancillary documents instead of taking possession of the cars themselves. For the pledgee and the pledgor, such model avoids delivery of the vehicles and may prevent sale of the vehicles without the pledgee\u2019s consent. However, this model is facing severe challenges in judicial evaluation when confronted with ownership claims from end consumers. In this regard, the Top Ten Typical Commercial Trial Cases of Chongqing Courts in 20249, selected by the Chongqing High People\u2019s Court, reflect a core judicial view: the creation of a pledge over movables must take physical possession of the collateral as a core requirement. Mere possession of ancillary documents instead of the movables does not constitute a valid pledge, and cannot prevail against a bona fide purchaser.<\/p>\n In this case, a Chongqing auto sales company entered into a Maximum Amount Pledge Contract over Movables with a Shanghai bank, agreeing to pledge all inventory vehicles and their certificates of conformity to secure its debts owed to the bank. Subsequently, several consumers signed purchase contracts, paid the full purchase price, and took delivery of the vehicles. However, because the certificates of conformity remained under the bank\u2019s supervision, the consumers were unable to register the vehicles for license. They subsequently sued the dealer and the bank to compel the delivery of the certificates.<\/p>\n The court held that the vehicles in question had not undergone an actual transfer of possession and control; thus, the pledge over the vehicles was never perfected. While the bank possessed the certificates based on a contractual relationship, only possession of certificates does not constitute a possession of the vehicles. Since no disclosure of the possession of the certificates have been made, the consumers were deemed as having exercised reasonable due diligence before purchase and bona fide third parties. The bank\u2019s undisclosed possession of the certificates could not be asserted against such bona fide third parties.<\/p>\n This case confirms the basic property law principle: possession of documents cannot replace physical possession of movable collateral. If the lender cannot prove exclusive physical control, the pledge will be deemed unestablished. If you are a lender engaged in vehicle financing, you face the risk of losing security interest if you rely on document custody instead of physical control. Therefore, banks should carefully review your finance structures to ensure that security interests are duly established and enforceable against third parties.<\/p>\n Judicial review of security interests is increasingly focused on substantive possession, information disclosure consistency and fairness. You should look beyond formal contract drafting and focus on the substantive effect of security arrangements. Greater attention should be paid to the perfection of security interests and regulatory compliance. To adapt to the changing rules, you should shift from formal compliance to substantive risk management to protect your security rights.<\/p>\n <\/p>\n On 31 December 2025, the National Financial Regulatory Administration (\u201cNFRA\u201d) published the Administrative Measures for M&A Loans of Commercial Banks (\u201cMeasures\u201d), effective on the same date, and repealed the Guidelines on Risk Management of M&A Loans of Commercial Banks published in 2008 (and amended in 2015, \u201cGuidelines\u201d).<\/p>\n (1) Background<\/span><\/p>\n Chinese regulatory authorities have been continuously exploring and developing the regulation of M&A loans, particularly published the Guidelines in 2008 which established a regulatory framework of M&A loans, and amended it in 2015 to allow longer loan period and higher loan to equity ratio. However, it is undeniable that some requirements of the Guidelines have imposed numerous limitations. For instance, the Guidelines only permitted M&A loans for transactions \u201cresulted in merger or actual control.\u201d As China\u2019s economy enters a critical phase of transition from old to new growth drivers, market entities have shown a significantly increased need to achieve industry consolidation and transformation and upgrading through equity investments. A large number of strategic equity M&A deals have been unable to obtain bank credit support due to policy restrictions, making it difficult to meet the financing needs of science and technology innovation enterprises and industrial upgrading. To address these issues, the NFRA, through pilot measures such as appropriately relaxing the policy on M&A loans for technology enterprises in 18 cities, accumulated valuable experience for the promulgation of the Measures.<\/p>\n After the publishment of the Measures, the core regulations of Chinese loan market, i.e. the Administrative Measures for Fixed Asset Loans, the Administrative Measures for Working Capital Loans, and the Administrative Measures for Syndicated Loans, have been updated. It also reflects that China\u2019s financial regulatory authorities are methodically improving and updating the legal framework of loan market regulations in a planned and step-by-step manner, ensuring that it not only better meets market needs but also systematically safeguards the safety and stability of China\u2019s loan market.<\/p>\n (2) Core Developments<\/span><\/p>\n The following five aspects of developments shall be paid attention to:<\/p>\n First, the scope of acquirers is expanded to \u201ca single acquirer\u201d or \u201cmultiple acquiring enterprises that have an acting-in-concert relationship\u201d, allowing a consortium to apply for an M&A loan.<\/p>\n Second, a few changes have been made related to the conditions for applying for an M&A loan. The borrower is limited to \u201cthe acquirer\u2019s wholly-owned or controlled subsidiary primarily engaged in investment management\u201d. The borrower shall have no record of credit defaults in a period of the past three years, which period is expressly stipulated at the first time. It is explicitly required that the target company or asset should have sound commercial value and be capable of generating a reasonable economic return for the acquirer.<\/p>\n Third, for the first time, M&A loans are categorised into two major types \u2014 control-type and equity participation-type \u2014 breaking the Guidelines\u2019 limitation of supporting only control-type M&A, and providing an institutionalized credit channel for the strategic equity participation of non-controlling shareholders. Control-type M&A loans support a single acquirer, or a consortium of parties acting in concert, in obtaining control of the target enterprise, and add a sub-type of M&A loans for maintaining or enhancing control. Equity participation-type M&A loans can support a single acquirer in acquiring a minority stake in the target enterprise (without achieving control). However, the Measures do not completely eliminate restrictions on the percentage of equity that the borrower must acquire. As provided by the Measures:<\/p>\n Fifth, it is clarified that an M&A loan may be used to refinance the acquisition price pre-paid by the acquirer (e.g., a bridge loan), but may not be used to refinance any existing M&A loan. The period between the first drawdown of the loan and the time when the entire transaction price to be refinanced has been paid must not exceed one year. This requirement closes off the avenue of using continuous refinancing to cover up the risks associated with M&A projects. For existing projects that plan to maintain liquidity by \u201crolling over debt\u201d, borrowers must plan their funding arrangements in advance. For M&A loan agreements entered into prior to the promulgation of the Measures, according to the responses from the responsible officials of NFRA to journalists\u2019 questions on the Measures, banks may execute them in accordance with their contractual terms, and such contracts will be naturally settled upon their expiry.<\/p>\n (3) Major Implications<\/span><\/p>\n The implementation of the Measures will have a profound impact on enterprises, commercial banks, and the entire M&A loan market. For banks fulfilling the requirements for M&A loan business as provided by the Measures, business opportunities may increase considerably, as equity participation-type M&A transactions bring new business growth points, while the optimisation of loan conditions and terms will assist banks in better matching client needs. For enterprises, the liberalization of \u201cequity participation-type\u201d and \u201cmaintained or enhanced control-type\u201d M&A loan is a significant boon, greatly enriching the toolkit for investment and M&A; at the same time, the tightening of the “refinancing” channel and restriction on the “refinance period” also require enterprises to enhance the foresight of their financial planning.<\/p>\n On 20 March 2026, the Ministry of Justice, PBOC, NFRA, the China Securities Regulatory Commission and SAFE jointly published the Financial Law of the People\u2019s Republic of China (Draft) (\u201cFinancial Law\u201d), soliciting public comments until 19 April 2026.<\/p>\n (1) Brief overview<\/span><\/p>\n The Financial Law consists of 11 chapters and 95 articles. It is positioned as China\u2019s first basic, comprehensive, and overarching law governing the financial sector, and lead a shift from fragmented legislation to systemic architecture in China\u2019s financial legal system. The intention is to build a top-level regulatory framework for the financial sector, constructing a the \u201c1+N+X\u201d financial regulatory system, consolidating and maintaining the stability of the existing regulatory architecture while leaving room for the development of the regulatory regime in the future.<\/p>\n (2) Key Points of the Financial Law<\/span><\/p>\n First, matters relating to risks of financial institutions. Based on the risk exposure of financial institutions over the past few years, the Financial Law reflects a heightened focus on these matters such as financial institution shareholder\u2019s liability, improper intervention in operations, transfer of benefits and institutional reorganization. Notably, a separate chapter is devoted to risk resolution of financial institutions, and a provision is added that the financial regulatory authorities under the State Council may petition a people\u2019s court to initiate reorganisation or bankruptcy liquidation of a financial institution. For banks, it is foreseeable that subsequent regulatory developments may intensify the supervision of shareholder behavior and responsibilities, related-party transactions, and bank risk control systems, thereby addressing the irregularities that have previously occurred in institutions such as city commercial banks and trust companies.<\/p>\n Second, the establishment of the substantive supervision principle. Article 51(1) of the Financial Law provides that the financial regulatory authorities shall, in accordance with the principle of \u201csubstance over form\u201d, supervise and administer financial activities and conduct industry statistical monitoring according to their respective duties. Although the principle of \u201csubstance over form\u201d has consistently been applied in China\u2019s financial regulatory practice, the fact that this draft of the Financial Law directly aims to incorporate this principle in the \u201cbasic law\u201d of the financial sector should still be given close attention. Meanwhile, the Financial Law requires to \u201cestablish a sound fallback regulatory mechanism\u201d in the same article, which reflects the regulators\u2019 reflection on the past problems of unregulated financial innovation and the difficulty of coordinating supervision over channel businesses. For financial institutions, they must henceforth exercise greater prudence when assessing the compliance of innovative products and cooperative arrangements with other financial institutions, and in particular consider, from a substance-over-form perspective, the economic substance of the business and the regulatory requirements that should apply to it, rather than only achieving formal compliance.<\/p>\n Third, cross-border business related requirements. The Financial Law embodies China\u2019s stance of continuing to expand institutional openness in the financial sector, while also requiring financial institutions to strengthen the safeguarding of financial security. Beyond conventional anti-money laundering, anti-corruption, and counter-terrorist financing measures, the Financial Law devotes considerable space to the orderly cross-border flow of funds, as well as data and cyber-related matters. Moreover, Article 85(4) mandates that no organisation or individual may enforce, or assist in enforcing, any discriminatory restrictive measures adopted by a foreign state in the financial sector against Chinese citizens or organisations, nor may they conduct, assist, or support any acts in the course of financial activities that harm China\u2019s sovereignty, security, or development interests. This requirement is consistent with the Rules for Implementing the Anti-Foreign Sanctions Law of the People\u2019s Republic of China, employing the restrained expression \u201cdiscriminatory restrictive measures\u201d. For multinational financial institutions, attention must be paid to whether the home countries of their parent companies or other affiliated entities have imposed any discriminatory restrictive measures, and these legal conflicts must be addressed in a timely and appropriate manner, if any.<\/p>\n Fourth, the encouragement of technology finance (as distinguished from fintech), green finance, inclusive finance, pension finance, and digital finance has been codified in the Financial Law. At the level of a \u201cbasic law\u201d of the financial sector, this clarifies the business areas that the government intends to encourage over the long term, providing clear guidance for the business development of financial institutions.<\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-140872","hot_topics","type-hot_topics","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/hot_topics\/140872","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/hot_topics"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/hot_topics"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=140872"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Integration of Regulatory Models: Ending the Dual-Track System<\/h5>\n
Expansion of Quota Space<\/h5>\n
Procedural Alignment: Linking Overseas Lending with ODI<\/h5>\n
Reshaping the Account System: Account Integration and Shared Usage<\/h5>\n
Conclusion<\/h5>\n
Observations on the Recent Judicial Developments in Matters related to Security Interests in Chinese Market Practice<\/h4>\n
Real Estate Finance: Pre-notice Mortgage Registration and Discharge of Developer\u2019s Guarantee Liabilities<\/h5>\n
Capital Markets: Judicial Negation of Implicit Credit Enhancement<\/h5>\n
Asset-Based Lending: Possession of Ancillary Documents Fails to Create a Pledge and Cannot Prevail Against Bona Fide Purchasers<\/h5>\n
Seeking Balance in an Evolving Landscape<\/h5>\n
Other Important Legal Updates<\/h4>\n
Administrative Measures for M&A Loans of Commercial Banks<\/h5>\n
\n
Financial Law (Draft)<\/h5>\n