China Makes Secured Financing Easier

China's foreign exchange administration authority, the State Administration of Foreign Exchange (SAFE) has substantially relaxed rules that have, for many years, imposed onerous restrictions on the ability of companies inside China to grant security in favour of foreign entities.

Details of the new regime are set out in the Notice on Issues in the Administration of the Provision of Security to Foreign Entities by Domestic Institutions (Notice) which was issued and became effective on 30 July 2010.

The move is expected to be widely welcomed in the market as it will allow Chinese domestic entities and foreign-invested enterprises (FIEs) easier access to financing. It will also ease the administrative burden on the providers of the finance, whether a financial institution or a non-financial institution.