SAFE Issues New Rules on Foreign Security

On 30 July 2010, China's State Administration of Foreign Exchange (SAFE) issued a Notice on the Administration of the Provision of Security to Foreign Entities by Domestic Institutions.

The Notice introduces changes to the current rules governing foreign security granted by Chinese institutions. Under the new regulations, banks have much more freedom and flexibility in providing foreign security. While non-banks are generally still subject to case-by-case approval from SAFE when providing foreign security, they can now enjoy a more relaxed regime if they are qualified and approved by SAFE.

Under the new rules, foreign security is defined to include "financing foreign security"¹ (FFS) and "non-financing foreign security"² (non-FFS). Chinese institutions are classified as banks, non-bank financial institutions and ordinary enterprises³. Each of these is subject to different rules.