China Banking Regulatory Commission, Administration of Investment and Equity Participation in Chinese-invested Financial Institutions by Offshore Financial Institutions Procedures

Promulgated: December 8 2003
Effective: December 31 2003
Interpreting authority: China Banking Regulatory Commission (CBRC)
Applicability: "Offshore financial institutions" is defined to include international financial institutions and foreign financial institutions. "International financial institutions" means the World Bank and its subsidiaries, other inter-governmental development-oriented financial institutions and other international financial institutions recognized by the CBRC. "Foreign financial institutions" means financial holding companies, commercial banks, securities companies, insurance companies, funds registered and established in foreign countries, and other foreign financial institutions recognized by the CBRC (Article 2).
  "Chinese-invested financial institutions" means Chinese-invested commercial banks, urban credit cooperatives, rural credit cooperatives, trust and investment companies, enterprise group finance companies, lease-financing companies and other Chinese-invested financial institutions established with the approval of the CBRC and that are legally established in China (Article 2).
  "Investment and equity participation proportion" means the proportion of the amount of capital contribution or the proportion of shareholding to the total paid-in capital or total equity of a Chinese-invested financial institution (Article 2).
  The Procedures apply to investment and equity participation in Chinese-invested financial institutions by Hong Kong, Macao and Taiwan financial institutions unless where the State Council provides otherwise (Article 17).
  The Procedures do not apply to purchase of negotiable shares of listed Chinese-invested financial institutions by qualified foreign institutional investors (Article 18).

Main contents: The Procedures set out the criteria for investment and equity participation in Chinese-invested financial institutions by offshore financial institutions. For instance, the year-end total assets of the recent year shall in principle be not less than US$10 billion for investment and equity participation in Chinese-invested commercial banks, and not less than US$1 billion for investment and equity participation in Chinese-invested non-bank financial institutions (Article 7(1)). Investment and equity participation shall be made in monetary funds (Article 6). Offshore commercial banks shall have a capital adequacy ratio of not less than 8% and offshore non-bank financial institutions shall have a total amount of capital that is not less than 10% of the total amount of weighted risk asset (Article 7(4)).
  Article 8 stipulates that the investment and equity participation proportion in a Chinese-invested financial institution by a single offshore financial institution shall not exceed 20%. If the aggregate investment and equity participation proportion in a non-listed Chinese-invested financial institution by more than one offshore financial institution amounts to or exceeds 25%, the non-listed financial institution shall be regulated as a foreign-invested financial institution. If the aggregate investment and equity participation proportion in a listed Chinese-invested financial institution by more than one offshore financial institution amounts to or exceeds 25%, the listed financial institution shall be regulated as a Chinese-invested financial institution (Article 9).
  Applications for investment and equity participation in Chinese-invested financial institutions by offshore financial institutions shall be made by the Chinese-invested financial institution that is absorbing the investment. If the applicant is a wholly state-owned commercial bank, share system commercial bank or a non-bank financial institution directly regulated by the CBRC, the application shall be made to the CBRC directly for approval. Other applicants shall have their applications made to a provincial-level branch of the CBRC for examination and verification and then submitted to the CBRC for approval (Article 10).