China Newsletter November 2009

Foreign Investment Financing in China

The difficult global economic environment of the last twelve months has affected financial planning and budgets of most businesses around the globe. The global downturn has especially impacted on the international trading of multi-national businesses. China in particular has experienced a steep fall of export business which has forced many foreign investors to review the financing situation of their Chinese subsidiaries. The financing and foreign exchange regulations of the PRC, the People’s Republic of China, make it difficult to react quickly to financial needs of foreign-invested enterprises (FIE), since capital control mechanisms are in place for foreign exchange transactions across the Chinese borders under the supervision of SAFE, the State Administration of Foreign Exchange, China’s national regulator for foreign capital control. This makes it necessary to react to threatening financing problems of PRC subsidiaries at the earliest opportunity.

This newsletter provides an overview of options to react to financing needs of FIE in China and any considered potential limitations to these. In practice, a mixture of these financing options is often applied.

Lawyers Dr. Sven-Michael Werner