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Regulatory Overview

On 8 March 2010, the China Banking Regulatory Commission, the National Development and Reform commission, the Ministry of Industry and Information Technology, the Ministry of Finance, the Ministry of Commerce, the People's Bank of China and the State Administration for Industry and Commerce promulgated the Interim Measurs for the Administration of Financial Guarantee Companies ("Interim Measures") to implement/strengthen "prudent regulation" of financial guarantee companies by setting forth requirements on the registered capital, leverage ratio, governance and internal control, risk management, disclosure, senior management and personnel qualification, and other aspects of financial guarantee companies.
Prior to promulgation of the Interim Measures, there were no major specific laws and regulations governing guarantee companies or guarantee business save as the following laws and regulations:
— the Guarantee Law of the PRC to govern the relationship between guarantors and guarantees under guarantee contracts;
—the Opinions on Strengthening Development of Credit Guarantee System for Small and Medium Enterprises to provide guidelines on corporate credit guarantee fees; and
— the Several Regulations on Implementation of Construction Contract Guarantee in Real Estate Development Projects (Trial) to regulate performance guarantee business for any construction contract for a real estate development project with an amount exceeding RMB10 million.
In accordance with the Interim Measures, the establishment of a financial guarantee company or its branch is subject to the receipt of approval and the issue of a fi nancial guarantee services permit from the relevant provincial level supervisory authority (the "Competent Supervisory Authority"). The Competent Supervisory Authorities in Hebei and Xiamen are the Industry and Information Technology Department of Hebei Province and the Economic Development Bureau of Xiamen respectively. The minimum registered capital for any financial guarantee compan y shall not be less than RMB5 million and such capital shall be paid-up registered capital contributed by cash. Nevertheless, local governments are authorised to promulgate stricter requirement on the minimum registered capital of guarantee companies. The Interim Measures set forth the ratios of a financial guarantee company's outstanding guarantee amount (for each and all debtors) to its net assets. In particular, a financial guarantee company's outstanding fi nancial guarantee amount shall not exceed ten times its net assets. The outstanding fi nancial guarantee amount provided by a fi nancial guarantee company for a single customer shall not exceed 10% of the net assets of the financial guarantee company, the outstanding financial guarantee amount provided for a single customer and its affi liated parties shall not exceed 15% of the net assets of the fi nancial guarantee company.
In order to facilitate implementation of the Interim Measures in Hebei and Xiamen, the local governments of Hebei and Xiamen promulgated the Hebei Implementing Rules on 20 May 2010, and the Xiamen Interim Measures on 22 September 2010, respectively. The Hebei Implementing Rules and Xiamen Interim Measures set forth detailed rules regarding the establishment, operation, business scope, risk control and other matters of local financial guarantee companies. The Xiamen Interim Measures set the minimum registered capital of a fi nancial guarantee company to RMB100 million, which is much higher than the minimum requirement of RMB5 million in the Interim Measures and Hebei Implementing Rules.
As advised by the PRC Legal Adviser, neither the performance guarantee fee nor consultancy fee is restricted by any regulations on determination of the rates or range of the fee. Both performance guarantee fee and consultancy fee are calculated on a case-by-case basis and subject to commercial negotiation between the relevant members of the Group and their respective customers. The PRC Legal Adviser further advised that the Group had complied with the regulatory requirements during the Track Record Period.
On 23 November 2006, the National Development and Reform Committee and other four authorities jointly promulgated the Opinions on Strengthening Development of Credit Guarantee System for Small and Medium Enterprises to encourage the SME credit guarantee business and improve the guarantee companies' sustainable development. Pursuant to these opinions, the guarantee fees charged by the guarantee companies which mainly provide loan guarantees to SMEs will be linked to their operation risks and costs. The benchmark rate of the guarantee fees may be 50% of the banks' loan interest rate for the same period, and the actual rate in an individual transaction may be 30% to 50% upper or lower than the benchmark rate, depending upon the level of risks of the specifi c projects.      

Regulatory Overview


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