By Huang Xuhua  Sau-Wing Mak  Kevin Tong  King & Wood Mallesons’ Corporate Group


As part of China’s commitment to foster the development of the offshore RMB bond market in Hong Kong, the National Development and Reform Commission (“NDRC”) published the “Circular on the Matters relating to the Issuance of RMB Bonds in Hong Kong by Onshore Non-financial institutions” (the “NDRC Circular”) on 2 May 2012. The Circular is a sequel to the “Interim Measures for the Administration of the Issuance of RMB Bonds in Hong Kong by Onshore Financial Institutions” published by the NDRC in June 2007 which regulate the issuance of RMB bonds in Hong Kong by onshore financial institutions (the “2007 Measures”).

Prior to the publication of the NDRC Circular, approvals for onshore PRC non-financial institutions to issue RMB Bonds in Hong Kong have been granted on a discretionary basis. In November last year, Baosteel Group Corporation became the first PRC corporate to issue RMB bonds in Hong Kong. Late last month, one metals and mining company and three state-owned power plant operators, namely China Minmetals, Guangdong Nuclear Power, Huaneng Power and Datang Power , were granted approvals by the NDRC to issue RMB bonds in Hong Kong. The significance of the NDRC Circular is that it formalises the approval process and stipulates the regulatory framework for onshore PRC non-financial institutions to issue RMB bonds in Hong Kong.

Scope of application

The NDRC Circular applies to the issuance of RMB bonds in Hong Kong by non-financial institutions incorporated in the PRC (“non-financial institutions”). The RMB bonds should have a tenor of no less than one year.

Although the NDRC Circular technically applies to all non-financial institutions, it remains to be seen how many and which type of institutions will be granted the approval. That said, it is likely that state-owned enterprises will be the first batch of companies to be granted the approval, as smaller private companies may struggle to meet all of the requirements set out by the NDRC.


Approval process and timing

The specific approval process varies depending on the type of non-financial institution. An enterprise which is supervised by the Central Government can submit the application directly to the NDRC for approval. A local enterprise is required to submit the application for examination and approval by the provincial branch of the NDRC, which will in turn submit the application to the NDRC for final approval.

The NDRC will decide whether it will grant the approval to a non-financial institution within 60 working days of accepting the application. Once the approval is granted, the non-financial institution is required to initiate the bond issuance process within 60 working days from the date of the approval. The NDRC approval will be valid for one year during which the RMB bond issuance must be completed. 

Applicant’s criteria


An applicant seeking to issue RMB bonds in Hong Kong must fulfil the following criteria:

(a)          it must have good corporate governance and creditability;

(b)          it must have relatively strong profitability;

(c)          the proceeds obtained from the RMB bond issuance must be mainly used for fixed asset investment projects which comply with the PRC’s national macroeconomic policies, industrial policies, foreign investment and outbound investment policies and fixed asset investment administrative rules;

(d)          none of its outstanding corporate bonds or other debt is in default and there has been no deferral of any payment of interest or principal; and

(e)          it has maintained a three-year compliance track record, with no material violation of any laws or regulations.

Whilst the eligibility criteria for non-financial institutions under the NDRC Circular are similar to the ones for financial institutions set out under the 2007 Measures in terms of corporate governance, financial condition and compliance track record, the NDRC Circular appears to have introduced a different treatment in terms of the use of proceeds of the RMB bonds. Under the 2007 Measures, the issuer is required to repatriate the proceeds of the RMB bonds back to the PRC within 30 working days after the completion of the bond issue. The repatriation of funds is no longer required under the NDRC Circular. Under the new rules, the proceeds must however be used to invest in fixed asset investment projects in those industries which are in line with China’s policies with respect to macroeconomic control, administration of industry and use of foreign investments. . It also appears that proceeds of the bond issue may be used for outbound investment projects, a move which is in line with PRC Government’s initiatives for RMB internationalisation.


Reporting and registration requirements

The issuer is required to report details of the status of the RMB bond issuance to the NDRC within 10 working days after completion of the bond issuance.

Any RMB bond issuance in Hong Kong by an issuer pursuant to the NDRC Circular will be classified as “foreign debt” and hence all related regulations, such as the usual registration requirements with the State Administration of Foreign Exchange (“SAFE”), will need to be complied with.

In the case of a RMB bond issuance in Hong Kong by an offshore branch or subsidiary of a non-financial institution and guaranteed by an onshore entity, such non-financial institution is required to report details of the issue size, tenor and use of proceeds of the proposed bond issue to the NDRC 20 working days before the issuance of the RMB bonds.

Whilst the reporting and SAFE registration requirements under the NDRC Circular are similar to the 2007 Measures, the NDRC Circular has introduced a new requirement for the non-financial institution to make a filing with the NDRC where its offshore branch or subsidiary issues RMB bonds in Hong Kong which are to be guaranteed by an onshore entity. This requirement is additional to the current requirement that the giving of a guarantee to an offshore beneficiary by an onshore entity is subject to SAFE’s approval.   Pursuant to the NDRC Circular, this filing requirement is limited to structures where there is a guarantee in place and does not appear to affect other structures commonly used in RMB bond deals, such as letter of support or keepwell arrangement or other forms of credit enhancement which does not constitute a guarantee. 



The NDRC Circular completes the regulatory framework in relation to the issuance of RMB bonds in Hong Kong by both financial and non-financial institutions incorporated in the PRC. The rules set out in the NDRC Circular are similar to the 2007 Measures. It is a welcoming development that the NDRC Circular has removed some of the limitations and restrictions under the 2007 Measures. In the last article of the NDRC Circular, it is also stated that RMB bonds to be issued by a non-financial institution in offshore markets other than Hong Kong should follow the same rules and requirements as set out in the NDRC Circular, a positive indication of the PRC government’s effort for further development of the offshore bond market on other jurisdictions and the internationalisation of RMB in the near future.