The People’sBank of China, the Ministry of Finance, the State Development and ReformCommission, the China Securities Regulatory Commission jointly issue the “ProvisionalAdministrative Rules on International Development Institutions’ Issuance of RMBBonds”

The People’s Bankof China, the Ministry of Finance, the State Development and Reform Commissionand the China Securities Regulatory Commission jointly issue the “ProvisionalAdministrative Rules on International Development Institutions’ Issuance of RMBBonds” (referred to as Administrative Rules hereinafter) on February 18, 2005in the form of a joint pubic notice (No. 5, 2005), allowing eligibleinternational development institutions to issue RMB bonds in China. TheAdministrative Rules take effects on the date of promulgation.

The “AdministrativeRules” are intended to standardize international development institutions’issuance of RMB bonds, so as to define responsibilities of various governmentdepartments and promote the development of bond market in an orderly and steadymanner by introducing the international development institutions as a newissuer. The “Administrative Rules” are not only consistent with current rulesand regulations, but take into account the overall strategy of capital marketdevelopment and China’s WTO commitments, with special focus on legal complianceand standardization of practices.

There are 25articles in the “Administrative Rules”, covering the following 5 aspects:

- Eligibility ofthe issuer. The rules set a credit rating floor for international developmentinstitutions’ RMB bonds.

- Standardizationof review and approval of the RMB bond issues. The Ministry of Finance will actas a reception department, accepting applications filed by internationaldevelopment institutions for issuance of RMB bonds and reviewing them jointlywith the People’s Bank of China, the State Development and Reform Commissionand the China Securities Regulatory Commission before submitting it to theState Council for approval.

- Clear definitionof regulatory responsibilities among relevant government departments. The StateDevelopment and Reform Commission, together with the Ministry of Finance, is toapprove the issuance size of the RMB bonds and review the use of the raisedfunds according to industrial policy of the State and developments of foreigncapital and debt, macroeconomic performance and the balance of payments. ThePeople’s Bank of China regulates the interest rate of RMB bonds’ initialoffering. The State Administration of Foreign Exchange administrates thespecial non-resident RMB account for the funds raised by RMB bond issues andthe conversion of these funds according to relevant regulations of foreignexchange.   

- Specific ruleson intermediaries involved in RMB bond issues.

- Limitation onuse of funds raised by RMB bond issues. Funds raised by internationaldevelopment institutions’ issuance of RMB bonds shall be used in projects inChina and are not allowed to be converted into foreign exchange and transferredoverseas, while the issuer shall use and manage the unused funds according torelevant rules and regulations in China.

After thepromulgation of the “Administrative Rules”, one or two internationaldevelopment institutions will be chosen as pilot issuers of RMB bond and thepractice will be extended to other eligible issuers based on the experience andperformance of the pilot issues. Allowing international developmentinstitutions to issue RMB bonds in domestic bond market will further diversifybond issuers in the domestic bond market, which will to a great extent promotethe development of the bond market.