(Promulgated by the State Administration of Foreign Exchange on 11 December 1997 and effective as of 1 January 1998.)
颁布日期：19971211 　实施日期：19980101 　颁布单位：国家外汇管理局

PART ONE　GENERAL PROVISIONS

Article 1　These Rules are formulated in accordance with the Administration of the Provision of Security to Foreign Entities by Domestic Institutions Procedures (the 'Procedures'), in order to standardize the provision of security to foreign parties and to improve the control over provision of security to foreign parties.

Article 2　The State Administration of Foreign Exchange and its branches and sub-branches (the 'Administration of Foreign Exchange') shall be the authority to control the provision of security to foreign parties.

Article 3　The provision of security to foreign parties shall be subject to approval by the Administration of Foreign Exchange, except where these Rules provide other restrictions.

Article 4　For the purposes of the Procedures, 'provision of security to foreign parties' shall mean the provision by an organization within the People's Republic of China ( 'Security Provider') of a guarantees to foreign parties in the form of a letter of guarantee, standby letter of credit, promissory note and bils of exchange, or of a mortgage to foreign parties of property stipulated under Article 34 of the PRC, Security Law (the 'Security Law'), or of a pledge to foreign parties of movable property stipulated under Section 1 of Part Four of the Security Law and of rights stipulated under Article 75 of Section 2 of Part Four of the Security Law as undertakings to organizations outside the People's Republic of China or foreign-invested financial institutions within the People's Republic of China (creditors or beneficiaries, hereafter, 'Beneficiaries') that if a debtor (the 'Secured Party') fails to perform its obligations as provided for in a contract, the Security Provider will perform the obligations; or the Beneficiaries will receive repayment on a priority basis by evaluating the property mortgaged or the thing pledged in terms of money or through the proceeds of the auction or selling off of the property mortgaged or the thing pledged, in accordance with the Security Law.

Article 5　Relevant concepts in the second paragraph of Article 2 of the Procedures shall have the meanings set forth below:

1. 'Finance security' shall mean security for repayment of principal together with the interest thereon, provided by the Security Provider for the Secured Party's obtaining of financing from the Beneficiary. Methods of financing include borrowing, issuance of negotiable securities (excluding stocks), overdrafts, deferred payments, credit lines provided by banks, etc.

2. 'Finance lease security' shall mean security provided by the Security Provider to the lessor of equipment imported by the finance lease method, whereby the Security Provider undertakes that if the lessee fails to pay rent in accordance with the lease contract, the Security Provider will pay on its behalf.

3. 'Security under compensation trade arrangements' includes performance bonds denominated in cash foreign exchange and performance bonds not denominated in cash foreign exchange. Of such bonds, 'performance bond denominated in cash foreign exchange' shall mean security by which the Security Provider undertakes with the equipment supplier that if the importer, after having received equipment in conformity with the contract, fails to deliver the products to the equipment supplier or a third party designated thereby and is unable to pay the equipment price and the interest thereon in cash foreign exchange, then the Security Provider will compensate the equipment supplier according to the amount secured plus interest and relevant costs. Performance bonds not denominated in cash foreign exchange do not involve payment to the foreign party in cash foreign exchange, and do not fall within the scope of security regulated by these Rules.

4. 'Security in connection with contracted projects outside the People's Republic of China' shall mean security whereby the Security Provider undertakes with the Secured Party that if the tenderer, after having won the tender or executed the contract, fails to execute a contract or fails to perform the contract within the specified time, then the Security Provider will, within the scope of the security, pay the amount specified in the contract to the party that invited the tender. It includes tender security, performance bonds, security for advance payment, etc.

5. 'Other security with a foreign debt nature' shall mean all security that may constitute a foreign debt other than the four types of security set forth above.

Article 6　The parties to security provided to foreign parties shall include Security Providers, the Secured Parties and Beneficiaries.

'Security Providers' shall mean organizations within the People's Republic of China that qualify as legal persons or have been authorized by legal persons and that satisfy Article 4 of the Procedures, including wholly Chinese-owned financial institutions, domestic investment enterprises and foreign investment enterprises, and excluding foreign-invested financial institutions within the People's Republic of China. Of such Security Providers, those guarantees provided to foreign parties shall be the guarantors, those providing mortgages to foreign parties shall be the mortgagors and those providing pledges provided to foreign parties shall be the pledgors.

'Secured Parties' shall mean domestic enterprises within the People's Republic of China, foreign investment enterprises, those wholly-owned subsidiaries of organizations within the People's Republic of China that have been registered outside the People's Republic of China, and enterprises in which Chinese parties have equity participation.

'Beneficiaries' shall mean organizations outside the People's Republic of China and foreign-invested financial institutions within the People's Republic of China. Of such Beneficiaries, those providing guarantees to foreign parties shall be the creditors, those providing mortgages to foreign parties shall be the mortgagees and those under pledges provided to foreign parties shall be the pledgees.

Article 7　A 'written contract' as mentioned in Article 13 of the Procedures may be a separate contract between the parties, including a letter, a facsimile, an insurance contract under credit insurance, a standby letter of credit, etc. between the parties that is in the nature of security, but may also be a security clause in the principal contract.

A contract for provision of security to a foreign party shall be a subordinate contract of the principal debt contract. If the principal debt contract is void, the contract for provision of security to a foreign party shall be void as well. If the contract for provision of security to a foreign party provides otherwise, the matter shall be handled in accordance with such provisions.

Article 8　The limits of authority to examine and approve the provision of security to foreign parties shall be as set forth below:

1. the provision of security by a Security Provider (excluding a wholly foreign-owned enterprise) to foreign parties on behalf of domestic investment enterprises within the People's Republic of China and the provision of security with a term of not more than one year by a Security Provider (excluding a wholly foreign-owned enterprise) to foreign parties on behalf of foreign investment enterprises shall be reported by the Security Provider to and subject to examination and approval by the branch of the province, autonomous region or municipality directly under the central government in which the Security Provider is located;

2. the provision of security with a term of more than one year by a Security Provider (excluding a wholly foreign-owned enterprises) to foreign parties on behalf of foreign investment enterprises and the provision of security by a Security Provider (excluding wholly foreign-owned enterprises) to foreign parties on behalf of organizations outside the People's Republic of China shall be reported by the Security Provider to and preliminarily examined by the branch of the province, autonomous region or municipality directly under the central government in which the Security Provider is located, and then be reported by that branch to the State Administration of Foreign Exchange for examination and approval;

3. if the Security Provider is a national wholly Chinese-owned financial institution in Beijing, a domestic investment enterprise directly subordinate to the central authorities or a foreign investment enterprise (excluding wholly foreign-owned enterprises) that obtained its business licence from the State Administration for Industry and Commerce, the security provided by it to foreign parties shall be subject to examination and approval by the State Administration of Foreign Exchange.

Wholly foreign-owned enterprises may provide security to foreign parties on their own authority without case-by-case approval by the Administration of Foreign Exchange.

Article 9　When a Security Provider conducts the application procedure for examination and approval of the provision of security to a foreign party, it shall provide all or part of the following materials to the Administration of Foreign Exchange:

1. an application;

2. the approval document for the feasibility study for the secured project or the approval for the secured project issued by the government department in charge, and other relevant official replies and documents;

3. balance sheets and profit and loss statements of the Security Provider and the Secured Party which have been verified by a registered accountant and to which such accountant has affixed the official seal of his accounting firm (if the Security Provider is a group company, it shall provide the consolidated balance sheet and its own balance sheet and profit and loss statement);

4. the contract or the letter of intent in respect of the principal debt secured and other related documents;

5. the contract or letter of intent of security;

6. other materials that the Administration of Foreign Exchange requires to be provided.

Mortgages and pledges to foreign parties shall require provision of proof of ownership of the property mortgaged or the thing pledged and documentary evidence of the appraisal of its present value.

When wholly Chinese-owned financial institutions and domestic enterprises provide security to foreign parties on behalf of foreign investment enterprises, they must provide a document showing that the security required for the portion of the debt corresponding to the foreign party's investment ratio has already been obtained.

Where a branch of a financial institution provides security to a foreign party, it shall additionally provide the authorization document etc. from its head office.

Article 10　After the Administration of Foreign Exchange has received application materials that conform to Article 9 hereof from a Security Provider, it shall examine the same and, within 30 days of the date of receipt of the application, give an official reply or forward the materials to the Administration of Foreign Exchange one level higher. If the application materials do not satisfy the conditions, the Administration of Foreign Exchange shall return them to the applicant.

Article 11　If a Security Provider fails to issue security to a foreign party within six months after the Administration of Foreign Exchange has approved the provision of such security, the approval document from the Administration of Foreign Exchange shall automatically become void. If the provision of security remains necessary, the Security Provider must make a separate submission for approval.

Article 12　If an extension is required upon the expiration of security period, the Security Provider shall, 30 days prior to the maturity date of the debt, conduct extension procedures with the authorized Administration of Foreign Exchange of the place where it is located. Such application shall be subject to examination and approval by the Administration of Foreign Exchange in accordance with the limits of authority set forth herein.

Article 13　The head offices of wholly Chinese-owned financial institutions shall formulate methods of authorization and administration measures in respect of the provision of security to foreign parties by their branches, and report such methods and measures to the State Administration of Foreign Exchange for the record. The branches of wholly Chinese-owned financial institutions shall submit the methods of authorization and administration measures of their head offices to the Administration of Foreign Exchange under whose jurisdiction they come, for the record.

On the basis of the methods of authorization and administration measures submitted for the record, the Administrations of Foreign Exchange shall examine the ability of the wholly Chinese-owned financial institutions in their respective jurisdictions to provide security. Branches of wholly Chinese-owned financial institutions may not issue security to foreign parties without having been granted corresponding authorization.

The State Administration of Foreign Exchange shall examine the qualifications and ability of wholly Chinese-owned financial institutions to provide security. It shall notify wholly Chinese-owned financial institutions that do not satisfy the conditions and notify all local Administrations of Foreign Exchange that they should not approve the provision of security to foreign parties by such institutions or their branches.

Article 14　Domestic investment enterprises may provide security to foreign parties only for their directly subordinate subsidiaries or for that portion of the foreign debt of an enterprise in which they have equity participation as corresponds to the ratio of the Chinese party's investment in such enterprise, except where the Secured Party is a foreign investment enterprise that is being listed outside the People's Republic of China by means of issuing B shares or H shares etc.

Article 15　If a secured foreign loan needs to be converted into Renminbi for use, such conversion shall be handled in accordance with the relevant regulations concerning foreign exchange settlement of capital account items formulated by the State Administration of Foreign Exchange.

Article 16　The costs of secured foreign loans shall be subject to supervision and guidance by the Administration of Foreign Exchange.

Article 17　If the Secured Party is an organization outside the People's Republic of China, it shall satisfy the following conditions:

1. if the Secured Party is a trade-type enterprise outside the People's Republic of China, the ratio of its net assets to its gross assets may in principle not be less than 10%; if the Secured Party is a non-trade-type enterprise outside the People's Republic of China, the ratio of its net assets to its gross assets may in principle not be less than 15%; and

2. the Secured Party may not be a loss-making enterprise.

Article 18　Real estate developers involved in the provision of mortgage security to a foreign party shall satisfy the following conditions:

1. permission or approval for foreign sale of buildings has been obtained from the relevant governmental authorities; and

2. the funds invested in the buildings to be sold to foreign buyers account for more than 70% of the total investment.

PART TWO　PROVISION OF GUARANTEES TO FOREIGN PARTIES

Article 19　For the purposes of the Procedures, 'provision of a guarantee to foreign parties' shall mean the act whereby the guarantor and the Beneficiary stipulate that when the debtor fails to pay its debt or perform its obligations as stipulated, the guarantor shall assume liability for payment of the debt or perform the obligations as stipulated.

Article 20　The provision of guarantees to foreign parties shall be controlled by the Administration of Foreign Exchange in accordance with the following provisions:

1. Finance guarantees, finance lease guarantees, performance bonds denominated in cash foreign exchange under compensation trade agreements, and deferred payment guarantees with a term of more than one year, etc. issued to foreign parties by wholly Chinese-owned banks shall be subject to case-by-case examination and approval.

2. The issuance to foreign parties by wholly Chinese-owned banks of guarantees other than those set forth in the preceding item shall be subject to control of the asset-liability ratio.

Within the ability to provide security to foreign parties specified in the first and second items of Article 21 hereof, wholly Chinese-owned banks may issue guarantees as mentioned above on their own authority. Contracts for the provision to foreign parties of guarantees as contemplated in this item which are issued by wholly Chinese-owned banks shall become effective on the date of issuance.

3. All guarantees to foreign parties issued by non-banking financial institutions and non-financial enterprise legal persons shall be submitted to the Administration of Foreign Exchange for case-by-case examination and approval.

Article 21　If the guarantor is a wholly Chinese-owned financial institution, it shall satisfy the following conditions:

1. the sum of the outstanding amount under security to foreign parties, the outstanding amount under security in foreign exchange within the People's Republic of China and the outstanding amount of the foreign exchange debts of the financial institution may not exceed 20 times the amount of its own foreign exchange funds;

2. the sum of the outstanding amount of foreign exchange loan proceeds disbursed, the outstanding amount under security provided in foreign exchange (calculated at 50%) and foreign exchange investment (equity participation) by the financial institution to any one enterprise legal person may not exceed 30% of its own foreign exchange funds.

Article 22　If the guarantor is a non-financial enterprise legal person, the outstanding amount under security to foreign parties may not exceed 50% of its net assets and may not exceed its foreign exchange revenue of the preceding year.

Of such enterprises, when a trade-type domestic investment enterprise provides guarantees to foreign parties, the ratio of its net assets to its gross assets may in principle not be less than 15%; and when a non-trade-type domestic investment enterprise provides guarantees to foreign parties, the ratio of its net assets to its gross assets may in principle not be less than 30%.

The Administration of Foreign Exchange shall differentiate between trade-type enterprises and non-trade enterprises according to the main lines of business specified on the business licence issued by the State Administration authorities for industry and commerce.

PART THREE　PROVISION OF MORTGAGES TO FOREIGN PARTIES

Article 23　For the purposes of the Procedures, 'provision of a mortgage to foreign parties' shall mean the use by a debtor or a third party of property as listed in Article 24 hereof as security for an obligation without delivering possession of such property. If the debtor fails to perform its obligation, the Beneficiary shall be entitled to repayment on a priority basis by evaluating the property in terms of money or through the proceeds of the auction or selling off of the property, in accordance with the Security Law.

The debtor or the third party mentioned in the preceding paragraph shall be the mortgagor, the Beneficiary shall be the mortgagee and the property provided for mortgage shall be the property mortgaged.

Article 24　The following property may be mortgaged to foreign parties:

1. premises and other attachments to land owned by the mortgagor;

2. machinery, means of communications and transportation and other property owned by the mortgagor;

3. State-owned leaseholds, premises and other attachments to land of which the mortgage is legally entitled to dispose;

4. leaseholds to wasteland such as barren hills, barren gullies, barren mounds, barren beaches, etc. which have been lawfully contracted for by the mortgagor, provided that the party which contracted out the same consents to the mortgage;

5. State-owned machinery, means of communications and transportation and other property of which the mortgagor is legally entitled to dispose;

6. other property that may be mortgaged according to law.

The mortgagor may mortgage items of property set forth in the preceding paragraph together.

Article 25　The obligation secured by the mortgagor to a foreign party may not exceed the value of the property mortgaged.

After property is mortgaged, such property may be mortgaged again for, but not in excess of, the balance of its value that exceeds the obligation secured.

Article 26　Property mortgaged to a foreign party shall undergo appraisal of its present value by a domestic valuation and appraisal organization.

Article 27　Where a mortgagor mortgages its own property to a foreign party as security for its own obligation, it shall not be required to obtain prior approval from the Administration of Foreign Exchange, but must only carry out procedures for registration of the provision of security to a foreign party with the Administration of Foreign Exchange in accordance with these Rules.

If the mortgagor mentioned in the preceding paragraph is a domestic investment enterprise, it shall, when carrying out procedures for registration of the provision of security to a foreign party, provide documentary evidence of the approval of its foreign debt by the Administration of Foreign Exchange.

If the mortgagor's own property mentioned in the first paragraph is property for which the Security Law specifies a corresponding authority for mortgaged property registration, the mortgagor shall, after having carried out procedures for registration of the provision of security to a foreign party, also carry out mortgaged property registration with the corresponding authority.

Article 28　If a mortgagor, as a third party, mortgages to a foreign party property for which no mortgage registration authority is specified in the Security Law, the mortgagor shall carry out mortgage approval and mortgaged property registration procedures directly with the Administration of Foreign Exchange.

Article 29　If a mortgagor, as a third party, mortgages to a foreign party property for which the Security Law specifies a corresponding authority for mortgaged property registration, the mortgagor shall first obtain the approval of the Administration of Foreign Exchange and then carry out registration procedures with the corresponding authority for mortgaged property registration in accordance with the Security Law.

Article 30　If a mortgagor provides a mortgage to a Beneficiary as security for another person's obligation, the balance of the obligation secured may not exceed its foreign exchange revenue of the preceding year.

PART FOUR　PROVISION OF PLEDGES TO FOREIGN PARTIES

Article 31　For the purposes of the Procedures, 'pledges to foreign parties' are divided into pledges of movable property to foreign parties and pledges of rights to foreign parties.

Article 32　'Pledges of movable property to foreign parties' shall mean the delivery by the debtor or a third party of possession of its movable property to the creditor, and the use of such movable property as security for an obligation. If the debtor fails to perform its repayment obligation, the creditor shall be entitled to repayment on a priority basis by evaluating the property in terms of money or through the proceeds of the auction or selling off of the property, in accordance with the Security Law.

Article 33　'Pledges of rights to foreign parties' shall mean pledges to foreign parties of the following rights:

1. bills of exchange, promissory notes, cheques, bonds, deposit certificates, warehouse receipts, bills of lading;

2. shares and share certificates that may be transferred according to law;

3. exclusive rights to use a trademark, patent rights, and property rights among copyrights, where the same may be transferred according to law;

4. other entitlements that may be pledged according to law.

Article 34　In a pledge to a foreign party, the debtor or the third party is the pledgor, the creditor is the pledgee and the movable property or right pledged is the thing pledged.

Article 35　Where a pledgor pledges its own movable property or right to a foreign party as security for its own obligation, it shall not be required to obtain prior approval from the Administration of Foreign Exchange, but must only subsequently carry out procedures for registration of the provision of security to a foreign party with the Administration of Foreign Exchange in accordance with these Rules.

If the pledgor mentioned in the preceding paragraph is a domestic investment enterprise, it shall, when carrying out procedures for registration of the provision of security to a foreign party, provide documentary evidence of the approval of its foreign debt by the Administration of Foreign Exchange.

When a foreign investment enterprise that is a limited liability company registers the pledge of an equity interest, it shall obtain prior authorization from its board of directors. If the said enterprise that registers the pledge of an equity interest is a wholly foreign-owned enterprise, it shall also obtain the approval of its original examination and approval authority.

Article 36　If a pledgor, as a third party, pledges to a foreign party an item which is able to be pledged pursuant to the Security Law, the pledgor shall carry out pledge approval and registration procedures directly with the Administration of Foreign Exchange.

If a pledgor pledges to a foreign party an item which is able to be pursuant to either pledged specified as such in Item Two or Three of Article 33 hereof, the pledgor shall also carry out procedures for registration of the thing pledged with the corresponding competent department as specified in the Security Law.

Article 37　If a pledgor provides a pledge to a Beneficiary as security for another person's obligation, the balance of the obligation secured may not exceed its foreign exchange revenue of the preceding year.

Article 38　When providing a pledge to a foreign party, the pledgor may deliver possession to the creditor of the thing pledged only after the requirements set forth above have been satisfied.

PART FIVE　SUPPLEMENTARY PROVISIONS

Article 39　After a Security Provider has provided security to a foreign party, it shall carry out security registration procedures with the Administration of Foreign Exchange of the place where it is located.

1. Non-financial enterprise legal persons shall be subject to case-by-case registration. Within 15 days of the date of conclusion of a contract of security, the Security Provider shall complete a Registration Form for Security Provided to Foreign Parties at, and obtain a Registration Certificate for Security Provided to Foreign Parties from, the Administration of Foreign Exchange of the place where it is located. Upon completion of the implementation of the contract of security, the security documents shall automatically become void and the Security Provider shall hand in the Registration Certificate for Security Provided to Foreign Parties to the authority that originally issued the same, for cancellation.

2. Financial institutions shall be subject to regular registration on a monthly basis. Within 15 days after the end of each month, they shall complete a Registration Form for Security Provided to Foreign Parties and a Feedback Form for Security Provided to Foreign Parties, and report details of the security provided during the preceding month to the Administration of Foreign Exchange of the place where they are located.

Article 40　The performance by a Security Provider of its security obligation to a foreign party shall be subject to examination and approval by the Administration of Foreign Exchange of the place where it is located. Financial institutions engaged in foreign exchange business shall carry out the procedures for sale and payment of foreign exchange in connection with the performance of security provided to a foreign party on the strength of the approval certificate of the Administration of Foreign Exchange. All branches of the State Administration of Foreign Exchange shall additionally send copies of their reports on examination and approval of the performance of such security to the State Administration of Foreign Exchange for the record.

Article 41　When a Security Provider carries out the procedures for examination and approval of the performance of security provided to a foreign party, it shall submit the following materials:

1. an application;

2. the original approval document in which the Administration of Foreign Exchange approved the Security Provider's issue of the relevant security to a foreign party;

3. the Registration Form for Security Provided to Foreign Parties and the Registration Form for Security Provided to Foreign Parties issued by the Administration of Foreign Exchange;

4. a copy of the contract concerning the provision of security to a foreign party;

5. the written notice in which the creditor demands performance of the security; and

6. the debtor's balance sheet.

Article 42　If a Security Provider has provided security to a foreign party without registering such security with the Administration of Foreign Exchange, then, when it is to perform such security vis-à-vis the foreign party, the Administration of Foreign Exchange will not approve its purchase and remittance of foreign exchange.

Article 43　After a Security Provider has provided security to a foreign party, if the creditor and the Secured Party need to amend major provisions of the debt contract and such amendment would lead to a change in the liability under the security, they must obtain the consent of the Security Provider, and the Security Provider shall report the matter for approval by the Administration of Foreign Exchange according to the original examination and approval procedure. If the consent of the Security Provider and the approval of the Administration of Foreign Exchange have not been obtained, the Security Provider shall be released automatically from its security obligations. However, where, according to these Rules, the provision of security to a foreign party does not require prior approval from the Administration of Foreign Exchange, amendment of major provisions of the debt contract by the creditor and the Secured Party shall not be subject to approval from the Administration of Foreign Exchange.

If a Security Provider changes major provisions of an approved contract of security without the consent of the Administration of Foreign Exchange, the changed provisions shall be void.

For the purposes of this Article, "major provisions of the debt contract" and "major provisions of an approved contract of security" shall mean provisions concerning the security's Beneficiary, Security Provider, Secured Party, debt term, amount, currency, interest rate, governing law, etc.

Article 44　The assignment by a Beneficiary of its rights under a security shall be subject to the prior consent of the Security Provider and the approval of the Administration of Foreign Exchange. If the consent of the Security Provider and the approval of the Administration of Foreign Exchange have not been obtained, the Security Provider shall be released automatically from its security obligations. If the contract of security contains different provisions, the matter shall be handled in accordance with such provisions. However, where, according to these Rules, the provision of security to a foreign party does not require prior approval from the Administration of Foreign Exchange, the Beneficiary's assignment of its rights under the security shall not be subject to approval from the Administration of Foreign Exchange.

Article 45　A contract of security shall specify the following particulars:

1. the Security Provider has the right to monitor the funds and property of the Secured Party;

2. after the Security Provider has provided security to a foreign party, within the validity period of the contract secured by it, the Security Provider shall perform the security obligations in accordance with the contract of security; after the Security Provider has performed the security obligations; it shall have the right to seek compensation from the Secured Party;

3. after the Security Provider has provided security to a foreign party, it shall be released automatically from its security obligations if, within the validity period of the contract of security, the Beneficiary fails to perform its obligations in accordance with the debt contract and thereby causes the Secured Party to be consequently released from its debt;

4. the Security Provider shall have the right to demand the Secured Party to arrange for a counter-guarantee or to provide a corresponding mortgage of property; and

5. the Security Provider shall have the right to collect the agreed security fee.

Article 46　State authorities and institutions may not provide security to foreign parties except in connection with on-lending of loans from foreign governments or international economic organizations in order for such loans to be used, where the State Council has given approved for such on-lending.

Security Providers may not provide security in respect of the registered capital of foreign investment enterprises. Domestic investment enterprises and wholly Chinese-owned financial institutions may not provide security for foreign debts in respect of the foreign party's portion of the investment in a foreign investment enterprise.

Security Providers may not provide security for the raising of off-shore funds outside the People's Republic of China carried out by financial institutions within the People's Republic of China that are engaged in off-shore financial business.

Security Providers may not issue security to foreign parties in the form of deposits or liens (advance payments in connection with trade transactions shall not be covered by the restriction on "deposits"contained in the Procedures).

A Secured Party outside the People's Republic of China may not repatriate, for purpose of use, the funds under the debt security provided for it by the Security Provider.

Article 47　The forms of security set forth below shall be governed by these Rules:

1. counter-security provided to foreign parties;

2. security provided by a Security Provider to a creditor within the People's Republic of China for an organization outside the People's Republic of China;

3. security provided by a Security Provider for the obtaining of financing by an organization outside the People's Republic of China from a financial institution within the People's Republic of China that is engaged in off-shore banking business;

4. off-shore security provided to a foreign party, where the Security Provider is a wholly Chinese-owned financial institution within the People's Republic of China that engages in off-shore banking business with the approval of the State Administration of Foreign Exchange.

Article 48　If a Security Provider provides security to a foreign party, which these Rules specify shall be subject to examination and approval by the Administration of Foreign Exchange, without having obtained approval, its contract of security with the foreign party shall be void.

Article 49　If, where these Rules specify the provision of a mortgage or pledge to a foreign party to be subject to examination and approval by the Administration of Foreign Exchange, the mortgagor or pledgor registers the property mortgaged or the thing pledged without having carried out approval procedures for the provision of such mortgage or pledge to a foreign party with the Administration of Foreign Exchange, the mortgagee or pledgee may not convert into foreign exchange and remit out of the People's Republic of China the Renminbi proceeds from its auction or selling off of the property mortgaged or the thing pledged upon maturity of the principal debt.

Article 50　If a Security Provider provides security to a foreign party without having obtained approval, the Administration of Foreign Exchange shall impose punishment in the form of a warning, circulation of a notice of criticism or suspension or cessation of the Security Provider's business of providing security to foreign parties, and shall additionally impose a fine of not less than Rmb 100,000 and not more than Rmb 500,000. If a Security Provider fails to register the security after its provision of security to a foreign party, the Administration of Foreign Exchange shall, according to the circumstances, impose punishment in the form of a warning, circulation of a notice of criticism or suspension or cessation of the Security Provider's business of providing security to foreign parties.

Article 51　The State Administration of Foreign Exchange shall be in charge of interpreting these Rules.

Article 52　These Rules shall be implemented from 1 January, 1998.