PBOC, SAFE Seek to Facilitate Cross-border Financing for China’s Small and Privately Run Firms

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The Chinese central bank and China’s forex authority hope to facilitate cross-border financing for domestic small businesses via adjustments to a key macro-prudential assessment parameter.

The “People’s Bank of China (PBOC) and State Administration of Foreign Exchange (SAFE) Notice Concerning Adjustment to the Full Caliber Cross-border Finance Macro-prudential Adjustment Parameter” (中国人民银行 国家外汇管理局关于调整全口径跨境融资宏观审慎调节参数的通知) (Yinfa [2020] No. 64) issued on 11 March increases the cross-border finance macro-prudential adjustment parameter from 1 to 1.25.

The adjustment will also see a corresponding increase in the ceiling for cross-border financial risk weighting, which authorities hope will facilitate the use of international financing sources by domestic companies, with an especial focus on small and privately run businesses.

“At present China’s external debt scope and structure is comparatively rational, and external debt risk is under control overall,” said SAFE in an official statement.

“Raising the macro-prudential adjustment parameter will both facilitate cross-border financing by domestic institutions, without triggering a large-scale rise in external debt levels.

SAFE said that it would “further improve the two pillar administrative framework of ‘macro-prudential + micro-regulation,’ actively prevent cross-border fund liquidity risk, and maintain national economic and financial security.”

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