Financing possibilities for foreign-invested companies in China

Abstract

Against the background of the strict foreign exchange controls applicable in the People’s Republic of China, the article examines various possibilities for the financing of Chinese subsidiaries by their foreign shareholders. Particular emphasis is placed on the granting of shareholder loans and the different manners for calculating the maximum amounts permitted by law. At the same time, issues regarding foreign exchange control may also play a role when a foreign-invested subsidiary takes out a domestic bank loan; this is the case when collateral from the foreign parent company is used to secure the loan. The article also considers this particular aspect of cross-border financing.