Rules eased to boost cross-border financing

China has stepped up policy support for cross-border financing by raising leverage ratios for overseas lending by foreign banks in the country and the Export-Import Bank of China, in a move aimed at boosting the real economy, facilitating trade and investment, and accelerating the global use of the renminbi.

The adjustment comes as banks' overseas lending has expanded steadily in recent years, with the share of renminbi-denominated loans continuing to rise, even as some banks have seen their outstanding overseas loans approach existing regulatory caps.

Under the new regulations, the overseas lending leverage ratio for wholly foreign-owned banks, Sino-foreign joint venture banks and branches of foreign banks in China has been raised from 0.5 to 1.5, while that of the Export-Import Bank of China, also known as China Eximbank, has increased from 3 to 3.5.

In a recently issued joint notice, the People's Bank of China, the central bank, and the State Administration of Foreign Exchange also said that domestic banks extending loans with maturity exceeding one year in renminbi and foreign currencies to overseas enterprises indirectly — such as through overseas banks — can now have those loans processed in accordance with regulations of their respective jurisdictions, simplifying procedures and improving cross-border financing efficiency.

Western Securities estimated that the adjustment will increase the aggregate overseas lending ceiling of 41 locally incorporated foreign banks in China, including wholly foreign-owned and JV banks, by 497.5 billion yuan ($73.13 billion), and raise China Eximbank's overseas lending ceiling by 194.8 billion yuan. Together with expanded quotas for domestic branches of foreign banks, the total increase in overseas lending capacity is expected to reach between 700 billion and 800 billion yuan.

Zhou Antong, an analyst at Western Securities, said in a research report that China Eximbank will benefit the most from the policy change, with its share of overseas lending assets expected to rise further. The second tier of beneficiaries include large foreign banks operating in China. In addition to higher overseas lending quotas, the simplified procedures for indirect lending will also benefit their global networks by strengthening cross-border coordination and boosting income from international business.

The report said that the policy adjustment aligns with the goals of the 15th Five-Year Plan (2026-30). It will provide financial support for the global expansion of China's "new three" industries, namely electric vehicles, solar panels and lithium-ion batteries, and other competitive sectors, while meeting the capital-intensive needs of high-end manufacturing going abroad.

Moreover, companies engaging in on-lending through overseas banks or participating in international syndicated loans can now proceed directly in accordance with local regulations, significantly reducing cross-border compliance costs.

Analysts said Chinese banks still have considerable room to expand their global footprint, making the role of China Eximbank especially important in areas such as overseas trade financing and cross-border guarantees. At the same time, as the internationalization of the renminbi accelerates and China's exports have grown rapidly in recent years, foreign banks are playing an increasingly vital role in cross-border payment services. Against this backdrop, expanding the business scale of foreign banks and strengthening their role as key partners in foreign trade has become an urgent priority.

Wesley Yang, deputy CEO of Standard Chartered China, said: "Raising the overseas lending leverage ratio for foreign-funded banks in China to 1.5 provides concrete and effective policy support for their further development."

Yang said that as Chinese companies expand overseas at a faster pace, demand for cross-border financial services, particularly cross-border loans, has risen significantly.

"The new policy will not only allow foreign banks to further leverage their strengths and deepen involvement in cross-border lending, but also effectively expand key channels for renminbi funds to go global, supporting the currency's broader use in international credit and investment," Yang said.

Standard Chartered will seize the opportunity presented by this new policy to continue leveraging its global network and extensive experience in cross-border financial services. The bank is dedicated to providing efficient financial support to both Chinese and foreign enterprises — particularly Chinese companies expanding overseas — including comprehensive cross-border RMB solutions, to help them navigate their global expansion with confidence and achieve long-term success, he added.

Dong Ximiao, chief economist at Merchants Union Consumer Finance, said the policy adjustment will further ease overseas financing difficulties for companies "going global", while encouraging greater use of the renminbi by overseas entities and advancing the currency's internationalization.

Zeng Gang, chief expert and director of the Shanghai Institution for Finance and Development, said the move will significantly enhance financial institutions' ability to serve the real economy.

On the one hand, raising the leverage ratios will substantially expand banks' lending capacity, addressing constraints such as limited overseas financing quotas and high funding costs. This will enable greater support for cross-border industrial chains, overseas infrastructure and livelihood-related projects, helping overseas entities maintain stable operations. On the other hand, simplifying indirect lending procedures encourages banks to conduct business in a compliant and more autonomous manner, improving the convenience of cross-border investment and financing, Zeng said.

The measures will also help balance cross-border capital flows and promote deeper integration of Chinese financial institutions into the global financial system, he added.

jiangxueqing@chinadaily.com.cn