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1. Chinese Government Concessional Loan
Basic Concept
Chinese Government Concessional Loan (hereafter referred as Concessional Loan) refers to the medium and
long-term, low interest rate credit extended by China Eximbank under the designation of the Chinese
Government with the nature of official assistance
Loan Purpose
The Concessional Loan is designed to:
■Fund manufacturing projects, infrastructure construction projects and social welfare projects in
the borrowing country, which can generate promising economic returns or good social benefits;
■Finance the procurement of Chinese mechanical, electronic products, complete sets of equipment,
technology and service and other goods by the borrowing country.
Credit Management
■The governance of Concessional Loan resides in Chinese Government represented by Ministry of Commerce in cooperation with Ministry of Foreign Affairs and Ministry of Finance. Ministry of Commerce is responsible for formulating policies and plans on Concessional Loan and the signing of inter-government framework agreement on ncessional Loan;
■China Eximbank is responsible for project appraisal, signing loan agreements, loan disbursement, loan operation monitoring and collecting principal and interest.
Prospective Borrower
The Borrower of Concessional Loan is normally the government of the borrowing country represented by Ministry of Finance. Under special circumstances, the borrower could be a financial institution or other agencies designated by the government of the borrowing country and acceptable to China Eximbank. In such case, Ministry of Finance of the borrowing country is required to provide repayment guarantee acceptable to the Bank.
Terms and Conditions
Loan Amount
In principle, the amount of loan applied shall be no less than RMB 20 million.
Interest Rate and Maturity
Interest rate and maturity shall be agreed upon between the Chinese Government and the Government of
the borrowing country, and shall be stipulated in the inter-governmental framework agreement. Maturity includes grace period (including drawdown period) and repayment period. In the grace period, the borrower shall pay the interest but no principal. In the repayment period, the borrower shall pay both the interest and the principal as stipulated in the loan agreement.
Interest payment
Interest is calculated and paid semi-annually. Interest collection dates are fixed on March 21st and September 21st every year.
Principal repayment
In repayment period, the principal is repaid semi-annually in equal installments. Principal repayment dates
are fixed on March 21st and September 21st every year.
Management Fee and Commitment Fee
Management Fee is calculated on the basis of the total amount of the Loan and paid in one lump sum before
the first drawdown. Commitment Fee is calculated on the basis of the un-drawn amount of the Loan and paid on interest collection dates.
Project Criteria
Candidate projects shall meet the following requirements:
1)The project shall be approved by both the Chinese Government and the Government of the borrowing country;
2)The borrowing country shall have sound diplomatic relations with Chinese Government, and shall be politically stable and economically sound, with debt servicing capacity and reliable contract-performance record;
3)The project shall be technically feasible and shall fall within priority sectors that can contribute to
the economic development and sector planning of the borrowing country while being able to yield sound economic returns or social benefits;
4)Chinese companies shall be selected as the project contractor. And for procurement projects, equipment
supply shall come from a Chinese exporter in principle;
5)In project procurement,priority shall be given to equipment,materials, technology or services from China.
In principle,no less than 50% of total procurement shall be made in China;
6)The counterpart funds for the project shall be already in place.
Qualification for Chinese Contractor/Exporter
The Chinese candidate contractor or exporter for executing the Concessional
Loan project shall satisfy the following requirements:
1)It shall be a medium- and large-sized company registered with the local Administration of Industry and Commerce, accredited with independent legal person status;
2)It shall be good in operation and management and sound in financial and credit status;
3)For contracting projects, the Chinese contractor shall be authorized for the operating rights of contracting
overseas projects with A-Class (the top class) professional qualification for relevant specialties, and shall be
experienced in contracting projects and good in performance.
4)For export projects, the Chinese exporter shall bear export license for relevant products, and shall be
experienced in foreign trade with good operation record.
Application Documents
1)Proposal or Loan Application from the Government of the borrowing country;
2)Recommendation issued by the Commercial Counselor's Office of the Chinese Embassy in the borrowing country;
3)Project Proposal or Feasibility Study Report approved by the Government of the borrowing country specifying the essential significance of the project (target and objectives), content and scope of the project,investment budget, and other information including technical and economical feasibility and social benefits;
4)Commercial contract or other types of cooperation agreements signed between the Chinese contractor/exporter and the local executing agency of the borrowing country;
5)Materials and documents presenting the political, economic and social status of the borrowing country;
6)Profile statements, duplicate copy of the business license, audited financial reports of the past three
years of both Chinese contractor/exporter and the local executing agency, and performance records of
Chinese contractor/ exporter both at home and abroad.
7)Other documents required by the Bank.
Loan Procedures
Application
The Government of the borrowing country proposes, based on its development plan and strategy, candidate projects
to the Chinese Government or China Eximbank with the submission of relevant application documents.
Appraisal
China Eximbank conducts appraisal at its own discretion on the candidate projects, and reports appraisal
results to the competent authority of the Chinese Government.
Loan Agreement
■Inter-governmental Framework Agreement is signed between the Chinese Government and the Government of the borrowing country, specifying the purpose, amount, maturity and interest rate of the facility;
■Individual loan Agreement is signed between China Eximbank and the Borrower in line with the terms and conditions stipulated in the intergovernmental framework agreement.
Project Implementation and Loan Disbursement Project Implementation
It is essentially the obligation of both the Borrower and the executing agencies to implement the project. In the process of implementation, no change to the project content is allowed without the consent of China Eximbank.
Loan Disbursement
■The borrower submits drawing notice and payment documents for drawdown of the loan as stipulated in the Loan Agreement. After examination, China Eximbank disburses the loan to the account of Chinese contractor/exporter;
■China Eximbank makes loan disbursement in line with the project progress and monitors the implementation of project to ensure an efficient use of fund;
■The borrower reports to China Eximbank such information as the project progress and use of funds and provides necessary assistance for the onsite inspection of the latter;
■Upon project completion, the borrower sends a completion report to China Eximbank
Loan Repayment
The Borrower repays principal and interests as stipulated in the Loan Agreement.
2. Preferential Buyer's Credit
Preferential buyer's credit refers to the medium and long-term credit with preferential terms and conditions, aiming to promote China's economic and trade cooperation with other developing countries. China Eximbank is the only operating bank for this credit.
Loan Management
As the sole lender of preferential export buyer's credit authorized by the Chinese Government, China Eximbank is responsible for project evaluation,signing of loan agreements, loan disbursement, collection of loan principal and interests and portfolio management. Objective
■To boost China's economic cooperation with other developing countries;
■To promote economic and social development of developing countries and improve living standards of the local people.
Loan Principles
1)Compliance Principle: Preferential export buyer's credit shall be conducted in line with state laws and regulations and rules of China Eximbank.
2)Centralized Management Principle: The Head Office of China Eximbank is responsible for the operation of preferential export buyer's credit.
Project Requirements
1)The Project shall meet the borrowing country's demand for economic development and priority sector planning, and shall contribute to both the social-economic development of the borrowing country and trade and economic cooperation between China and the borrowing country.
2)The Project shall be able to generate foreign exchange revenue and create jobs in the borrowing country.The credit focuses on supporting infrastructure such as energy, transportation, telecommunication projects,and high-efficiency sectors such as manufacturing, processing, and agriculture in the borrowing country.
3)Equipment, materials, technology or services demanded by the project shall be procured from China in priority.
Terms and Conditions
1)I nt erest and Mat urit y: Ref erring t o t he t erms d ecid ed in t he General Loan Agreement on Preferential
Export Buyer's Credit.Maturity Period includes Grace Period and Repayment Period. In the Grace Period, the borrower shall pay the interest but no principal. In the repayment period, the principal is paid as stipulated in the loan agreement, usually in equal installments.
2)Principal Repayment and Interest Payment: The interest rate is calculated semi-annually on January 21 and July 21 every year. Interest collection and principal repayment dares are fixed on the same date.
3)The borrower shall pay the management fee in one lump sum before the first drawdown and pay commitment fee based on the un-drawn amount of the loan.
Qualification Requirements for Chinese Exporter/Contractor
1)Registered with Chinese Administration for Industry and Commerce or its local offices and accredited with independent legal person status.
2)Competent in exploring markets in developing countries.
3)Demonstrating sound operation, financial status and reliable credit records.
4)For construction projects (including project design), the Chinese contractor shall be licensed or authorized to contract overseas projects and shall have obtained from competent Chinese government authorities A-Class certificate for relevant field, with experience in overseas construction and contract performance capacity.
5)For product exports, the Chinese exporter shall be licensed or authorized to export products and have experience in foreign trade with good records.
6)For joint-venture investments, the Chinese company shall be duly qualified and shall have the financial strength and managerial expertise compatible to the project with previous experience in overseas operation.
Application Documents
1)Loan Application;
2)Project proposal or project feasibility study report, specifying the purpose and objective, scope and content of the project as well as investment budget and feasibility analysis on technical, economical aspects of the project;
3)Commercial contract or other intention agreement;
4)Information on the investment environment (country information) of the project;
5)Duplicate copy of the business license, profile statements and audited financial statements of the past three years of Chinese executing agency;
6)Profile statements and financial statements of overseas executing agency (importer, foreign share-holder, project owner);
7)In the case that the borrower is a financial institution or other institution, a duplicate copy of business license, profile statement, audited financial statements of the past three years and a Letter of Intent for repayment guarantee issued by the government shall be provided.
8)Other documents required by the Bank.
Loan Procedure
Signing of the General Loan Agreement
After the State Council approves a credit line for a specific country, China Eximbank and the borrower shall negotiate and sign the General Loan Agreement, specifying the lender and the borrower, repayment guarantee,loan purpose, amount, terms and conditions, procedures, law application and etc. Loan Application
Under the General Loan Agreement, the government of the borrowing country shall provide China Eximbank with a candidate project list together with application documents. Terms and conditions for individual projects shall follow those stipulated in the General Loan Agreement.
Project Appraisal
China Eximbank conducts appraisal on the feasibility of the project and reports results to the Chinese government. The appraisal usually covers such aspects as qualification, performance records and credit standing of the borrower, the executing and other related parties, project risks and etc.
Signing of Loan Agreement and Effectiveness
China Eximbank signs a loan agreement with the lender based on negotiation results. The borrower shall provide China Eximbank with relevant documents.The loan agreement will not take effect unless the effective clause of the loan agreement is satisfied.
Project Implementation and Loan Disbursement
Project implementation is essentially the obligation of both the borrower and the executing agencies of both sides. Without prior approval from China Eximbank, the content of the project cannot be changed.
The borrower shall send China Eximbank the Drawing Notice together with other relevant documents as specified in the agreement. After due examination, China Eximbank will disburse the loan to the account of Chinese executing agency.
To ensure an efficient use of fund, China Eximbank disburses the loan according to project progress and monitors project execution. The borrower shall report to China Eximbank project progress and the use of funds.Upon project completion, the borrower shall submit a completion report to China Eximbank.
Loan Repayment
The Borrower repays principal and interests as stipulated in the Loan Agreement.
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