Pilot project for cross-border transfer of claims on QEX

The term “cross-border transfer of claims” means that a creditor in China transfers claims that it lawfully holds (the subject claims) to an offshore investor, and the foreign investor replaces the existing domestic creditor to become the new creditor.

There are, in practice, two relatively successful means of effecting cross-border transfers of claims. The first involves a financial asset management company bundling non-performing assets and transferring them to foreign investors. This is the most direct and widely used method for foreign investors to participate in the disposal of Chinese non-performing assets. Both the National Development and Reform Commission (NDRC) and the State Administration of Foreign Exchange (SAFE) have issued regulations on the recordal and foreign exchange issues relating to this.

The second method involves a cross-border transfer on the Qianhai Financial Assets Exchange (QEX). In 2016, the first cross-border transfer of claims was completed on the QEX. A branch in China of a certain foreign-funded bank transferred the subject claims – a bundle of non-performing assets – to an offshore branch. The Shenzhen exchange control bureau referred the matter to the SAFE for approval, following which the transfer of the claims and the receipt and payment of foreign exchange were completed.