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Measures for the Administration of Loans and Grants from International Financial Organizations and Foreign Governments

  

  (Promulgated on July 3, 2006 by Order No. 38 of the Ministry of Finance)

  Chapter I General Provisions

  Article 1 For the purposes of further regulating and strengthening the administration of loans and grants made by international financial organizations and foreign governments and making effective and reasonable use of the funds, these Measures are formulated in accordance with relevant provisions of the State Council.

  Article 2 The administration of loans and grants made by international financial organizations and foreign governments (hereinafter referred to as the ^loans ̄ and ^grants ̄ respectively) shall be governed by these Measures.

  Article 3 The Ministry of Finance, the central administrative organ for foreign debts of the Government, shall be responsible for the administration of the loans and grants. 

  Article 4 The use of the loans and grants shall be in line with the strategies of national economic development and social development, shall embody the functions of public finance and promote the harmonious development between the economy and the society and between the urban areas and rural areas.

  Article 5 The raising, use, and repayment of the loans shall embody the principle of unifying the responsibilities, powers and interests, with the aim of generating a sustainable and sound cycle of debts and effectively preventing and eliminating the risks of debts.

  Article 6 Definitions of the following terms in these Measures are as follows:

  (1) The term ^loans ̄ means the loans granted by international financial organizations and the loans made by foreign governments.

  (2) The term ^loans granted by international financial organizations ̄ means the loans which are uniformly raised by the Ministry of Finance on behalf of the State upon approval of the State Council, from the World Bank, Asian Development Bank, International Fund for Agricultural Development, European Investment Bank and other international financial organizations, and which form the foreign debts of the Government, as well as the joint financing used in combination with the said loans.

  (3) The term ^loans made by foreign governments ̄ means the loans which are uniformly raised by the Ministry of Finance on behalf of the State upon approval of the State Council, from foreign governments and the Nordic Investment Bank, and which form the foreign debts of the Government, and other foreign loans approved by the State Council and managed by reference to loans made by foreign governments, as well as the joint financing used in combination with the said loans.

  (4) The term ^grants ̄ means the international grants which are accepted by the Ministry of Finance or by the Ministry of Finance on behalf of the State upon approval of the State Council, and which are not under the precondition of combined use with the loans.

  Chapter II Administrative Organs and Their Functions

  Article 7 The Ministry of Finance shall administer the loans and grants in a centralized manner and shall exercise the following functions:

  (1)To determine the principle for the administration of the loans and grants and to formulate basic rules and regulations thereon;

  (2)To make plans on the loans in collaboration with relevant departments of the State Council;

  (3)To plan and carry out the work in relation to the loans and grants as a whole, and to hold negotiations and talks and sign legal documents with international financial organizations and foreign governments;

  (4)To be responsible for the on-lending, sub-granting, use, repayment, accounting and monitoring of the loans and grants; and

  (5)To offer policy guidance, coordinate and supervise the activities in relation to the loans and grants.

  Article 8 Local finance departments are the representative of the creditor¨s rights and the debtor¨s liabilities in relation to the loans of the governments at the same level and are the administrative organs for the loans and grants. They shall be responsible for the full administration of the loans and grants of their own regions.

  Article 9 In the case of a project whose loan funds are directly on-lent or sub-granted by the Ministry of Finance to relevant departments of the State Council, the said departments of the State Council shall determine a central project executive body, which shall be responsible for organizing the concrete execution of the project.

  Article 10 In the case of an inter-regional project across two or more provinces, autonomous regions and municipalities directly under the Central Government, whose loan funds are directly on-lent or sub-granted by the Ministry of Finance to the local government and necessitates the organization or coordination of relevant departments of the State Council, the said departments of the State Council shall determine a central project coordination body, which shall be responsible for offering guidance over, organizing and coordinating the work in relation to the project.

  Article 11 In the case of a project whose loan is to be repaid by a local government or for which a grant has been accepted by the local government, the local government shall determine a local project executive body, which shall be responsible for organizing and executing the project.

  Article 12 The central project executive body, central project coordination body or local project executive body shall be subject to the guidance and supervision of the finance department of the same level, and shall submit its plan on disbursements to the finance department at the same level for examination and approval or for filing.

  Chapter III The Raising of the Loans

  Article 13 The raising of the loans involves the loan application, review and evaluation, negotiations and talks with foreign parties, signing and execution of the legal documents in respect of the loans, determination of on-lending relationship as well as clarification of repayment liability.

  Article 14 Where a local region plans to use the loans granted by international financial organizations, the finance department of the province, autonomous region, municipality directly under the Central Government and cities under separate state planning, or the Finance Bureau of Xinjiang Production and Construction Corps (hereinafter referred to as the ^provincial finance departments ̄ collectively) shall, on behalf of the government of the same level, file a loan application with the Ministry of Finance.

  A relevant department of the State Council or any other institution planning to use the loans granted by international financial organizations shall file a loan application with the Ministry of Finance. If the debt is to be repaid by the local governments, the application shall be accompanied by a repayment commitment letter issued by the provincial finance departments.

  A loan application shall include the following key items:

  1) the purposes and necessities of the loans;

  2) the main content of the loan-funded project;

  3) the sources of the loans and supporting funds; and

  4) the on-lending and debt repayment arrangements.

  Article 15 The Ministry of Finance shall examine the loan application and shall, in accordance with the provisions in Articles 4 and 5 of these Measures as well as the requirements of the loan providers, decide whether to list the loan application into the programme of the loans granted by international financial organizations.

  Article 16 Provincial finance departments shall organize reviews of the project listed into the programme of the loans granted by international financial organizations and shall submit the review opinions to the Ministry of Finance, which shall, on the basis of the review opinions, decide whether to arrange negotiations and talks with foreign parties. The issues to be reviewed mainly include:

  (1)The debt burden and financial capacity of the provincial government;

  (2)The financial, economic and social benefits of the loan-funded project;

  (3)The financial status of the project entity and the assured sources of supporting funds; and

  (4)The on-lending arrangements, repayment liability and sources of the repayment fund.

  Article 17 Projects funded by the loans made by foreign governments fall into the following three categories broke down by different repayment liability:

  (1) projects with the provincial finance departments or the relevant departments of the State Council as the debtors and bearing the repayment liability;

  (2) projects with the project entities as the debtors and bearing the repayment liability and the provincial finance departments or the relevant departments of the State Council providing repayment guarantee; and

  (3) projects with the project entities as the debtors and bearing the repayment liability and the on-lending institutions as the ultimate repayers of the loans, where the provincial finance departments or the relevant departments of the State Council shall neither act as the debtors nor provide repayment guarantee.

  Article 18 The provincial finance departments shall organize reviews of the projects planning to use the loans made by foreign governments. The issues to be reviewed shall be determined in accordance with the provisions in Article 16 of these Measures.

  Article 19 Where a project planning to use the loans made by foreign governments meets the relevant requirements upon review, the provincial finance departments shall file an application with the Ministry of Finance and submit the following materials:

  (1) the debt burden of the government related to the debtor;

  (2) an application by the provincial finance departments for using the loans made by foreign governments. The loan application shall give a brief introduction to the project, and indicate the source of the loans for the project, amount of the loans, the debtor, on-lending institution, on-lending type, and source of the supporting fund; and

  (3) an environmental impact evaluation report and a feasibility report on the project in English as required by the loan providers.

  Article 20 Upon examination and confirmation of the applications submitted by the provincial finance departments for using the loans made by foreign governments, the Ministry of Finance shall, in accordance with the development aid policies and the fund commitment of the loan providers, propose the candidate projects to the loan providers in a centralized manner.

  Article 21 Where it is necessary to change the loan-providing country for a project or increase the amount of the loans made by foreign governments for a project, the provincial finance departments shall file a written application with the Ministry of Finance. The Ministry of Finance shall make a decision after taking into consideration the requirements of the loan provider, the actual needs of the project and other information as a whole.

  Article 22 The Ministry of Finance shall hold negotiations and talks with the international financial organizations or foreign governments in respect of the projects satisfying the relevant requirements for the loans, sign and execute relevant legal documents on the loans and handle relevant matters in respect of the execution of the said legal documents. Other relevant departments shall offer assistance to the Ministry of Finance thereon.

  Article 23 The Ministry of Finance shall, in light of the type of the projects funded by the loans made by foreign governments, entrust the on-lending institutions with or advise the on-lending institutions of evaluating the projects and going through other relevant on-lending formalities in a timely manner.

  Article 24 The on-lending institutions of the loans made by foreign governments shall, in accordance with relevant provisions, sign relevant legal documents on the loans with foreign financial institutions and sign an on-lending agreement with the debtor so as to ensure the repayment of the principal and interest to foreign parties and the advance payment of the fund.

  

  Chapter IV Uses of the Loans

  Article 25 The uses of the loans mainly include procurement for the loan-funded projects, payment of the loan fund, technical aid, training of personnel, monitoring and report of the progress of the execution of the projects.

  The project entity shall, in accordance with the provisions of laws and regulations of the State, as well as the legal documents on the loans, arrange the execution of the loan-funded projects.

  Article 26 In the case of a project funded by the loans granted by international financial organizations, with the local government bearing the debt, the overseas visit plan, procurement plan, selection of procurement agencies and other matters in relation to the project may not be executed prior to the examination, approval and confirmation by the provincial finance departments.

  The overseas visit plan in relation to other projects funded by the loans granted by international financial organizations may not be executed prior to the approval by the Ministry of Finance. The procurement plan and selection of procurement agencies shall be reported to the Ministry of Finance for filing.

  In the case of a project funded by the loans made by foreign governments, which has been examined, approved and confirmed by the Ministry of Finance, the provincial finance departments shall, in accordance with relevant provisions of the Ministry of Finance, arrange or direct and supervise the project entity¨s determination of procurement agencies and shall report the result to the Ministry of Finance for filing.

  Article 27 The procurement agency shall, in accordance with the agency agreement and the requirements of the loan provider, make the procurement for the project funded by the loans made by foreign governments.

  Article 28 The use of the loans¨ fund shall be in compliance with the provisions in the legal documents on the loans. No entity or individual may obtain any fund by making false report, falsely claiming it as their own or by other fraudulent means. No entity or individual may detain, hold back or misappropriate any fund in any form or for any reason, or change the purposes of any fund without authorization.

  Article 29 The provincial finance departments shall strengthen the administration and supervision of the projects funded by the loans granted by international financial organizations. Relevant matters mainly include:

  (1) to formulate the administrative system for the loan-funded projects, and to provide guidance on and supervise the administration of the funds, finance and debt of the loan-funded projects;

  (2) to supervise the assured availability and use of the loan funds and supporting fund; to be responsible for the payment of the loan funds and the administration of the special account under authorization by the Ministry of Finance; and to be responsible for dividing the debt of the loan funds and repaying the principal and interest of the loans;

  (3) to provide guidance on and supervise the procurement of the loan-funded projects in collaboration with other departments; and

  (4) other matters of supervision and administration in relation to the execution of the projects.

  Article 30 The local or central project entities shall, in accordance with the requirements of relevant legal documents on the loans, submit the progress reports, financial reports and auditing reports in respect of the projects respectively through the provincial finance departments or directly to the Ministry of Finance and the loan providers.

  Article 31 Finance departments at various levels shall supervise and inspect the execution of the projects. In the case of any problem, the finance departments shall order the project entities to take effective measures, find solutions and make rectifications in a specified time limit.

  Article 32 Upon the completion of the loan-funded projects, the project entities shall settle the final accounts in respect of the completion in a timely manner and conduct all-round evaluation and make a summary on the execution of the projects. The project entities shall also prepare and submit a completion report of the projects in accordance with relevant provisions and go through formalities in respect of asset transfer and registration.

  Finance departments at various levels shall provide guidance on and urge the project entities¨ evaluation and summary of the projects.

  Article 33 Prior to the completion of the loan-funded projects, the project entities shall work out the future operation plan of the projects in a timely manner to monitor the actual operation of the projects.

  Prior to the full repayment of the loans, finance departments at various levels shall supervise and inspect the enforcement of the operation plan of the projects and acquaint themselves with and make analysis about the economic effect of the projects in a timely manner.

  Article 34 During the execution of the projects funded by the loans granted by international financial organizations, the project entities shall have independent financial management, accounting and auditing over the loan-funded projects in line with national financial and accounting systems and in accordance with specific provisions on financial and accounting management for the loan-funded projects, and shall establish and improve internal financial and accounting systems. 

  Chapter V The Repayment of Debts

  Article 35 Upon the execution of relevant legal documents on the loans, the on-lending institutions and the debtors shall go through foreign debt registration formalities in accordance with relevant provisions promulgated by the State on the administration of foreign debts.

  Article 36 The debtors shall abide by the on-lending agreements, and work out plans on the repayment of the principal due, interest, commitment fee and other relevant fees in respect of the loan-funded projects to ensure timely and full repayment.

  Article 37 The debtors of the projects funded by the loans granted by international financial organizations shall have accounting, auditing and statistics of the debt of the loans in accordance with relevant provisions by the Ministry of Finance, prepare complete and accurate reports on the general conditions of credit and debt in their own regions and units, and submit the said reports to competent departments at higher levels and the local governments at the same levels on a regular basis.

  On-lending institutions of the projects funded by the loans made by foreign governments shall furnish statistical information and data of the credit and debt in a timely manner as required by the Ministry of Finance and relevant provincial finance departments. 

  Article 38 The debtors shall establish reserve funds for the repayment of the loans in accordance with relevant provisions by the Ministry of Finance specially for advancing the debt due for the loans made by international financial organizations and foreign governments.

  The reserve funds for the repayment of the loans of the governments at various levels shall be established and managed by finance departments at the same levels.

  Article 39 Finance departments at various levels shall establish mechanisms for the statistics, monitoring and warning in respect of the foreign debts of the governments to prevent and eliminate debt risks.

  Article 40 The debtors may resort to financial instruments for value retention and hedging in accordance with relevant provisions of the laws and rules, provided that the principle of caution and prudence is upheld and internal control mechanism is sound and healthy.

  When selecting transactions, the debtors shall follow he principle of competition to avoid the loss of the principal. After the closing of the transactions, the debtors shall submit relevant documents in relation to the transactions to the Ministry of Finance for filing.

  Article 41 When the loan-funded projects are completed pending examination and acceptance, project ownership and credit-and-debt relationship shall be clarified so as to prevent the loss of state-owned assets and evasion of debts.

  Article 42 In the event of capital restructuring, enterprise reform or other ownership alterations or bankruptcy, the debtors shall obtain prior consent from the on-lending institutions and the Ministry of Finance, as well as the consent from the loan providers when necessary, and reach agreements in respect of debt repayment arrangements to ensure first-place repayment of government foreign debts.

  Chapter VI The Management of the Grants

  Article 43 The management of the grants involves the initial preparations, the use of the funds, evaluation and summary upon completion, and asset management in respect of the grant-funded projects.

  Article 44 The initial preparations of the grant-funded projects include such matters as the submission of grant applications, the compilation of project proposals, talks and negotiations, the signing and execution of legal documents and the establishment of sub-granting relationship. 

  Local finance departments shall strengthen the coordination and administration of the initial preparations of the grant-funded projects of their own regions.

  Article 45 Project entities applying for the grants shall submit applications for the grants, attached by a project outline.

  Central project entities shall file applications with the Ministry of Finance directly and submit a project outline. Local project entities shall file applications with the Ministry of Finance through the provincial finance departments and submit a project outline. A project outline shall include:

  (1) the background of the project;

  (2) the aims of the project;

  (3) the content of the project;

  (4) the budget of the project;

  (5) the project¨ sustainability and exemplary role; and

  (6) the risks involved in the project.

  Article 46 Upon review and approval by the Ministry of Finance of the grant applications and the project outline, the central project entities shall submit a project proposal to the Ministry of Finance directly, and the local project entities shall submit the project proposal to the Ministry of Finance through the provincial finance departments.

  A project proposal shall include:

  (1) the aims of the project;

  (2) the necessity and feasibility of the project; 

  (3) the activities of the project;

  (4) the execution plan and arrangements of the project;

  (5) the budget of the project;

  (6) the quality and risk control of the project;

  (7) the utilization and popularization of the results of the project; and

  (8) monitoring and evaluation. 

  Article 47 The Ministry of Finance shall, on the basis of the examined and approved project proposal, arrange talks and negotiations with international financial organizations or foreign governments, and arrange the signing and execution of legal documents on the grants. Other relevant departments shall offer assistance to the Ministry of Finance thereon.

  Article 48 The Ministry of Finance may sign sub-granting agreements or execution agreements directly with the domestic grantees to define the rights and obligations of both parties, or entrust other institutions therewith. The Ministry of Finance may also charge 1% of the total sum of the grants as paid use fee in accordance with relevant provisions of the Ministry of Finance.

  The preceding paragraph applies to the charge of paid use fee in respect of the grants in the joint financing in combined use with the loans.

  Article 49 The use of the grants¨ fund shall be in compliance with the provisions in the legal documents on the grants. No entity or individual may obtain any fund by making false report, falsely claiming it as their own or by other fraudulent means. No entity or individual may detain, hold back or misappropriate any fund in any form or for any reason, or change the purposes of any fund without authorization.

  Article 50 The grant-funded project entities shall establish and improve internal financial and accounting control systems; the project entities shall have independent financial management, accounting and auditing over the projects in accordance with relevant provisions of the Ministry of Finance on financial and accounting management for grant-funded projects; the project entities shall, in accordance with the requirements in the legal documents on the grants, work out the execution plans of the projects, arrange the execution of the projects, settle the final accounts in respect of the completion and prepare and submit completion reports; and the project entities shall submit the execution reports and auditing reports of the projects to the finance departments and the grantors.   

  Article 51 Prior to the completion of the grant-funded projects, the Ministry of Finance shall specify the ownership and disposals of the assets generated as a result of the grants in accordance with relevant provisions of the State and the legal documents on the grants.

  If the assets generated as a result of the grants are state-owned assets, the relevant entities shall take measures to prevent the loss of state-owned assets by reference to the provisions of Article 41 of these Measures and other relevant provisions of the State.

  Chapter VII Legal Liabilities

  Article 52 In the case of the project entities¨ failure to find solutions and make rectifications to the problems discovered in supervision and inspection in violation of the provisions of Article 31 of these Measures, finance departments may take such actions against the project entities as suspension of loan fund payment, demand for the return of paid funds or suspension of approval of overseas visit plans.

  Article 53 In the case of the project entities¨ violation against the provisions of Articles 34 and 50 of these Measures, finance departments shall order rectifications in a specified time limit and may impose penalties in accordance with relevant laws and rules of the State on accounting management.

  Article 54 In the case of the debtors¨ failure to make timely and full repayment of the principal due, interest, commitment fee and other relevant fees in respect of the loan-funded projects in violation of Article 36 of these Measures, finance departments may take the following actions:

  (1) to charge fund possession fee or liquidated damages;

  (2) to suspend the preparations for new loan-funded projects;

  (3) to suspend the examination, approval and execution of overseas visit plans for the loan-funded projects;

  (4) to suspend the payment of funds for the loan-funded projects;

  (5) to speed up the repayment of the unmatured debts of the loan-funded projects; or

  (6) to settle the payments by deducting from the budget or by other means.

  Article 55 In the case that any entity or individual obtains any fund by making false report, falsely claiming it as their own or by other fraudulent means, or detains, holds back or misappropriates any fund, or violates the provisions on the use of loan fund, or gains illegal benefits from the loans borrowed by or pledged by the governments in violation of the provisions of these Measures, finance departments shall deal with the abovesaid violations in accordance with the provisions of the Regulations on Penalties and Sanctions against Illegal Fiscal Acts and relevant laws and rules.

  Article 56 In the case of violation of the provisions of Articles 49 of these Measures, finance departments shall order rectifications in a specified time limit, and where the circumstances are severe, finance departments shall give warnings and may take such actions as suspension of the payment of funds, or suspension of approval of overseas visit plans.

  Article 57 Administrative penalties shall be imposed on the staff of finance departments and competent project authorities who are guilty of corruption and taking bribes, abuse of powers, dereliction of duty or engaging in malpractices for personal gains in the course of the administration of the loans and grants, the use of funds and repayment. 

  Chapter VIII Supplementary Provisions

  Article 58 These Measures apply to the use of the loans and grants made by foreign governments by relevant departments of the State Council, corporate groups in cities under separate state planning and enterprises under direct management of the Central Government. 

  Article 59 On-lending institutions may formulate specific implementing measures on the basis of these Measures.

  Article 60 These Measures shall take effect from September 1, 2006.  

 
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