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China Regulates Acceptance, Discount and Rediscount of Commercial Draft

Thu, 24 Feb 2022
Categories: China Legal Trends

On 14 Jan. 2022, the People’s Bank of China and the China Banking and Insurance Regulatory Commission issued the “Measures on the Management of the Acceptance, Discount and Rediscount of Commercial Draft (Draft for Public Comment)” (hereinafter “the Measures”, 商业汇票承兑、贴现与再贴现管理办法(征求意见稿)) for public opinions through 14 Feb. 2022.

The Measures was promulgated when China has been facing debt crisis in real estate. Recently, real estate companies like Evergrande failed to pay commercial papers on time, which involved a large amount of money, causing serious financial risks.

According to the Measures, the acceptor shall be in good operating and financial condition and have the ability to pay when due.

The Measures shortens the maximum payment period. The payment term of commercial draft shall not exceed a maximum of six months starting from the date of issuance to the date of maturity.  

Besides, the Measures strengthens the management of information disclosure. Companies, financial companies and banks that do not disclose the required information on the acceptance of bills are not allowed to carry out bill business.

These rules clearly target the real estate companies that are currently in the debt crisis and restrict those financially distressed from raising funds from their suppliers via commercial paper.

 

 

Cover Photo by Willem Chan on Unsplash

Contributors: CJO Staff Contributors Team

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