PROVISIONAL REGULATIONS ON PROVIDING SPECIAL SHORT-AND MEDIUM-TERM
LOANS FROM THE PEOPLE'S BANK OF CHINA TO THE LIGHT AND TEXTILE
INDUSTRIES


(Issued by the People's Bank of China on January 14, 1980)


CONTENTS


CHAPTER I ELIGIBLE BORROWERS AND THE PURPOSES FOR WHICH LOANS ARE TO
BE USED


CHAPTER II PREREQUISITES FOR BORROWING


CHAPTER III TERM AND REPAYMENT OF LOANS


CHAPTER IV APPLICATIONS FOR LOANS, EXAMINATION AND APPROVAL OF
APPLICATIONS


CHAPTER V SUPPLY OF MATERIALS FOR PROJECTS TO BE FINANCED


CHAPTER VI PERIODIC REVIEW AND SUPERVISION OF LOANS


CHAPTER VII LOANS IN CONVERTIBLE FOREIGN CURRENCY


CHAPTER VIII SUPPLEMENTARY REGULATIONS


For the purpose of carrying out the policy of "readjustment,
restructuring, consolidation and improvement" and taking special
measures to boost the light and textile industries so as to meet
market demands at home and abroad, provisional regulations are hereby
issued for the People's Bank of China and the Bank of China to
provide special short-and medium-term loans and foreign-currency
loans in the form of buyers' credits to the light and textile
industries.


CHAPTER I ELIGIBLE BORROWERS AND THE PURPOSES FOR WHICH LOANS ARE TO
BE USED


Article 1. Loans are to be granted to state-owned and
collectively owned enterprises in the light and textile
industries (including specialized companies responsible for their
own profits and losses). The loans are to be used primarily for
the purposes of tapping production potential (including raw
material potential), making technological innovations and
launching small-scale construction and renovation projects related to
such purposes.


Article 2. No loans shall be granted for construction of new
factories or for extension of existing factories.


CHAPTER II PREREQUISITES FOR BORROWING


Article 3. Applicants must meet the following requirements:


(a) They must be able to generate quick returns, more profits
and more foreign exchange earnings in proportion to the money borrowed.


(b) They must have the necessary materials, equipment,
design and construction manpower in place and ready to be used
for the project undertaken, and must be assured of the availability of
raw materials, power and labour force once the project is in
operation. They must be able to find markets to sell their products.


(c) Their production techniques must be up to standard.


(d) They must promise economic yields and must be able to repay
the loan with operating profits when due.


(e) They must be able to take effective measures to prevent
environmental pollution.


CHAPTER III TERM AND REPAYMENT OF LOANS


Article 4. A loan is normally available for one to two years
but not longer than three years.


Article 5. A borrower must institute a separate accounting
system to monitor the economic gains from the loan. Repayment
of the loan plus interest shall be made out of earnings attributed
to the loan, not from previous earnings.


State-owned enterprises must repay loans out of the profits
from new projects or from the depreciation reserves for fixed
assets or from the charges payable to the government for the use
of fixed assets. If the above-mentioned funds are not sufficient for
repayment, the deficit may be covered by the industrial-commercial
tax that would otherwise be collected by the government on the
increased output attributed to the loan.


Collectively owned enterprises must repay loans out of the
accumulated profits from the new project after tax (during the period
of repayment, the department in charge is not allowed to collect
profits or other funds from the borrower for tax purposes) or from
the depreciation reserves for fixed assets. If these funds are
inadequate for repayment, the deficit may be covered by the income
tax and industrial-commercial tax that would otherwise be
collected by the government on the increased output attributed to the
loan.


Article 6. If a loan cannot be repaid when it falls due,
owing to suspension of the project in the course of construction or
to failure of the borrower to generate the expected returns,
repayment must be made out of the depreciation reserves for fixed
assets and other reserves.


Article 7. The interest rate to be charged for a loan is 4.2% per
month and interest is to be paid as soon as the financed project is in
operation.


CHAPTER IV APPLICATIONS FOR LOANS, EXAMINATION AND APPROVAL OF
APPLICATIONS


Article 8. Plans for borrowing shall be examined and
approved as follows:


The Bureau of Light Industry, the Bureau of Light Industry
No. 2 (handicrafts) and the Bureau of Textile Industry in the
provinces, municipalities and autonomous regions (hereinafter
called "local departments in charge") shall submit annual plans
for borrowing on the basis of their programmes for tapping
production potential and for making technological innovations duly
approved by the Economic Commission in their locality. Plans for
borrowing are to be examined by the local branches of the People's
Bank of China (hereinafter called "bank branches"). They are to be
submitted for re-examination by the head office of the People's Bank of
China (hereinafter called "bank head office") and the ministries of
light and textile industries (hereinafter called the
"responsible ministries") who will, after adding their comments,
submit the plans for further approval to a joint conference
chaired by the State Economic Commission and attended by the
bank head office, the State Planning Commission, responsible
ministries and the Ministry of Finance. Then, the responsible
ministries and the bank head office shall send back to the local
departments in charge the approved plans for borrowing involving
maximum project financing of over two million yuan for the textile
industry and over one million yuan for light industries, with
copies sent to the bank branches, the local economic commissions,
planning commissions and finance bureaus. As for loans below the said
maximum amounts, the bank head office and responsible ministries
shall send back the approved plans for borrowing to the bank branches
with copies sent to the local departments in charge.


Article 9. Authority to deal with applications for loans:
Borrowers shall submit their applications to the bank branch
where they keep an account. If a loan is below the said maximum
amount, the bank branch has the right to approve the application
in consultation with the local departments in charge. A report
shall be sent to the responsible ministries and bank head office
and a copy sent to the local economic commission, planning
commission and finance bureau. For a loan over the maximum amount, the
application shall be examined by the bank branch together with the
local departments in charge and then, if agreeable, submitted to the
bank head office and the responsible ministries for approval. The
bank head office and the responsible ministries shall send back
the approved application to the bank branches and local
departments in charge with copies sent to the State Economic
Commission, State Planning Commission and Ministry of Finance and their
respective organizations.


Article 10. After approval of the project to be financed, the
borrower and the bank shall sign a loan agreement whereby the bank
is to provide funds within the approved amount in accordance with
the progress of the project.


Article 11. A loan that has not been completely drawn down
in the current year may continue to be available in the next
year. Repayment received during the current year may be used for
lending by the bank within its jurisdiction.


CHAPTER V SUPPLY OF MATERIALS FOR PROJECTS TO BE FINANCED


Article 12. The planning commission and supply
administration at different levels shall be responsible for the
supply of materials such as steel, timber, cement, etc. needed by
the projects to be financed. These materials shall first be
supplied from the local stockpile. The State Administration of
Supplies will provide half of the necessary amount, which is then
included in its distribution plans for tapping production potential and
technological innovation. The ministries of light and textile
industries shall make suggestions on the allocations of materials
to be provided by the State Administration of Supplies. Accordingly,
the State Administration of Supplies will instruct its local
branches to supply the materials on the spot. The remaining
supplies are to be provided, in principle, by the local authorities.


Article 13. Special equipment shall be supplied by the
ministries of light and textile industries; general equipment by the
State Administration of Supplies and its local branches; and
optional equipment by the local authorities.


CHAPTER VI PERIODIC REVIEW AND SUPERVISION OF LOANS


Article 14. The People's Bank of China and the departments in
charge shall inquire into each project before financing it and
oversee the performance of the borrower after the loan is granted.
They must carefully check whether the project conforms to the
provisions of Articles 1, 2 and 3 and see to it that all
necessary measures have been taken, giving preference to those
borrowers who promise good returns and have the ability to repay loans.


Article 15. The loan must be used to finance the project for
which it is granted. The bank has the right to suspend the loan
before maturity in case the borrower changes its plans and raises its
expenditure without the bank's consent or diverts the loan and
construction materials to projects other than those agreed upon by the
bank.


Article 16. The People's Bank of China and the departments in
charge should work in close cooperation to help the borrower run
its enterprise and regularly check the progress of the project and
how the loan is being utilized so as to urge the enterprise to
make the most of the loan with early returns.


Article 17. The borrower must submit to the departments in
charge and the bank branch quarterly and annual reports on the
progress of the project and how the loan is being used, with
supporting statements and statistics. On the basis of these
reports, the ministries of light and textile industries shall
submit a quarterly consolidated report to the State Economic
Commission and State Planning Commission with a copy sent to the bank
head office.


CHAPTER VII LOANS IN CONVERTIBLE FOREIGN CURRENCY


Article 18. When light and textile industrial enterprises require
loans in foreign currency, such loans shall generally be in the form
of buyers' credits. In addition to the funds from buyers' credits,
the Bank of China may, if necessary, grant a supplementary loan
in convertible foreign currency to cover down payment for
imported equipment plus freight and insurance, or to import major
components to fit the equipment to be manufactured by the borrower,
or to import such things that are not covered by buyers' credits,
thereby accelerating the development of light and textile
industries.


Article 19. Foreign currency loans are to be applied for and
granted according to the regulations issued by the Bank of China.


CHAPTER VIII SUPPLEMENTARY REGULATIONS


Article 20. These regulations are to be formulated and amended
by the head office of the People's Bank of China. Branch banks in
the provinces, municipalities and autonomous regions may issue
supplementary rules to suit local conditions and submit a report to the
head office for the record.


These regulations shall come into force on the date of issue.