The People's Bank of China
("PBOC") promulgated the Notice of
Relevant Issues concerning RMB Lending Rates (the
"Notice") on 10 December 2003. The
Notice serves to revise the rules governing RMB lending rates and
became effective as from 1 January 2004.
The PBOC has made the following revisions to the rules governing
RMB lending rates under the Notice:
Lending Rate Calculation and
The Notice provides that lenders and the borrowers may freely
negotiate the methods for calculating and settling interests for
all types of RMB loans except end-user mortgage loans.
Adjustment of Lending Rate During the Loan
Instead of fixing rates on an annual basis, lenders and
borrowers may, based on commercial considerations, adjust lending
rates of medium and long term RMB loans monthly, quarterly or
annually during the loan period, or adopt a fixed rate for the
loans. As for loans with tenor of more than 5 years, lenders
may use their own discretions to fix the lending rates by reference
to the rates applicable to loans beyond 5 years as specified by
Default Interest Rate
a. The rate of default interest due to the failure of the
borrower to repay the loan will now be charged at 30%-50% of the
lending rate as specified in the loan agreement instead of 0.021%
per day previously.
b. The rate of default interest due to misappropriation of loan
will now be charged at 50%-100% of the lending rate as specified in
the loan agreement instead of 0.05% per day previously.
c. Compound interest, calculated at the default interest rate,
is payable on interest which is overdue.
For loans granted before 1 January 2004, lenders and borrowers
may choose to apply the provisions set out in the Notice.
However, the Notice shall be applicable to loans disbursed
after 1 January 2004.
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Stokes & Master at the date written first above. All rights
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legal issues and developments of interest to our clients and
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the subject matter and is not intended to provide legal advice or a
substitute for specific advice concerning individual situations.
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respect to the matters discussed herein. Please also read the JSM
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