CHINA Law and Practice Contributed by: Chen Yanhong, Beijing DHH Law Firm
access to dispute resolution mechanisms, subject to confirmation of their applicability. 8.6 Common Financing Sources and Typical Structures Typical financing sources and structures for project financings in China include four categories. • Bank financing, the core debt source: domestically, policy banks such as the China Development Bank (CDB) and Exim Bank provide long-term preferen- tial loans, while state-owned and joint-stock banks join syndicated loans. Internationally, the Asian Infrastructure Investment Bank (AIIB) and multina- tional banks offer multi-currency financing, usually secured by project revenues/assets with limited recourse. • Export Credit Agency (ECA) financing: China Export & Credit Insurance Corporation (Sino- sure) provides guarantees, often co-operating with foreign ECAs on mixed loans/insurance to cover political/commercial risks, cutting costs and extending tenors for equipment exports and over- seas projects. • Project bonds: domestic bonds (eg, project rev- enue bonds, green bonds, infrastructure REITs) attract long-term capital from insurers/social secu- rity. International foreign-currency bonds, which require foreign debt registration, are well suited to stable-cash-flow projects. • Alternative sources: private equity, commodity trader financing, and less common structures, such as streaming/royalty financing (revenue-sharing by output), serving resource-based or high-growth projects. 8.7 Natural Resources Carrying out natural resources projects in China requires focus on three core issues. • Resource ownership and development rights: under the Constitution and Mineral Resources Law, all mineral and water resources are state-owned. Enterprises can only obtain time-limited explora- tion/mining rights or water extraction permits via bidding/auction, with the scope of development and duration subject to strict regulation.
• Foreign investment restrictions: the Negative List prohibits foreign investment in rare earths and radioactive minerals. Strategic resources, such as oil and gas, require Sino-foreign joint ventures with Chinese control, and projects may be subject to national security reviews. • Export and beneficiation: strategic minerals (eg, rare earths, tungsten) require export quotas or licences, and some may be subject to export tariffs. Policies encourage domestic beneficia- tion to increase resource value and reduce raw ore exports, meaning projects must meet local processing requirements as set out in industrial policies. 8.8 Environmental, Health and Safety Laws In China, projects must fully comply with environmen- tal, health and safety (EHS) and community consulta- tion laws, as overseen by multiple regulatory bodies. In terms of the environment, they adhere to the Envi- ronmental Protection Law and Environmental Impact Assessment (EIA) Law by conducting EIAs, imple- menting the “three simultaneities” system (design- ing, building and operating environmental facilities alongside the main project), and meeting pollution control requirements for air, water and solid waste. The Ministry of Ecology and Environment and its local branches oversee EIA approvals and pollution discharge. For health and safety, enterprises establish safety management systems and fulfil occupational health obligations under the Work Safety Law and Law on Prevention and Control of Occupational Diseases; the Ministry of Emergency Management supervises work safety, while the National Health Commission leads occupational disease prevention. For commu- nity consultation, public opinions are solicited during the EIA process in accordance with the Measures for Public Participation in Environmental Impact Assess- ment. Land acquisition projects must publicise com- pensation plans under the Land Administration Law, and major projects are required to carry out social stability risk assessments. The Ministry of Natural Resources manages land procedures, and the NDRC and local governments provide guidance on stability assessments.
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