Market participants warned foreign investors not to
underestimate the difficulty of enforcing rights in a default
situation onshore, and the importance of conducting due
diligence on People’s Republic of China (PRC)
enterprises at Latham & Watkins’ Debt
Restructuring Conference in Hong Kong last week.
The People’s Bank of China issued new
guidelines in early May, allowing foreign direct lending to PRC
enterprises, marking a departure from previous rules in which
special approval from the State Administration of Foreign
Exchange (SAFE) was needed in such a provision.
But panelists warned foreign investors of potentially
negative consequences when overlooking the importance of
assessing the financials of PRC enterprises when investing
onshore, citing the difficulty for foreign parties to enforce
their rights in a default case onshore.
"The whole enforcement situation onshore is...