On November 22, the China State-owned Assets Supervision and Administration Commission ("SASAC") of the State Council issued the Circular on Strengthening the Management of Financing Guarantees of Central Enterprises (the "Circular").

The Circular regulates central enterprises from eight aspects: improving the financing guarantee management system, strengthening budget management of financing guarantee, strictly restricting the entities for which financing guarantee is provided, and strictly controlling the scale of financing guarantee, etc. The Circular emphasizes that, a central enterprise is strictly prohibited from providing any form of guarantee to non-group companies in which it holds no stakes. It is also not allowed to provide guarantees for sub-companies or affiliated companies that are unable to maintain ongoing operations because they are subject to reorganization or insolvency and liquidation proceedings, become insolvent, operate at loss for three consecutive years or more and have negative operating net cash flows; it is not allowed to provide guarantee for its financial sub-companies; and sub-companies in a group that do not have a direct equity relationship shall not provide guarantee for each other. If the guarantee is really needed under any of the above three scenarios due to objective circumstances and the risks are controllable, the approval of the group's board of directors is required.

(Source: China State-owned Assets Supervision and Administration Commission)