China on Thursday lowered the upper limit for non-financial firms' cross-border financing amid efforts to rein in risks.
The macro-prudential adjustment parameter, a multiplier that is part of an equation deciding the upper limit of outstanding cross-border financing a company can have, has been revised down from 1.25 to 1 for non-financial firms, according to a circular issued jointly by the People's Bank of China and the State Administration of Foreign Exchange.
For companies that see their risk-weighted outstanding cross-border financing exceed the limit due to the revision, they will be allowed to hold the contracts inked before the change to maturity, said the circular.
The upper limit is basically decided by a non-financial firm's net asset, and the leverage ratio for cross-border financing as well as the adjustment parameter set by regulators.
On Dec. 11, 2020, China lowered the macro-prudential adjustment parameter for financial institutions to 1 from 1.25, with the aim of further improving the macro-prudential management of cross-border financing and guiding the institutions to adjust their foreign debt structure.
