【正文】 ough established FIEs or participation in Sinoforeign joint ventures, or possibly through crossborder derivative structures). Market potential ? Although the Guidelines do not restrict the type of industries for which Mamp。 the majority of such deals have used offshore financing via an offshore investment holding structure. The Guidelines are an attempt to level the playing field by allowing domestic panies to borrow from qualifying banks for outbound acquisitions. ? Even if demand for Mamp。 the analysis must include examination of strategic risk, legal and pliance risk, integration risk, operation and finance risk, and government approval risk. The Guidelines highlight points of analysis for each such type of risk. In addition, the CBRC has said that where the Mamp。 and ? it must have a special team for due diligence and risk assessment, and the relevant responsible person must have at least 3 years of experience in acquisition transactions. As for due diligence, the lender is required to undergo a stringent risk analysis for each Mamp。A loans extended to a single pany may not exceed 5% of its core capital。A loans must not exceed 50% of its core capital。A loan must be secured (such as by way of mortgages, pledges, and thirdparty guarantees), and on terms more stringent than security generally required by the lender for other types of loans。A loan should generally be no longer than 5 years。A transaction。A loans will be treated as a special form of financing, subject to special financing terms, stringent risk analysis, and more indepth due diligence. The key terms of an Mamp。A loans could be extended solely for private equity investments unless the private equity investors, established in the PRC, partner with other PRC enterprises that already operate in the relevant industry to conduct Mamp。A lending to offshore panies, which may portend a further relaxation of lending rules in the future. The strategic relevance requirements The Guidelines contain, in Article 22(3), requirements that the borrower/acquiring party and the target enterprise have a relatively high degree of strategic relevance. ? Ramifications. The business or strategies of the two parties must correlate so that the acquiring party would obtain a strategic benefit from the transaction (., Ramp。 and for FIEs whose business scope does not include investment business, there are restrictions on conversion of an FIE39。 ? approval by the Ministry of Commerce (MOFCOM) or its local branch is required to acquire a domestic business in a restricted industry。the Guidelines require that the proposed Mamp。A transaction must give the acquirer a controlling interest in the target pany. It is unclear whether a controlling interest must be a majority interest, or whether a minority equity stake coupled with preferential board representation or similar mechanisms would qualify. Third, although we understand that FIEs incorporated in China would fall within the ambit of the Guidelines, there are other considerations that may limit the feasibility of FIEs obtaining Mamp。 that is, by means of a whollyowned or controlled subsidiary enterprise that has been established especially by the acquiring party and that conducts no other business activities. ? Ramifications. First, it appears that the proceeds of Mamp。A loan must be extended in connection with acquisitions of new or existing equity interests, purchase of assets, or the undertaking of liabilities resulting in the merger with or the obtaining of de facto control over an already established and operating target enterprise. The Guidelines specifically allow for the Mamp。s banks (about 2%), relying on the interbank market for liquidity. Second, local Chinese banks still hold a significant advantage in information about, and relationships with, Chinese panies who stand to benefit from the new lending rules. Who can borrow? Qualifying Mamp。A lending as a result of the Guidelines. Three other banks have reported meeting the 10% capital adequacy requirement (according to 2021 thirdquarter financial statements): China Merchants Bank, CITIC Bank, and Industrial Bank. Most mercial banks, however, do not currently satisfy the capital adequacy requirements. ? What about foreign banks? More than 30 foreign banks are incorporated in the PRC and theoretically can take advantage of the Guidelines by extending Mamp。A loans. The key requirements and tests include having strong risk management and effective internal control systems, a loan loss reserve adequacy rate of no less than 100%, a capital adequacy rate of no less than 10%, a general reserve balance of no less than 1% of the loan balance for the same period, and established Mamp。A, effectively lifting the ban on Mamp。A loans p