On 25 October 2022, the People's Bank of China and the State Administration of Foreign Exchange jointly announced that the macro-prudential adjustment parameter of cross-border financing for enterprises and financial institutions will be raised from 1 to 1.25 in order to further improve the macro prudential management of full-covered cross-border financing and increase the cross-border financing of enterprises and financial institutions.

According to the Notice of the People's Bank of China on Matters concerning the Macro-Prudential Management of Full-Covered Cross-Border Financing (Yin Fa [2017] No. 9), the foreign debt quota for enterprises and financial institutions, i.e., the upper limit of outstanding cross-border financing = the capital or the net assets × the leverage rate of cross-border financing × the macro-prudential adjustment parameter.

Provided that other conditions remain unchanged, the macro-prudential adjustment parameter of cross-border financing is raised from 1 to 1.25, then the foreign debt quota for enterprises and financial institutions, i.e., the upper limit of outstanding cross-border financing, will be increased by 25%. This is undoubtedly a good signal to enterprises that wish to raise funds.

The initial macro-prudential adjustment parameter of cross-border financing is 1. The People's Bank of China and the State Administration of Foreign Exchange raised the macro-prudential adjustment parameter for enterprises and financial institutions to 1.25 in March 2020. Thereafter, the macro-prudential adjustment parameter of cross-border financing for financial institutions was reduced to 1 in December 2020, and the macro-prudential adjustment parameter for enterprises was reduced to 1 in January 2021.

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