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Project finance in Xiamen follows the broader legal and regulatory framework of the People’s Republic of China, combined with practical local rules and administrative practices in Xiamen city and Fujian province. Project finance typically funds large infrastructure, energy, transport, industrial park and real estate projects through a non-recourse or limited-recourse financing structure centered on a project company or special purpose vehicle - SPV. Lenders and investors rely on project contracts, predictable cash flows, asset security, permits and government approvals to allocate risk.
Xiamen is a coastal municipality with special economic and trade functions. The city can offer local incentives and administrative channels that affect how projects are structured, permitted and taxed. However, national laws - such as the Civil Code, tax regulations, foreign investment rules and banking and foreign exchange supervision - remain determinative for key project finance issues.
Project finance transactions are legally complex and involve multiple stakeholders - developers, sponsors, lenders, contractors, operators, land authorities and local government departments. You may need a lawyer for one or more of the following common situations:
- Structuring the SPV and investment vehicle to allocate risk, tax and foreign investment obligations;
- Drafting and negotiating financing documents including loan agreements, security documents, intercreditor agreements and onshore-offshore funding documents;
- Securing and documenting collateral - for example land-use-right mortgages, equity pledges, receivables pledges and guarantees - and ensuring proper registration;
- Navigating permits and administrative approvals - land use, construction permits, environmental approvals, energy and utility connection approvals;
- Advising on Public-Private Partnership - PPP or concession - models, and preparing bidding, concession and government support agreements;
- Ensuring compliance with foreign investment rules, currency controls and capital account requirements for cross-border lending and profit repatriation;
- Handling tax planning, VAT and local tax incentives, transfer pricing and potential withholding tax on cross-border payments;
- Preparing risk-allocation clauses, performance security and contractor agreements - construction contracts, operation and maintenance agreements;
- Managing dispute resolution - arbitration clauses, choice of law, enforcement of foreign arbitral awards or judgments in China;
- Conducting or responding to lender-driven enforcement or insolvency actions where the project company or sponsor faces financial distress.
The most important legal and regulatory elements that affect project finance in Xiamen include national laws and local administrative practices. Key aspects to consider are:
- Civil Code - The Civil Code, effective from 2021, governs contracts, guarantees, property rights and obligations. It replaced prior Contract Law rules and incorporated guarantee and property provisions that are central to security packages in project finance.
- Company and corporate rules - Company Law and related regulations govern SPV formation, governance, shareholders agreements, equity pledges and company registry filings. Equity pledge and changes to shareholding must be registered with the relevant local company registration authority.
- Land and land-use rights - Urban land in China is state-owned; projects typically obtain land-use rights for a fixed term. Mortgages over land-use rights and property must be registered with the local real estate registration center. Xiamen municipal rules apply to land supply, leasing and industrial park arrangements.
- Banking and lending regulation - Loan documentation and onshore lending are subject to rules issued by the People’s Bank of China, China Banking and Insurance Regulatory Commission and commercial banks. For projects relying on offshore financing, State Administration of Foreign Exchange - SAFE - and the tax authorities impose registration and reporting requirements for cross-border loans, capital contributions and profit repatriation.
- Foreign investment regime - The PRC Law on Promotion of Foreign Investment and the Negative Lists regulate foreign participation in certain sectors. Xiamen may offer pilot programs or preferential policies, but sector-specific restrictions and approval or filing requirements must be observed.
- Public procurement, PPP and concession rules - National-level guidance and ministry rules define PPP models, risk sharing and fiscal support. Municipal authorities in Xiamen handle bidding, procurement and approval of government-related projects. Understanding the local PPP implementation rules and whether government support or viability gap funding is available is crucial.
- Environmental, safety and construction laws - Environmental Impact Assessment procedures, construction permits and safety inspections are necessary pre-conditions for financing and operation. Noncompliance can delay financing and trigger lender default provisions.
- Bankruptcy and restructuring - The Enterprise Bankruptcy Law governs insolvency procedures. Project finance lenders must consider the rights and ranking of creditors in insolvency and the effectiveness of security enforcement against project assets.
- Tax and customs - VAT, corporate income tax, local tax preferences and customs incentives may apply. Special economic zone or pilot policies in Xiamen can affect tax treatment of certain projects, but careful local tax planning is required.
Project finance uses the cash flows and assets of a single project as the primary security for loans, often through an SPV, rather than relying on the credit of a corporate sponsor. Lenders focus on the project contracts, permits and projected cash flows, and financing is typically limited-recourse or non-recourse to sponsors.
Foreign investors can own project companies in many sectors subject to the national foreign investment rules and the negative list. Some sectors require joint ventures or restrict foreign control. Local approvals or filings with the municipal commerce bureau and other departments may be required.
Urban land in China is owned by the state and granted through land-use rights for a term. Mortgages over land-use rights, buildings and fixed assets can be taken as security, but they must be registered at the local real estate registration center. Certain natural resources and land for specific uses may be restricted.
Common security includes mortgages on land-use rights and buildings, pledges of equity in the project company, pledges of receivables and contractual rights, guarantees from sponsors, and pledges over bank accounts and machinery. Registration and perfection of these interests with the relevant authorities are essential to ensure priority.
PPP projects follow national PPP guidance and local implementing rules. Xiamen municipal authorities will have procurement, bidding and concession rules. Government support, guarantees and fiscal transfers are subject to central and local budget rules. Legal counsel can help assess whether a project can qualify as PPP and what government approvals are required.
Cross-border loans, capital contributions and profit repatriation are subject to SAFE registration and certain approval processes. Offshore creditors and onshore borrowers must comply with foreign exchange registration and reporting requirements, which can affect the timing and structure of cross-border payments.
Contracts often include arbitration clauses with a specified arbitral institution and seat - either in China or abroad - or a local court choice. Enforcement of foreign arbitral awards in China is generally governed by the New York Convention and domestic recognition procedures. Local courts and arbitration centers are also widely used for onshore enforcement.
Timelines vary widely depending on project complexity, environmental approvals, land supply and local coordination. A simple project may clear primary approvals in several months, while major infrastructure projects can take a year or more to secure all land, environmental and construction permits. Early regulatory mapping and stakeholder engagement help manage timing risk.
Project participants should consider VAT on construction and services, corporate income tax, local tax incentives, land use fees, stamp duties on contracts and potential withholding tax on cross-border interest and dividends. Local tax authorities in Xiamen may offer incentives for certain projects, but those incentives often require advance filings and compliance.
Enforcement routes depend on the security package. For mortgages and registered pledges, lenders may apply for foreclosure or sale through local courts, apply to enforce contractual claims, or, if allowed contractually, take over management rights under certain procedures. Insolvency proceedings under the Enterprise Bankruptcy Law can affect the remedies and priority of creditors. Properly perfected security and clear enforcement clauses improve recovery prospects.
Useful governmental bodies and organizations for project finance matters in Xiamen include municipal and national authorities that handle permits, investment and finance. Typical contacts and resources to consult are:
- Xiamen Municipal Government and Xiamen Development and Reform Commission for project approval and macro planning;
- Xiamen Municipal Bureau of Commerce for foreign investment filings and local investment policies;
- Xiamen Municipal Finance Bureau and local treasury departments for fiscal support and municipal bond issuance guidance;
- Xiamen Municipal Natural Resources and Planning Bureau or Real Estate Registration Center for land-use rights, land supply and registration matters;
- Xiamen Municipal Ecology and Environment Bureau for environmental impact assessment and permits;
- State Administration of Foreign Exchange local bureau for cross-border financing registrations and foreign exchange compliance;
- Local tax authority - Xiamen Municipal Tax Service - for VAT, corporate income tax and incentives;
- People’s Court at the municipal level and local arbitration commissions for dispute resolution and enforcement matters;
- National-level ministries and regulators such as the National Development and Reform Commission, Ministry of Finance and Ministry of Commerce for sector guidance and national PPP policies;
- Industry associations and professional advisors - construction, engineering, legal and financial advisers in Xiamen who specialize in project finance and PPP implementation.
If you need legal assistance with a project finance matter in Xiamen, consider the following practical steps:
- Prepare a concise project brief - include project scope, location, estimated costs, funding needs, parties involved, intended timeline and any government support or concession model contemplated;
- Identify what you need from counsel - structuring advice, contract drafting, security perfection, permitting support or negotiation with lenders;
- Seek a law firm or lawyer with demonstrated experience in Chinese project finance, familiarity with Xiamen local procedures and experience with the relevant sector - energy, transport, water, industrial parks or real estate;
- Ask potential counsel about prior projects handled, local government contacts and experience with cross-border financing and foreign exchange compliance; request references or case examples where appropriate;
- Agree on an engagement scope and fee structure - phased work, fixed-fee for discrete deliverables such as due diligence reports, or hourly retainer for ongoing negotiation support;
- Conduct legal due diligence early - including corporate, land-use, permits, contracts, environmental, tax and security searches - to identify legal risks and mitigation steps;
- Build a regulatory and documentation timeline that aligns permitting, construction, financing closing and disbursements;
- Use counsel to prepare robust contractual documents - allocation of construction, completion and revenue risks; termination and step-in rights; security package; and clear dispute resolution and enforcement clauses;
- Maintain active communication with local authorities and lenders during structuring to anticipate approvals and registration requirements.
Project finance transactions in Xiamen require careful coordination of law, regulation and local administrative practice. Early engagement of qualified local counsel reduces execution risk, helps access local incentives and increases the likelihood of a successful financing and project delivery.
