China will adopt strict measures to standardize the transfer of bad loans of domestic financial institutions to foreign investors, so as to protect the legitimate rights and interests of investors and enhance smooth treatment of domestic bad loans.

The National Development and Reform Commission (NDRC) and the State Administration of Foreign Exchange (SAFE) have jointly issued a notice saying that the bad loan transfer will be included in the management of China's foreign debts.

The notice says measures aimed for the transfer of bad loans of domestic financial institutions to foreign investors will become effective on April 1 this year.

Any domestic financial institutions which want to transfer their bad loans to foreign investors should first report to the NDRC and SAFE.

The NDRC and SAFE will be involved in the management of bad loan transfer in accordance with the mix of China foreign debts, international payment balance, the amount of domestic bad loans and treatment of bad loans.

Domestic financial institutions are required to transfer their bad loans through public bidding or auction and get the payment from foreign investors in full and at one time, according to the notice.

Bad loans with governments of various levels being the obligors and warrantors are banned from being transferred to foreign investors. Bad loans of enterprises in the industrial sectors that are important to the national security and bad loans of other sectors banned by Chinese laws are also prohibited from being transferred to foreign investors.

Foreign investors who viciously make public China's foreign debts, do something that damages China's credit in paying foreign debts or are engaged in money-laundering will be banned from buying domestic bad loans and those who violate Chinese laws will be sent to judicial departments for punishment, according to the notice.