The Chinese government recently issued new rules to facilitate
the approval procedure for the increasing outbound investments by
Chinese companies. On 14 February 2011, the National Development
and Reform Commission ("NDRC") delegated
part of its approval authority for outbound investment to its local
branches, resulting in a more transparent and efficient approval
If Chinese companies want to invest abroad, they generally need
government approval. Three government agencies share the
responsibility for reviewing and approving such foreign investments
by Chinese enterprises. NDRC is responsible for reviewing project
feasibility and checking interference with China's laws and
public interest. NDRC is an important regulator and a preliminary
consultation with NDRC before signing any non-binding document is
required. The Ministry of Commerce
("MOFCOM") is responsible for reviewing
the target country's political and economic situation, and
checking interference with Chinese laws and public interest. The
State Administration of Foreign Exchange
("SAFE") is responsible for examining
the source of the funds and approving the conversion of RMB into
relevant foreign currencies. Any contracts or agreements in
relation to outbound investments will not become effective until
approvals are given by the relevant authorities.
In addition, sector-specific regulators such as the China
Banking Regulatory Commission and the China Insurance Regulatory
Commission may play a role when financial institutions or listed
companies are involved in the outbound investments. If investments
are made by state-owned entities, approval by the State-Owned
Assets Supervision and Administration Commission
("SASAC") is also required. In practice,
approvals by NDRC and the MOFCOM are, however, considered to be the
most crucial ones. Applications to other regulators for approval
must be supported by NDRC and MOFCOM approvals.
Although the basic system for approving foreign investments by
Chinese companies is in place, there are still some administrative
hurdles, such as complicated procedures and uncertainty about
approval time frames and criteria. After MOFCOM issued regulations
to create more transparent approval procedures in 2009 and 2010,
NDRC also simplified it's requirements on approvals by issuing
the Notice on Delegation of Approval Authority for Overseas
Investment Projects ("the Notice"). NDRC
delegated part of its approval authority to provincial departments
when the project is:
An outbound investment up to USD 100 million related to
non-natural resources, or
An outbound investment up to USD 300 million related to natural
The 120 state-owned enterprises under supervision of the central
PRC government (central SASAC) do no longer need any NDRC approval
for projects under the abovementioned thresholds. Regardless of the
size of the investment, special projects, such as outbound
investment in sensitive industries and/or countries, must always be
approved by the NDRC and/or the State Council.
The Notice is an important step towards a more efficient and
transparent approval procedure, but further improvement seems
desirable. The Chinese government has expressed its intention to
unveil new regulations to further address these issues.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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