The National Development and Reform Commission (NDRC), one of
the Chinese regulators governing Chinese enterprises' overseas
investments, recently issued new rules to simplify the approval
requirements for outbound investment transactions. The revised NRDC
rules took effect on 8 May. The changes symbolise the Chinese
government's policy to encourage Chinese enterprises to
internationalise and diversify their investment portfolios. These
changes should help to clarify past uncertainties in the position
of Chines investors abroad, which is good news for sellers outside
Generally, a Chinese enterprise needs to go through several
steps for completing an overseas investment project, including:
review by the NDRC
the approval or filing at the Ministry of Commerce (MOFCOM)
obtaining the registration certificate issued by the Chinese
foreign exchange control authority, the State Administration of
Foreign Exchange (SAFE), which enables the Chinese investor to pay
the purchase price to its foreign counterparty.
And for Chinese State-owned enterprises:
obtaining the endorsement of the Chinese State-Owned Assets
Supervision and Administration Commission or its delegate.
Until recently, all overseas investments by Chinese investors
(acquisition deals or incorporation of new foreign entities) were
subject to the NDRC's approval. An approval is generally an
administrative formality which is more stringent than a filing
under Chinese law.
The new rules took effect on 8 May 2014. Under these new
transactions with a value exceeding USD 1 billion require an
approval from the central NDRC office or its superior, the Chinese
transactions with a value below USD 1 billion only require
filings with the competent NDRC offices.
More specifically, for transactions with a value below USD 1
transactions with a value exceeding USD 300 million require
filing with the central NDRC office (in Beijing)
transactions with a value below USD 300 million require filing
with the provincial NDRC office.
Documentation required for filing, compared to the previous
approval requirements, has been simplified and the timeline for
this formality has become more transparent. Also, since the NDRC
process needs to be completed before the MOFCOM and SAFE
formalities, simplification of the NDRC process will contribute to
a faster PRC regulatory approval process. Chinese media have also
reported that MOFCOM may soon follow the NDRC in simplifying its
outbound investment review process.
These changes symbolise the Chinese government's policy to
encourage Chinese enterprises to internationalise and diversify
their investment portfolios. Although the new rules still leave
significant discretionary powers to the NDRC, these changes should
be welcomed by non-Chinese sellers, for whom the role of a Chinese
investor in a sales process should become more predictable.
One more specific aspect about the new NDRC rules is that it was
previously unclear whether Chinese limited partners had to obtain
NDRC approval when contributing subscriptions to foreign private
equity funds. In previous cases, many Chinese PE investors could
not carry out this approval / filing / registration process due to
a lack of clear guidelines, and then failed to remit their money
outside of China in a manner acceptable to these authorities. The
new NDRC rules now expressly provide that these investments also
fall under the scope of the new rules, and an NDRC approval or
filing will be required, as applicable.
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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