The investment directive issued by the Chinese government in
December 2013 has led to a wave of new regulations aimed at
promoting Chinese investments abroad. The latest regulation comes
from the Ministry of Commerce, which has replaced a significant
part of its approval procedure by a filing process. Furthermore,
the timeframe for approval has been shortened, forms have been
simplified, and the whole process has been partly decentralised.
This is good news not only for Chinese investors, but also for
non-Chinese sellers, who will have fewer reasons to be uncertain
about Chinese investments abroad.
reported in February 2014 on the release of the Catalogue
of Investment Project subject to Government Approvals by the
PRC State Council. The Catalogue provided that only investments of
USD 1 billion or more, or investments involving sensitive
industries, would still require verification by the Chinese
government, whereas other outbound investment would only require a
filing. But the investment directive had to be implemented by
various regulators before it could take effect.
In May 2014, we
mentioned the new implementation rules for Chinese outbound
investments transactions issued by the National Development and
Reform Commission (NDRC). Under these new rules, only transactions
with a value exceeding USD 1 billion still require the approval of
the central NDRC office or its superior, the Chinese State Council,
while transactions with a value below USD 1 billion only require
filing with the competent NDRC offices.
Very much in line with these two regulations, new
AdministrativeMeasures for Outbound Investment
issued by the Ministry of Commerce (MOFCOM) took effect on 6
October 2014. Notably, MOFCOM's new measures require filing
rather than approval of outbound investments, with investment in
sensitive countries or sensitive industries as the only exceptions.
The timeframe for approval has also been shortened to 20 working
days for state-owned enterprises and 30 working days for other
companies. In addition, the forms have been simplified, and MOFCOM
departments at provincial levels will take over the workload from
departments at the central level.
To manage the uncertainties involved in securing Chinese
outbound approvals, non-Chinese sellers often take into account a
"China premium" when valuing bids by Chinese investors.
This means that Chinese investors are expected to pay more in order
to be considered attractive buyers. NDRC and MOFCOM's new rules
still leave significant discretionary powers to authorities and
therefore do not signal the end of the China premium. However, the
role of a Chinese investor in a sales process should become more
predictable and these changes should therefore be welcomed by
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