China: Deregulation in Chinese Outbound Direct Investment: 2014 and beyond

Last Updated: 6 May 2015
Article by Xiong Jin

Towards the end of 2013, the State Council of China ("State Council") issued the "Catalogue of Investment Projects Subject to Governmental Verifications (2013)(«政府核准的投资项目目录»(2013年本))" ("2013 Catalogue"), which substantially reduced the verification1 powers of the two key regulatory bodies for Chinese outbound direct investments ("ODIs"), being the National Development and Reform Commission ("NDRC") and the Ministry of Commerce ("MOFCOM").

Closely following the policy spirit of the 2013 Catalogue, NDRC and MOFCOM revised their outbound regulations in tandem in mid and later 2014. In addition, the State Administration of Foreign Exchange ("SAFE") and the China Securities Regulatory Commission ("CSRC") have also revised relevant regulations with a view to further relaxing their control over ODIs.

On 19 November 2014, the State Council issued the "Catalogue of Investment Projects Subject to Governmental Verifications (2014)(«政府核准的投资项目目录»(2014年本))" ("2014 Catalogue"), which further reduced the verification powers of NDRC on ODIs.

State Council/NDRC: Project Verification and Record-Filing

The "Administrative Measures for the Verification and Record-filing on ODI Projects" taking effect from 8 May 2014 ("No.9 Regulation") established the new regime that makes record-filing (registration) the primary administrative measure for Chinese ODI projects -- as opposed to verification, record-filing is meant to be a much simplified process without substantive review by the regulator.

On 27 December 2014, NDRC further amended No.9 Regulation so that only ODIs involving (i) sensitive countries (regions) or industries; or (ii) exceeding US$2 billion will need State Council (through NDRC) verification.

The responsibilities of NDRC and its provincial counterparts (provincial development and reform commissions, or "DRCs") under the amended No.9 Regulation are set out in the table below.

Regulator Authority Scope of application Time limit
State Council/NDRC Verification Investment amount exceeding US$2 billion; or
ODIs in sensitive countries (regions) or industries
Within 20 working days after acceptance of application
Record-filing Investment amount between US$300 million and US$2 billion; or
Investments by centrally-administered state-owned enterprises ("CASOEs")
Within seven working days after acceptance of application
Provincial-level DRCs
Record-filing Investment < US$300 million
To be decided by the Provincial-level DRCs referring to No.9 Regulation

Under No.9 Regulation, ODIs made by the overseas subsidiaries of Chinese domestic companies are only subject to verification or record-filing (as the case maybe) if such ODIs involve the provision of credit support (such as parent company guarantee) by such Chinese domestic companies.

Nevertheless, the controversial "road pass" regime still remains under the amended No.9 Regulation: if a Chinese investor is to participate in an overseas bidding or undertake an overseas acquisition and the investment by such Chinese investor is greater than US$300 million, then it must submit an information report (in prescribed form) to NDRC (if applicable, through the relevant DRCs) and obtain the project confirmation letter issued by NDRC before it can commence any substantive work (which is generally taken to include signing binding documentation, making binding offers and commencing foreign investment review processes in the relevant jurisdictions).

MOFCOM: Overseas Entities Establishment Verification and Record-Filing

The amended MOFCOM regulation, the "Administrative Measures for Outbound Investments", took effect from 6 October 2014. The new regulation also makes record-filing a primary regulatory process for (most) ODIs.

In addition, for the first time, MOFCOM has adopted the "negative list" approach for the administration of ODIs, which means that only certain types of ODIs which fall into the "negative list" are subject to the scrutiny (or substantive review) by MOFCOM and its provincial counterparts (ie, verification), while other ODIs, regardless of their size and nature of the assets, are not subject to the scrutiny by MOFCOM. The responsibilities of MOFCOM and its provincial counterparts under the new regime are set out in the table below.

Regulator Authority Scope of application Time limit
MOFCOM Verification ODIs in sensitive countries (regions) or industries
Within 20 working days after acceptance of application
Record-filing ODIs by CASOEs
Within three working days after acceptance of application
Provincial-level commerce commissions
Record-filing Investment by SOEs other than CASOEs and private invested enterprises
To be decided by the Provincial-level commerce commissions referring to the MOFCOM regulation

Only four types of ODIs are on the MOFCOM negative list, being those:

  • jeopardise national sovereignty or security, or the public interest, or violate the laws;
  • harm the relationship between China and the relevant country (region);
  • violate an international treaty or convention to which China has acceded, or is a party; or
  • involve the export of products or technologies which are prohibited.

The revised MOFCOM regulation does not require that Chinese investors complete verification or record-filing process with NDRC (or its provincial counterparts) before applying for verification or record-filing with MOFCOM (or its provincial counterparts). It appears that Chinese investors can now undertake the NDRC and MOFCOM application procedures in parallel, which can substantially reduce the time otherwise required for completing the two processes in tandem.

SAFE: Reform on ODI foreign exchange registration verification

Until recently, the local counterparts of SAFE are responsible for verification of foreign exchange registration for ODIs, a process which must be completed before funds in foreign currency can be remitted to the foreign recipients. It could take up to 20 business days before the registration can be completed.

On 28 February 2015, SAFE issued a notice to delegate the verification authority to qualified commercial banks. The notice will take effect on and from 1 June 2015. It is anticipated that such delegation would substantially reduce the time required before funds can be paid out of China in future ODIs. We also anticipate that the banks are likely to take a more cautious approach at early stage of this new process though.

SAFE: Reform on Cross-Border Guarantee Regime

In 2014, SAFE has substantially amended its regulation "Provisions on the Administration of Foreign Exchange for Cross-Border Security" which govern the administration of cross-border securities. Pursuant to the amended regulations, which took effect from 1 June 2014, only cross-border securities provided in the form of securities provided by domestic guarantors for foreign creditors ("Neibaowaidai") or securities provided by foreign guarantors for domestic creditors ("Waibaoneidai") are required to be registered with SAFE. Cross-border securities provided in other forms are not required to be registered. In both cases, failure to register will not affect the legal validity of such contracts. The new regulation has also removed the requirements on the equity nexus between the guarantor and the debtor for most types of cross-border securities (with only a few special types of securities, such as securities provided for the purpose of overseas bond issuing, still subject to such requirement). The requirement for the debtor to meet a certain equity/debt ratio has also been removed.

CSRC: ODIs by Chinese Listed Companies

To boost mergers & acquisitions and restructuring activities, in March 2014, the State Council issued opinions announcing new policies to be implemented to "eliminate prior reviews of listed company acquisition reports and enhance post-transaction accountability; eliminate the approvals required for material asset purchases, sales and swaps by or in respect of listed companies (with the exception of backdoor listing); and eliminate certain approval requirements for acquiring listed companies through takeover bids".

On 23 October 2014, the CSRCpublished the amended "Measures for the Administration of Material Asset Reorganization of Listed Companies" and "Measures for the Administration on Acquisition of Listed Companies". These two amended measures abolished the need for prior reviews to ensure compliance with the State Council's requirements.

It is worth noting that, pursuant to PRC Securities Law, the amended measures did not repeal the approval for acquisitions of listed companies affected with offerings of new shares. Accordingly, more substantive reforms involving listed company mergers and restructurings still require further amendments to the relevant and prescriptive laws (including the Securities Law) before they can be realized. Listed companies have actively participated in Chinese ODI transactions recently, and the on-going reform will certainly give a further push to this trend.


It is encouraging to see Chinese government continue to reform and deregulate its ODI regulatory regimes.

Notwithstanding, certain obstacles still remain under the new regimes, including: unnecessary involvement of multiple regulators; time-consuming and unpredictable process; preference to keep the market-distorting "road pass" regime; and complex and lengthy approval requirements imposed on ODIs conducted by listed companies and SOEs. It is therefore imperative for the Chinese government to continue further deregulation reform.

Even under the more relaxed new ODI regulatory regimes, on our experience, some regulators still get used to the old "approval mentality" by carrying out substantive review on ODI projects notwithstanding only record-filing is required. It seems that a "transitional period" is still required before the regulators get comfortable with those new regimes. Till then, Chinese ODI investors must factor those challenges into their overseas transactions.


1Verification is in substance no different from "approval" in China's regulatory context whereby the concerned Chinese regulators have discretions on if certain investment can go ahead.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.