Dec. 27 (NBD) -- China's top economic planner Tuesday released new rules to streamline administrative procedures and to enhance the administration over outward investments by domestic companies.

With China's further opening-up, domestic enterprises are accelerating the pace of going abroad. The release of the new rules is a reflection of the Chinese government's fine management and the prelude to the legislation on outbound investment, Bai Ming, deputy director of the international market research institute of the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, told NBD in an interview. 

Investments of Chinese firms' overseas entities put under supervision

Effective as of March 1, 2018, the new rules, issued by the National Development and Reform Commission, brings forth a series of substantial measures to facilitate Chinese businesses' overseas investments, including cancelling the requirement of project information reporting, removing the provision relating to the preliminary examination by local governments, and prolonging the deadline for investors to gain approval and file records.

Meanwhile, innovative approaches are included to strengthen the management of Chinese enterprises' outbound investment. 

According to the NDRC, investment activities of firms established overseas by domestic companies or Chinese residents will be put under the government management framework. 

However, this doesn't means all of their overseas investment projects have to file the report and obtain the government approval. 

In fact, only sensitive investment activities need to get the approval first. For non-sensitive projects with an investment of 300 million U.S. dollars or above, investors only need to notify the NDRC in advance, but don't need to file reports. As for non-sensitive ones worth less than 300 million U.S. dollars, there is no need to notify or submit reports.  

The new rules stipulate that outbound investment activities by domestic companies or Chinese residents should neither threaten China's national interests and security nor violate the country's macro-economic and industrial policies.

To reinforce the supervision over these overseas investments, measures like online monitoring, interviews, and random inspections will be adopted, and punishment will also be imposed on enterprises with records of violations of related laws and regulations.  

Physical investments to go mainstream 

NBD learned that the outward investment structure of Chinese companies is optimizing continually. 

Data from the MoC shows that the newly added non-financial direct investment made by domestic investors in 5,796 overseas firms in 174 countries and regions totaled 107.55 billion U.S. dollars in the first 11 months of this year, down 33.5 percent year-on-year. 

Zhou Liujun, director-general of the Department of Outward Investment and Economic Cooperation, MoC, said at a recent media briefing that the entity economy and emerging industrial areas such as chemical and robot manufacturing saw an increase in mergers and acquisitions (M&As), with the number of M&As worth more than 100 million U.S. dollars reaching up to 52.

In sharp contrast, the fields like real estate, sports clubs, and entertainment didn't see any new investments from Chinese companies. 

Looking into 2018, Zhou said that irrational investment activities like blind M&As will be further curbed, and authenticity and compliance vetting of overseas investments will be strengthened. Meanwhile, banks, enterprises, universities, and research institutions are urged to work together to help enterprises featuring the integration of design, consulting, investment, financing, construction, and operating establish a presence overseas, so as to improve the overall competitiveness. 

He Zhenwei, secretary-general of the China Overseas Development Association, told NBD that blind M&As will not only damage Chinese enterprises' images overseas, but also lead to the outflow of a large amount of capital.

In the future, domestic enterprises will give priority to physical investment when investing overseas, and the focus of investment will shift to infrastructure and manufacturing industries, rather than industries like finance, insurance, and culture, He added.

 

Email: lansuying@nbd.com.cn