Article China: New Rules Relax Government Approvals for Overseas Investment

(July 3, 2014) On April 8, 2014, China’s National Development and Reform Commission (NDRC) promulgated an administrative rule regulating the approval of and record-filing for overseas investment made by Chinese investors. Effective on May 8, 2014, the new Administrative Measures for the Verification, Approval, and Record-Filing of Outbound Investment Projects (Measures) replaced the Interim Measures for the Administration of Approval of Overseas Investment Projects promulgated by the NDRC in October 2004 (Interim Measures). (Jingwai Touzi Xiangmu Hezhun he Bei’an Guanli Banfa [Measures], NDRC Order [2014] No. 9 (Apr. 8, 2014), NDRC website; English translation available through Westlaw China online subscription database.)

Under the new Measures, the following outbound investment projects are subject to the verification and approval of the NDRC:

(1) projects with an amount of Chinese investment that reaches or exceeds US$1 billion;
(2) projects in a sensitive country or region; and
(3) projects in a sensitive industry. (Measures, art. 7.)

Where the investment amount exceeds US$2 billion and the project is in a sensitive country, region, or industry, the NDRC must submit its review opinions to the State Council for final verification and approval. (Id.)

Sensitive countries or regions are those countries with no diplomatic relations with China or that are subject to international sanctions and countries or regions affected by wars or turmoil. (Id.)

Sensitive industries are defined to include the operation of telecommunication infrastructure, development and utilization of cross-border water resources, large-scale land development, main power transmission lines and power grids, and news media. (Id.)

All other outbound investment projects now only need to go through a filing process with the NDRC at the central or provincial level. (Measures, art. 8.)

The requirements are relaxed significantly comparing with those under the 2004 Interim Measures, which mandated that outbound investment projects exceeding US$10 million (or $30 million for natural resources-based projects) were subject to NDRC approval, among which those exceeding US$50 million (or $200 million for natural resources-based projects) were subject to State Council final verification and approval. All other projects were subject to approval of the NDRC on the provincial level. (Jingwai Touzi Xiangmu Hezhun Zanxing Guanli Banfa, NDRC Order [2004] No. 21 (Oct. 9, 2004), arts. 4 & 5, Central People’s Government of the PRC website.)

Overall, as noted by law practitioners in China, the new Measures “streamline and simplify the regulatory and approval process for Chinese outbound investments, and delegate significant power to the NDRC at the provincial level.… This reflects the government’s aim to encourage and facilitate investments made by Chinese entities in foreign jurisdictions.” (Jay Ze & Yawen Han, Opening the Gates for Outbound Investment, CHINA LAW AND PRACTICE (July/Aug. 2014), online, subscription journal.)

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China: New Rules Relax Government Approvals for Overseas Investment
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China: New Rules Relax Government Approvals for Overseas Investment. 2014. Web Page. https://www.loc.gov/item/global-legal-monitor/2014-07-03/china-new-rules-relax-government-approvals-for-overseas-investment/.

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(2014) China: New Rules Relax Government Approvals for Overseas Investment. [Web Page] Retrieved from the Library of Congress, https://www.loc.gov/item/global-legal-monitor/2014-07-03/china-new-rules-relax-government-approvals-for-overseas-investment/.

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