(Oct. 31, 2014) On September 6, 2014, China’s Ministry of Commerce (MOFCOM) released the revised Administrative Measures for Overseas Investment (Measures). (Jingwai Touzi Guanli Banfa, MOFCOM Order  No. 3 (Sept. 6, 2014), MOFCOM website; English translation available through Westlaw China online subscription database.) Taking effect on October 6, 2014, the new Measures repealed the Administrative Measures for Overseas Investment that MOFCOM had promulgated in 2009. (Id. art. 39.) This development followed a November 2013 decision to reform the regulatory approval process in order to promote greater outbound investment. (Zhonggong Zhongyang Guanyu Quanmian Shenhua Gaige Ruogan Zhongda Wenti de Jueding [Decision of the Central Committee of the Communist Party of China on Several Major Issues on Comprehensively Deepening Reforms] CHINA.ORG.CN (Nov. 12, 2013); English translation available through Westlaw China online subscription database.)
In December 2013, the State Council promulgated the Catalog of Investment Projects Subject to Government Verification and Approval (2013 Version) (Catalog). (Guowuyuan Guanyu Fabu Zhengfu Hezhun de Touzi Xiangmu Mulu de Tongzhi (Guo fa 2013) [Notice of the State Council on Promulgating the Catalog of Investment Projects Subject to Government Verification and Approval] [2013 version], No. 47, GOV.CN (Dec. 2, 2013); English translation available through Westlaw China online subscription database.) The revised Measures specify the detailed requirements for those projects included in the Catalog, including provisions aimed at simplifying the processing of applications, and delegate some powers to lower administrative bodies.
A media release published by MOFCOM on September 9 stated that China’s total outbound investment increased 22%, to US$107.84 billion, in 2013. (MOFCOM, SAFE, National Bureau of Statistics Jointly Issued the Annual Statistical Bulletin of China’s Outward Foreign Direct Investment [in Chinese], MOFCOM website (Sept. 9, 2014).)
Highlights of the Measures
The Measures make record-filing, rather than verification and approval, the default rule. The entity making an overseas investment will be required to file a record of the investment with MOFCOM or the relevant provincial competent commerce department (PCCD). As in the past, investments in listed sensitive countries, regions, or industries will still be examined and approved by MOFCOM or the relevant PCCD. (Id. art. 6.) Centrally-administered enterprises must report to MOFCOM for record-filing, while a local enterprise must report to the PCCD in its province of domicile. (Id. art. 9.) This division of administrative and supervisory powers related to record-filing is designed to help speed the investment process.
Furthermore, the Measures clarify and expand the definitions of enterprises and of overseas investment activities, stating that “enterprise” does not include non-financial enterprises and natural persons. (Id. art. 2.) The activities that are governed by the Measures include:
- the activities whereby an enterprise duly established within the territory of China, through a new establishment, merger and acquisition, etc., holds the ownership, controlling power, rights of operation and management, and other rights and interests of a non-financial enterprise overseas, or acquires the ownership, controlling power, rights of operation and management, and other rights and interests of an existing non-financial enterprise overseas (id.);
- outbound investments by public institutions that qualify as legal persons and the establishment of overseas branches by enterprises (id. art. 36); and
- investments in Hong Kong, Macao, and Taiwan (id. art. 37).
In addition, the Measures modify the time limit for the approval of applications for investments in listed sensitive countries and industries. MOFCOM must make a decision on whether to approve an application submitted by a centrally-administered enterprise within 20 working days after acceptance of the application, while a PCCD must complete the process within 15 working days. (Id. art. 12.)
Finally, the Measures introduce for the first time criminal liability for certain acts. Those acts will constitute a criminal offense if the enterprises or the staff members of MOFCOM and PCCDs seriously violate the Measures. (Id. arts. 29, 31, & 33.)
Related Measures of NDRC on Filing
On May 8, 2014, the National Development and Reform Commission (NDRC) issued the Administrative Measures for Ratification and Filing of Outbound Investment Projects, which together with the revised Measures streamline the approval regime for outbound investment. (Laney Zhang, China: New Rules Relax Government Approvals for Overseas Investment, GLOBAL LEGAL MONITOR (July 3, 2014).) Both of these instruments extend the principles of the Catalog, because typically an overseas investment by a Chinese enterprise will be supervised by both the NDRC and MOFCOM, as has been the practice for many years. (Id. art.5; Catalog, supra.)
In a related action aimed at supporting offshore investments and financing by Chinese citizens and residents, in July 2014 the State Administration of Foreign Exchange (SAFE) published the Notice of the SAFE on the Administration of Foreign Exchange Involved in Overseas Investment Financing and Return on Investment Conducted by Residents in China via Special-Purpose Companies (Notice). (Guojia Waihui Guanliju Guanyu Jingnei Jumin Tongguo Teshu Mudi Gongsi Jingwai Tourongzi ji Fancheng Touzi Waihui Guanli Youguan Wenti de Tongzhi, Hui Fa  No. 37, SAFE.GOV.CN (July 4, 2014); English translation available through Westlaw China online subscription database.)
The revised Measures discussed above are aimed at outbound investments by enterprises, while the Notice is focused on overseas investments by citizens and residents. Promulgated under the China’s “going global” strategy, they both amend the administrative examination system of overseas investment in order to encourage such investments. (Zhonggong Zhongyang Guanyu Quanmian Shenhuan Gaige Ruogan Zongda Wenti de Jueding, supra.)
Prepared by Lana Xiao Yu, Law Library Intern, under the supervision of Laney Zhang, Senior Foreign Law Specialist.