Title: Red tape cut for Chinese firms investing abroad
Blog Entry: China’s top economy news planner yesterday announced new regulations that cut the red tape for domestic companies investing abroad.The new overseas investment rules will come into effect from March 1 next year, the National Development and Reform Commission said in a statement. It does away with the 2014 provision that required companies to get administrative approval for overseas investments worth over 300 million yuan (US$45.85 million) in non-sensitive areas. It would take seven days for NDRC to approve the investment plan. The new rules will now cut the administrative costs for overseas investment.Large deals however still have to be reported to the government while those under 300 million yuan no longer need approval from the government.For projects that have to be approved or recorded, companies must apply directly to the NDRC instead of approaching provincial offices. The new rules give companies more space in arranging deals by relaxing deadlines for approval or recording procedures. Companies must have the official acknowledgement in hand before implementing the project. The NDRC said the new rules corrects the regulatory loophole, in which domestic companies carried out overseas investment through an overseas unit. Various government authorities will work together to improve regulation on overseas investment through online monitoring, interviews, and selective examinations. The NDRC said the authorities will enhance inspection of companies for illegal investment and false reporting. Outbound investment activities of domestic firms should neither threaten China’s national interests and security nor violate the country’s macro-economic and industrial policies. The new regulations follow the code of conduct put forward last week for private companies seeking overseas investment. The NDRC and four other government units ordered private companies to report investment plans to the government and warned them not to use the investment deals to transfer assets or money laundering.Authorities started tightening inspections on outbound investments late last year after becoming aware of “irrational tendency” in the field. In August, the State Council clarified that overseas investment in areas including real estate, hotels, cinemas, and entertainment would be restricted, while investment in sectors such as gambling would be banned. Outbound investment however is being encouraged under the Belt and Road Initiative and infrastructure constructions. Howard Wu, a partner at law firm Baker McKenzie FenXun, said Chinese authorities are trying to encourage outbound foreign investment in targeted sectors, which can benefit the growth at home. In a report last month, the NDRC said China continues to improve management systems and policies on outbound investment, and the country still has a huge growth potential for outbound investment.